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Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria


Nikolay Nenovsky


Bulgarian National Bank

Evgeni Peev


Bulgarian Academy of Sciences - Institute of Economics

Todor Yalamov


Center for the Study of Democracy; Saint Clement of Ohrid University of Sofia - Department of Economics and Business Administration; ARC Fund

April 2003

William Davidson Institute Working Paper No. 555

Abstract:     
This study analyses bank lending in the larger context of bank-firm relations within the Bulgarian specificity of currency board. It focuses on the 'intersection' of credit supply and demand on the side of banks and firms simultaneously. We suggest both traditional and new hypotheses corresponding to the specific conditions of the Bulgarian ownership change, transitional corruption and other institutional and political factors. The model is based on a survey on Bulgarian banks and a unique database on firms. The study found that the dynamics and structure of credit is affected mainly by the features of the institutional environment, whereas the 'resource' and traditional factors became secondary. During the period 1998-2001, there is separation of the banking sector activity from the activity of the real sector in Bulgaria. In the new conditions of currency board, the dual sector of enterprises and the specific institutional environment continue their existence. Despite its disciplining effect the currency board by itself is not sufficiently effective to overcome the remaining 'institutional' obstacles, associated mainly with the inefficiency of the judicial system, corruption, state capture, uncertain property rights, etc.

Number of Pages in PDF File: 28

Keywords: corporate governance, bank lending, currency board, corruption, transition economy

JEL Classification: E5, G2, L1, P2

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Date posted: May 17, 2003  

Suggested Citation

Nenovsky, Nikolay and Peev, Evgeni and Yalamov, Todor, Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria (April 2003). William Davidson Institute Working Paper No. 555. Available at SSRN: http://ssrn.com/abstract=401640 or http://dx.doi.org/10.2139/ssrn.401640

Contact Information

Nikolay Nenovsky (Contact Author)
Bulgarian National Bank ( email )
str "St. Sofia" 5
Sofia, 1040
Bulgaria
+ 359 2 9145 1239 (Phone)
+ 359 2 980 24 25 (Fax)
Evgeni Peev
Bulgarian Academy of Sciences - Institute of Economics ( email )
3, Aksakov Street
Sofia, 1421
Bulgaria
Todor Yalamov
Center for the Study of Democracy ( email )
5 Alexander Zhendov St.
Sofia, 1113
Bulgaria
HOME PAGE: http://www.csd.bg
Saint Clement of Ohrid University of Sofia - Department of Economics and Business Administration ( email )
Sofia
Bulgaria
HOME PAGE: http://www.feb.uni-sofia.bg
ARC Fund ( email )
5 Al. Zhendov Str
Sofia, 1113
Bulgaria
HOME PAGE: http://www.arcfund.net
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