The Role of Financial Institutions in the Transition to a Market Economy

50 Pages Posted: 15 Feb 2006

See all articles by Hans J. Blommestein

Hans J. Blommestein

Vivid Economics; Organization for Economic Co-Operation and Development (OECD); Tilburg University - Tilburg University School of Economics and Management

Date Written: October 1993

Abstract

Financial institutions intermediate between savers and investors and contribute to corporate governance. Equity and bond markets in the former centrally planned economies are not yet in a position adequately to provide these services. It is not yet clear that investment funds will provide the necessary financing and corporate management. Therefore the first priority for financial sector reforms must be to establish a healthy commercial banking sector. Banks are the most promising source of financing, provide payment services which are crucial to both the real and financial sectors and, by monitoring the use of loaned funds, will be the primary source of corporate governance during the transformation to a market economy.

JEL Classification: G2, G3, P2

Suggested Citation

Blommestein, Hans J., The Role of Financial Institutions in the Transition to a Market Economy (October 1993). IMF Working Paper No. 93/75, Available at SSRN: https://ssrn.com/abstract=883794

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