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

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  • Patricia McGrath

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.

Suggested Citation

  • Patricia McGrath, 2005. "Financial Deregulation and Economic Growth in the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series wp804, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2005-804
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40190/3/wp804.pdf
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    Cited by:

    1. Egert Juuse & Rainer Kattel, 2015. "Implications of the Transformation of the State-Owned Banking System into System of Foreign-Owned Banks in New Member States for Macroeconomic and Financial Stability," Working papers wpaper103, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

    More about this item

    Keywords

    Transition Economies; Industrial Development; Financial Deregulation; Economic Growth; Eastern Europe;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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