Bank Insolvency and Stabilization in Eastern Europe
January 1, 1992
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Summary
The profound structural reform underway in Eastern Europe has revealed the weakness of the banking sector there; macroeconomic stability and other reforms are thereby threatened. After an overview of recent developments in the banking sectors of these countries, a model is developed that clarifies the role of banking in an emerging market economy, and the danger that the disturbances inherent to it may be magnified and prolonged by a banking collapse. The implication is that priority must be given to mobilizing fiscal resources to cover the costs of restructuring the banking sector.
Subject: Bank credit, Bank solvency, Banking, Commercial banks, Consumption, Currencies, Financial institutions, Financial sector policy and analysis, Loans, Money, National accounts
Keywords: bank contract, bank portfolio, Bank solvency, banking system, capital stock, cash flow, Commercial banks, Consumption, consumption good, Currencies, Eastern Europe, enterprise reform, heterogenous firm, index-linked liability, Loans, market clearing price, money supply, nominal rate, payment ability, price level, socialist economy, WP
Pages:
46
Volume:
1992
DOI:
Issue:
009
Series:
Working Paper No. 1992/009
Stock No:
WPIEA0091992
ISBN:
9781451927146
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 39, No. 4, December 1992.
