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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.
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Chapter 13: Payment systems and economic development in transitional economies

Convergence Between the EU and Central and Eastern Europe

Maxwell J. Fry


Maxwell J. Fry INTRODUCTION It was noted that in most countries, central banks are responsible for national payments systems, as well as monetary policy and financial stability. For example, the Bank of EnglandÕs mission statement specifically recognizes the promotion of sound and efficient payment and settlement arrangements as an important element of the BankÕs core purposes. Gerry Corrigan, former President of the Federal Reserve Bank of New York, also recognized this important role when referring to the ÔtrilogyÕ of central banking functions and responsibilities: monetary policy, banking supervision and payment systems. In the transitional economies, central bankers have faced uncompetitive and uncooperative commercial banking systems. Despite or because of this, central banks in the transitional economies are more heavily involved in their countriesÕ payment systems than are central banks in the industrial countries. There is now a general appreciation among both central and commercial bankers that the operation of payment and settlement arrangements is not something that can simply be left for the Ôback officeÕ to sort out. Because of their role as the ÔplumbingÕ of the financial and banking system, how efficiently and safely these arrangements operate has become an issue with wider strategic and policy implications for central banks. This Chapter has two basic objectives. The first is to examine the reasons why central banks are interested in payment systems. The second is to provide an overview of the role of central banks in the payment system reforms in transitional economies; Poland is used as the...

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