Comparison of the Tax Structure in Central European and European Union Countries: Tax Reform Goals and the Current Situation

The paper provides an analyses of the public finance reform in Central European Countries during the economic transition. The process of reforming public finance (covering both tax and expenditure reforms) is a long lasting one with specific features in individual countries. Nevertheless, some common, general features to the restructuring of CEC public finances can be identified.economic transition, public finance, Central Europe, taxation

Housing finance in transition economies : the early years in Eastern Europe and the former Soviet Union

The transition to markets dominates the development agenda of the 1990s. Financial sector reforms are central to a successful transition to a market economy. The author focuses on one dimension of these reforms: the development of housing finance institutions and services. He presents a progress report for the years since 1989, when the road to change opened with the collapse of communist regimes in most countries. Rather than a detailed account of reform in 25 countries, he offers a general framework for analyzing change and evaluating the prospects for rapid development of market-based housing finance systems. To understand why sound housing finance systems have not yet developed, one must consider factors in four key reform areas: the macroeconomic policies adopted to liberalize the economy and stabilize prices; privatization policies, in particular in housing and real estate; the strategies adopted - whether by design or by default - to reform the financial sector; the nature of the financial priorities and institutional constraints affecting housing finance reform strategies followed in different countries. Housing finance policy development has been somewhat haphazard in many countries. But the evidence suggests that the transition economiesthat have achieved low inflation, have adopted radical banking reforms, and seriously reformed and liberalized their real estate sector should be among the first to develop a modern system of housing finance.Non Bank Financial Institutions,Banks&Banking Reform,Payment Systems&Infrastructure,Housing Finance,Public Sector Economics&Finance,Banks&Banking Reform,Housing Finance,Public Sector Economics&Finance,Non Bank Financial Institutions,Municipal Financial Management

East Germany: Transition with Unification ; Experiments and Experiences

--Economic transition,public finance

Law and Finance in Transition Economies

This paper offers the first comprehensive analysis of legal change in the protection of shareholder and creditor rights in transition economies and its impact on the propensity of firms to raise external finance. Following La Porta et al. (1998), the paper constructs an expanded set of legal indices to capture a range of potential conflicts between different stakeholders of the firm. It supplements the analysis of the law on the books with an analysis of the effectiveness of legal institutions. Our main finding is that the effectiveness of legal institutions has a much stronger impact on external finance than does the law on the books, despite legal change that has substantially improved shareholder and creditor rights. This finding supports the proposition that legal transplants and extensive legal reforms are not sufficient for the evolution of effective legal and market institutions.shareholder and creditor rights, legal effectiveness, external finance, transition

Formal finance and trade credit during China's transition

Using a large panel dataset of Chinese industrial firms, the authors examine the determinants of access to loans from formal financial intermediaries and extension of trade credit. Poorly performing state-owned enterprises were more likely to redistribute credit to firms with less privileged access to loans through trade credit, a pattern consistent with some of the extension of trade credit being involuntary. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these private firms'customers that were shut out of formal credit markets. As biases in lending became less severe, the amount of trade credit extended by private firms declined.Investment and Investment Climate,Economic Theory&Research,Banks&Banking Reform,Financial Crisis Management&Restructuring,Financial Intermediation

Bank behavior based on internal credit ratings of borrowers

This study examines the relation of bank loan terms like interest rates, collateral, and lines of credit to borrower risk defined by the banks' internal credit rating. The analysis is not restricted to a static view. It also incorporates rating transition and its implications on the relation. Money illusion and phenomena linked with relationship banking are discovered as important factors. The results show that riskier borrowers pay higher loan rate premiums and rely more on bank finance. Housebanks obtain more collateral and provide more finance. Caused by money illusion in times of high market interest rates loan rate premiums are relatively small whereas in times of low market interest rates they are relatively high. There was no evidence for an appropriate adjustment of loan terms to rating changes. But bank market power represented by a weighted average of credit rating before and after a rating transition serves to compensate for low earlier profits caused by phenomena of interest rate smoothing. Klassifikation: G21

To what extent are savings-cash flow sensitivities informative to test for capital market imperfections?

We construct a simple model with lumpy investment, cash accumulation and costly external finance. Based on this model, we propose a new savings specification aimed at examining savings behavior in the presence of investment lumpiness and financial constraints. We then test a key prediction of our model, namely, that under costly external finance, savings-cash flow sensitivities vary significantly by investment regime. We make use of a panel of firms from transition and developed economies to estimate the new savings regression which controls for investment spikes and periods of inactivity. Our findings confirm the validity of the model's prediction

Bureaucratic Structure Aspect in Implementation of Indonesian Finance Policy About Accrual Based Accounting in Local Government

Financial managementisan importantpartof thepublic administration. Implementation of Finance Policy of Indonesian Government about transparencyandaccountabilityin thefinancial managementsystemis connectedbythe financial report. Accrual-based financialreport has become ahallmarkof modernmanagement but its implementation is not easy. Transition from current accounting based to accrual based needs big changes and long terms project .The problems of accrual based implementation are more difficult in local governmen

Which are the challenges of the corporate finance within East European emerging countries? Overview on the peculiarities of the finance mechanisms

The European East emerging countries represent an interest research topic both in terms of macroeconomic environment and corporate finance decision. Their evolution within the process of nominal and real convergence process requires a challenging analysis of the way the main macroeconomic environment affects corporate segment. This analysis will focus in a first stage on the macroeconomic environment, highlighting out the way it evolved during the transition process from the centralized and planed economy to the market oriented one. Secondly, the focus will be oriented on the corporations based in these countries. Their finance decision will be analyzed in comparison with the corporations located into the emerging countries and moreover a deep interest will be granted to their leverage, especially from the point of view of the way finance mechanisms can be valorized based on their balance sheet data.rating, sovereign risk, idiosyncratic risk.

Comparing mortgage credit risk policies : an options-based approach

Buckley, Karaguishiyeva,Van Order, and Vecvagare analyze the structure of approaches to mortgage credit risk that are now being used in a number of OECD and transition economies. The authors'basic approach is to show how option pricing models can help measure and evaluate the risks of various schemes. They find that mortgage default insurance can be a cost-effective tool for both improving housing affordability and efficiently addressing some of the rationing that characterizes this market. When correctly structured, as it is in a number of transition and market countries, this kind of program can be expected to reduce nonprice rationing at an actuarially fair price. At the same time, considerable care must be exercised in the development of such instruments. Geographical risk diversification, particularly across borders, can play a major role in the success of these programs. Such diversification could be important not only in smaller transition economies but in EU countries as well.Insurance&Risk Mitigation,Banks&Banking Reform,Environmental Economics&Policies,Payment Systems&Infrastructure,Labor Policies,Banks&Banking Reform,Insurance&Risk Mitigation,Housing Finance,Environmental Economics&Policies,Health Economics&Finance