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Financial and Monetary Integration in the New Europe

Financial and Monetary Integration in the New Europe

Convergence Between the EU and Central and Eastern Europe

Edited by David G. Dickinson and Andrew W. Mullineux

Potential new entrants to the European Union from Central and Eastern European countries face many challenges to achieve financial convergence with the existing EU nations. Using detailed case studies from Bulgaria, the Czech Republic, Latvia, Lithuania and Poland and analysis of cross country data from these regions, Financial and Monetary Integration in the New Europe looks at the key issues for applicant countries as they negotiate the terms of their membership in the European Union. Of major concern to these countries is the financial sector and its implications for economic growth and the conduct of macroeconomic policy. The book examines, in particular, monetary and exchange rate policies, banking regulation and financial market efficiency. The overall impact of building a market driven financial system on economic development is also explored.

Chapter 10: The Asian financial crisis and lessons for CEE economies

David G. Dickinson and Andrew W. Mullineux

Subjects: economics and finance, financial economics and regulation


David G. Dickinson and Andrew W. Mullineux INTRODUCTION The Asian financial crisis can be traced, in chronological terms, to the collapse of the pegged exchange rate regime in Thailand in mid-1997. Whether this was the catalyst for a contagious bout of ÔAsian financial fluÕ where the symptoms were more important than the causes, in itself indicating the speculative nature of much international capital movement, or whether the result of the Thai crisis was to highlight the domestic economic inadequacies of several of the economies of the region is a matter of intensive debate. However, what is clear is that the financial crisis had sustained real effects with large falls in output (in the Association of South-East Asian Nations (ASEAN) region as a whole the International Monetary Fund (IMF) has reported a 9.4 per cent drop in 1998), although the performance for 1999 and the outlook for the year 2000 is more optimistic. Financial crises elsewhere (in Russia and Brazil) have created additional clouds on the horizon and the global financial system seems currently to be in a state of shock. As a result, finding the reasons for the crisis, and the appropriate policy response, is a matter of concern to the international policy community and as we shall discuss here, an issue of great interest to the economies of Central and Eastern Europe. This chapter takes the view that the inadequacies of the economic, legal and regulatory structure (particularly in the financial system) lie at the heart of the problems...

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