Obstacles to Financial Development in Transition Economies: A Literature Survey

James E. McNulty and Joel T. Harper

Financial Markets, Institutions & Instruments, 2012, vol. 21, issue 4, 203-240

Abstract: This survey of approximately 70 studies considers five causes of weak financial system development in transition economies. These are: problem loans and inadequate capital; the absence of a credit culture, giving rise to perverse incentives to continue to make bad loans; inadequate regulatory systems; deposit insurance; and weak legal systems. There results a perverse feedback loop across the various problem areas that constrains the development of solutions. Policy recommendations include a focus on basic contract law as a way to break the perverse feedback loop.

Date: 2012
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https://doi.org/10.1111/j.1468-0416.2012.00174.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:finmar:v:21:y:2012:i:4:p:203-240

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