## Financial Sector Reforms and Exchange Arrangements in Eastern Europe

_Occasional Papers, February 15, 1993_

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**Canonical URL:** [Financial Sector Reforms and Exchange Arrangements in Eastern Europe](https://www.imf.org/en/publications/occasional-papers/issues/2016/12/30/financial-sector-reforms-and-exchange-arrangements-in-eastern-europe-46)

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## Bibliographic details
- Authors: Guillermo Calvo, Eduardo Borensztein, Paul R Masson, Manmohan S. Kumar
- Published: February 15, 1993
- Series: Occasional Papers
- DOI: https://doi.org/10.5089/9781557752796.084

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### Overview
- Two papers draw from the brief yet radical reform experiences of five countries: Bulgaria, former Czechoslovakia, Hungary, Poland, and Romania.
- Paper objectives:
  - Describe financial sector reforms undertaken since the 1980s and the problems encountered.
  - Discuss roles of privatization, stabilization policies, and prudential supervision in financial sector development.
  - Analyze different exchange arrangements as they apply to previously centrally planned economies.
  - Examine general arguments for convertability and consider the desirable degree of exchange rate flexibility.

### Part I — Financial Markets and Intermediation (Guillermo A Calvo and Manmohan S Kumar)
- Focus:
  - Financial sector reforms implemented by Bulgaria, former Czechoslovakia, Hungary, Poland, and Romania since the 1980s.
  - Problems encountered in the reform processes.
- Key analytical points:
  - Roles of privatization in transforming ownership and market structure.
  - Importance of stabilization policies for macroeconomic environment conducive to financial development.
  - Need for prudential supervision to support safe intermediation and market confidence.

### Part II — Exchange Arrangements of Previously Centrally Planned Economies (Eduardo Borensztein and Paul R Masson)
- Focus:
  - Application of different exchange arrangements to previously centrally planned economies.
  - Examination of general arguments for convertability in these countries.
  - Consideration of the desirable degree of exchange rate flexibility for transition economies.

### Cross-cutting themes and policy implications
- Reform sequencing and coordination:
  - Privatization, stabilization, and prudential supervision are interrelated and influence financial sector development outcomes.
- Convertability and exchange rate policy:
  - Policy choice should weigh arguments for current account convertability against macroeconomic stability risks.
  - Degree of exchange rate flexibility should be assessed in light of each country’s transition dynamics and institutional capacity.
- Institutional development:
  - Strengthening prudential supervision and regulatory frameworks is central to successful financial sector reform and market development.

*Source: Financial Sector Reforms and Exchange Arrangements in Eastern Europe, By Guillermo Calvo, Eduardo Borensztein, Paul R Masson, Manmohan S. Kumar*

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_Source: https://www.imf.org/en/publications/occasional-papers/issues/2016/12/30/financial-sector-reforms-and-exchange-arrangements-in-eastern-europe-46_