Efficiency, investment and bank lending in transition and emerging economies

Abstract

This thesis studies the economic development in transition and emerging economies with focus on three particular economic issues: production efficiency, physical investment rate and bank lending under bank ownership perspective. The thesis chooses to study transition and emerging economies because they have undergone many important reform processes that may be thought of as experiments of different policy choices which lead to different economic outcomes. The thesis contributes to the literature in several ways. First, it adds to the literature on institutional economics and transition economies by confirming the significant role of institutional quality for efficiency and investment in a panel of transition economies. Better institutions are associated with higher efficiency levels and investment rates in transition economies. Given that investment is one of the key determinants of growth this means good institutions are important for growth in transition economies. Second, the thesis finds that banks of different ownership respond in remarkably different ways to monetary policies, which has important implication for the transmission and effectiveness of monetary policy. It also finds an asymmetric effect of monetary policy on bank lending with regard to the monetary conditions: in easy regime bank lending may not be affected my monetary tightening. This result calls for duly consideration of the ownership structure of the banking system when monetary policy and its effect on credit are studied. In summary, the thesis highlights the importance of institutional settings for economic development in transition and emerging economies.