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This paper relates that, since money is an economic multiplier and contributes to the flourishing of an economy, it is assumed that banking reform is an important factor to economic growth in transition economics. Next, the paper looks at to what extent banking reform is influential, to what degree it is needed and the structure and functions of the banking sector as required for economic growth. After a literature review of several studies, the paper concludes that banking reform definitely is a necessary precursor to economic development because significant innovation and private enterprise needed to develop the economy must be able to attain funding.
From the Paper:"Fries and Taci's study findings further suggested that to achieve more economic growth there was a need for policies which could strengthen the supply response (their capacity to supply loans and financial support) of banks in order to accelerate banking and enterprise reforms. These included freedom in entry and exit from the banking industry, availability of background information about a prospective borrower, withdrawal of barriers as regards the spread of foreign-owned banks, and banking skills and technology transfer to improve small and medium-sized enterprises' access to bank loans .
"The findings of Fries & Taci's study showed that there was a positive correlation between the government balance and real expansion of loans to enterprises and households. The observed rate of real growth in outstanding customer loans reflects the interaction over time of the demand for banking loans and their supply by individual institutions."
Sample of Sources Used:
- Berglof, E. and P. Bolton, "The Great Divide and Beyond: Financial Architecture in Transition", Journal of Economic Perspectives, 2002; 16 (1): 77-100.
- Cetorelli, N. and M. Gambera, "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data, The Journal of Finance, 2001, 56(2): 617-648.
- Collier, Paul. "The Bottom Billion"; Oxford University Press: Oxford, 2008;
- EBRD, 2001 report: Belarus, Kazakhastan, Mongolia, Turkmenista & Ukraine; http://www.ebrd.com/pubs/funding/tc05f.pdf; downloaded on 20 February 2010.
- EBRD, Transition Report 2006: Finance in Transition, London: EBRD. 2006
Cite this Analytical Essay:
Banking Reform in Transition Economies (2012, February 15) Retrieved October 18, 2019, from https://www.academon.com/analytical-essay/banking-reform-in-transition-economies-150414/
"Banking Reform in Transition Economies" 15 February 2012. Web. 18 October. 2019. <https://www.academon.com/analytical-essay/banking-reform-in-transition-economies-150414/>