 The connection between more multinational banks and less real credit in transition economiesNo B 08-1999, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies Abstract: The number of multinational banks have increased in transition economies in Central and Eastern Europe, while the amount of real credit has simultaneously decreased. Based on the cases of Poland and Hungary during the first six years of economic transition this paper investigates if there is a link between greater international financial competition and less real credit. I provide a theoretical argument that connects the number of multinational banks to the availability of capital for domestic banks, and hence to their lending capacity. In support of this argument, I employ data from both countries' central banks, central statistical offices, and private institutions, as well as from international institutions, such as IMF and BIS. The evidence suggests that the increases in efficiency which result from greater competition do not outweigh the limitations on the capital base of domestic banks. Consequently, I find that the constraints that international financial competition places on domestic banks to raise their capital leads them to reduce their commercial lending activities in the early stages of financial liberalization. JEL-codes: F23 F36 O16 O52 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:zeiwps:b081999 Access Statistics for this paper More papers in ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies Contact information at EDIRC. |
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