The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe

35 Pages Posted: 7 Feb 2005

See all articles by Gerald A. McDermott

Gerald A. McDermott

University of South Carolina - Moore School

Date Written: November 2004

Abstract

This article examines the political conditions shaping the creation of new institutional capabilities. It analyzes bank sector reforms in the 1990s in three leading postcommunist democracies - Hungary, Poland, and the Czech Republic. It shows how different political approaches to economic transformation can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the depoliticization approach creates few changes in bank behavior and, indeed impedes investment in new capabilities at the bank and supervisory levels. The deliberative restructuring approach fostered innovative, costeffective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding banking sector.

Keywords: Institutional change, transition economies, bank crises, bank supervision, learning

JEL Classification: G28, F02, P26, P48, K23

Suggested Citation

McDermott, Gerald A., The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe (November 2004). William Davidson Institute Working Paper No. 726, Available at SSRN: https://ssrn.com/abstract=663641 or http://dx.doi.org/10.2139/ssrn.663641

Gerald A. McDermott (Contact Author)

University of South Carolina - Moore School ( email )

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HOME PAGE: http://www.geraldamcdermott.com

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