Financial Deregulation and Economic Growth in the Czech Republic, Hungary and Poland

Patricia McGrath ()

No wp804, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Advocates of financial regulation, Arestis and Demetriades, argue that financial liberalisation does not impact on financial market efficiency and the allocation of investment. Results in this study find that Czech, Hungarian and Polish firms are subject to scrutiny when applying for credit. The firm’s ability to provide collateral, the potential of the proposed investment project and individual financial backgrounds are all factors that are used before loans are offered, and it likely that allocational efficiency is strengthened in these circumstances, and not weakened. Stiglitz has the view that financial repression improves the quality of the pool of loans. Results here indicate that companies in these countries previously had very limited access to credit while government owned companies and government projects received the bulk of credit. After deregulation it became apparent that the quality of the pool of loans was very poor. This study supports Shaw’s assertion that financial deregulation improves financial deepening.

Keywords: Transition Economies; Industrial Development; Financial Deregulation; Economic Growth; Eastern Europe (search for similar items in EconPapers)
JEL-codes: G G2 G21 (search for similar items in EconPapers)
Pages: pages
Date: 2005-11-01
New Economics Papers: this item is included in nep-eec, nep-fdg, nep-fmk, nep-pke, nep-reg and nep-tra
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