Log in

PKSG Working Paper Series

Working Paper PKWP0803

A stages approach to banking development in transition economies

March 2008

Sheila C. Dow, Dipak Ghosh, Kobil Ruziev

Credit shortages are widely thought to explain the output contraction in former Soviet Union (FSU) countries during the 1990s. It is argued here that these shortages were the result of an ahistorical approach to policymaking which ignored the time needed for the establishment and further development of money, banking, and nonbanking financial institutions. Starting from Chick’s stages-of-banking-development framework, we examine the experience of the FSU economies in transition from central planning. We then develop a fivephase framework to characterize the process of banking development required for them to reach stage two of Chick’s framework, where bank liabilities are accepted as money.

Keywords: Banking development, FSU countries, money, trust

JEL classification:

Download unavailable: Unrefereed papers are available to PKSG members only, or on request