IMF Working Papers

Explaining the Behavior of Financial Intermediation: Evidence from Transition Economies

By Philipp C Rother

March 1, 1999

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Philipp C Rother. Explaining the Behavior of Financial Intermediation: Evidence from Transition Economies, (USA: International Monetary Fund, 1999) accessed November 21, 2024
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

This paper investigates the effects of macroeconomic and structural variables on financial intermediation. To this end, it presents a theoretical foundation for two new measures of intermediation, the money multiplier and the ratio of private sector credit to monetary base. Results from panel estimations covering 19 transition economies indicate that policy makers need to address in particular the problems of bad loans on bank balance sheets and high market concentration while maintaining a stable macroeconomic environment. Further variables, such as minimum reserve requirements and the capital adequacy ratio, are found to possess less explanatory power.

Subject: Banking, Credit, Financial institutions, Financial markets, Financial sector development, Inflation, Monetary base, Money, Nonperforming loans, Prices

Keywords: Baltics, Concentration ratio, Credit, Eastern Europe, Economic growth, Financial intermediation, Financial sector development, Inflation, Inflation cost, Inflation expectation, Interest rate level, Interest rate variable, Monetary base, Nominal interest rate, Nonperforming loans, Opportunity cost, Private sector, Transition economies, Transition economy, WP

Publication Details

  • Pages:

    32

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1999/036

  • Stock No:

    WPIEA0361999

  • ISBN:

    9781451845433

  • ISSN:

    1018-5941

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