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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 14: Mobilization of savings in transition countries: the case of Lithuania

Convergence Between the EU and Central and Eastern Europe

Dalia Vidickiene, Salomeja Jasinskaite and Rasa Melnikiene


Dalia Vidickieneù, Salomeùja Jasinskaiteù and Rasa Melnikieneù INTRODUCTION Notwithstanding the huge importance of saving for the economy, savings regularities in transition countries still remain one of the least investigated subjects. The scanty literature that does analyse specific features of saving in transition countries restricts itself to a mere mention of such abstract factors making an impact on the savings behaviour as Ôchoice of reform sequencingÕ and reform strategy, that is, Ôbig bang or gradualismÕ (De Melo et al. 1995; Schmidt-Hebbel and Serven 1997). However, these factors relate only to what has already occurred and are suitable only for a comparative analysis of countries. Such an analysis is of little practical use when searching for ways to increase the scale and rate of saving. Therefore, it is not surprising that the process of saving in transition countries has so far been ignored, while depreciation and compensation of savings are being addressed for political reasons, since the theory of economics cannot provide an answer concerning the basis for optimal decisions. This chapter analyses changes to the savings rate in transition countries and the need for these countries to mobilize domestic savings. The chapter has four further sections. The next section includes a survey of the main modern theories of saving and evaluates whether they can predict savings behaviour in transition countries. After analysing the actual situation during the first years of reform, we shall investigate the main reasons for the decrease in the savings rate. The third section analyses the characteristic...

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