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The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe

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  • Gerald A. McDermott

Abstract

This article examines the political conditions shaping the creation of new institutional capabilities. It analyzes bank sector reforms in the 1990s in three leading postcommunist democracies ??? Hungary, Poland, and the Czech Republic. It shows how different political approaches to economic transformation can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the ???depoliticization??? approach creates few changes in bank behavior and, indeed impedes investment in new capabilities at the bank and supervisory levels. The ???deliberative restructuring??? approach fostered innovative, costeffective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding banking sector.

Suggested Citation

  • Gerald A. McDermott, 2004. "The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe," William Davidson Institute Working Papers Series wp726, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2004-726
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    1. Dr. Rezarta Shkurti (Perri) & Dr. Brunilda Duraj, 2010. "The Assessment Of The Financial Soundness Of The Banking Sectors In Balkan Countries Using "Early Warning Indicators" - A Comparative Study With Policy Implications," Journal Articles, Center For Economic Analyses, pages 33-48, June.

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    More about this item

    Keywords

    Institutional change; transition economies; bank crises; bank supervision; learn;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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