THE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Bridging “the Great Divide”: Countering Financial Repression in Transition
نویسندگان
چکیده
The large and widening gap between economic performance in Eastern European transition economies and those of the former Soviet Union has been dubbed “the Great Divide” by Berglof and Bolton (2002). This paper provides a rationale for the gap based upon the concept of financial repression. The magnified effects of transition to the market can be attributed to the government manipulation of financial markets in these countries, with the divide defined by the length of time that governments relied upon financial-market manipulation to finance government fiscal policy. Policies undertaken to assist in financing government expenditures caused financial repression and financial fragmentation, to use the terms introduced by McKinnon (1973). After an introductory section, I introduce a theoretical model of real and financial sectors in transition. The dynamic path to equilibrium from transition is derived. It is shown to have a tendency toward output contraction and hyperinflation when government policies promote financial repression. In the third section this hypothesis is examined with macroeconomic data from Ukraine for the period 1992 2001. These data are consistent with the hypothesis, although other factors (e.g., recession in trading partners) are also shown to be important. JEL Classifications: E21, E44, H11, O16
منابع مشابه
THE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Human Capital, Growth and Inequality in Transition Economies
Transition economies have an initial condition of high human capital relative to living standards. I explore the possible implications of this key fact by surveying and adapting literature on growth and inequality. I focus especially on the long run and policy options.
متن کاملTHE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Financial Dependence, Stock Market Liberalizations, and Growth
Stock market liberalizations provide a natural experiment to test for the causal relation between financial development and economic growth. We test this relation by investigating whether liberalizations facilitate growth through the particular mechanism of reducing capital market imperfections that drive a wedge between the external and internal cost of capital to firms. Using panel data on a ...
متن کاملTHE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Formation of social capital in Central and Eastern Europe: Understanding the gap vis-à-vis developed countries
متن کامل
THE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Resolution, Recovery and Survival: The Evolution of Payment Disputes in Post-Socialist Europe
What determines the mechanism chosen to resolve a commercial dispute? To what degree does the aggrieved recover damages? And does the relationship survive in the aftermath? The answers to these questions affect expectations as to the costs of transacting and, thereby, the development of markets. But they have received almost no attention in the economic literature on the post-socialist transiti...
متن کاملDo Corporate Global Environmental Standards Create or Destroy Market Value
Glen Dowell • Stuart Hart • Bernard Yeung 263 College of Business, University of Notre Dame, Notre Dame, Indiana 46556 Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina 27599 New York University, Stern School of Business, 44 W 4th Street, Room 7/65, New York, New York 10012, and William Davidson Institute, University of Michigan Business School, Ann Arbor,...
متن کامل