Financial Development in the Cis-7 Countries: Bridging the Great Divide

20 Pages Posted: 14 Feb 2006

See all articles by Gianni De Nicolo

Gianni De Nicolo

Johns Hopkins University - Carey Business School; CESifo (Center for Economic Studies and Ifo Institute)

Sami Geadah

International Monetary Fund (IMF)

Dmitriy Rozhkov

International Monetary Fund (IMF)

Date Written: October 2003

Abstract

This paper documents the great divide in the level of financial development between the Commonwealth of Independent States (CIS)-7 countries and the more advanced economies in transition, in particular those of Central and Eastern Europe and Baltic states. It discusses the roots of financial underdevelopment in the CIS-7 countries by examining the differentials in interest rate spreads between the CIS-7 countries and the transition economies that have achieved faster financial development. The roots of the divide are traced to weaknesses in the institutional infrastructure for financial intermediation, which lead to a combination of low depositor trust in the banking system and high credit risk. High credit risk stems mainly from the poor creditor-rights protection and weak auditing and accounting standards. Financial sector reform strategies that fail to give priority to the resolution of weaknesses in the basic financial infrastructure are unlikely to be successful in letting the CIS-7 countries bridge the great divide.

Keywords: Financial development, transition economies

JEL Classification: G21

Suggested Citation

De Nicolo, Gianni and Geadah, Sami and Rozhkov, Dmitriy, Financial Development in the Cis-7 Countries: Bridging the Great Divide (October 2003). IMF Working Paper, Vol. , pp. 1-20, 2003. Available at SSRN: https://ssrn.com/abstract=880857

Gianni De Nicolo (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States
(410) 234-4507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Sami Geadah

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Dmitriy Rozhkov

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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