Systemic Requirements for Monetary Stability in Eastern Europe and the Former Soviet Union

February 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The primary function of banks during economic transformation is seen to be provision of an efficient payments mechanism. The lack of banking skills, particularly in credit allocation, is seen as the major problem in stable monetary systems. This is a problem which can be expected to last many years. The solution is to limit banks to very safe assets (initially central bank liabilities). Combining such safe banks with a monetary rule would provide stable monetary systems during transition.

Subject: Banking, Central banks, Commercial banks, Currencies, Financial institutions, International reserves, Monetary base, Monetary systems, Money

Keywords: bank, bank assets, bank management, banking system, central bank, commercial bank, Commercial banks, Currencies, debt forgiveness, Eastern Europe, government, International reserves, Monetary base, monetary rule, Monetary systems, money multiplier, PCE banking system, post-communist government, rule, savings bank, state bank, successive bank recapitalization, targeted money aggregate, WP

Pages:
24
Volume:
1994
DOI:
https://doi.org/10.5089/9781451920987.001
Issue:
024
Series:
Working Paper No. 1994/024
Stock No:
WPIEA0241994
ISBN:
9781451920987
ISSN:
1018-5941

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