Focus on Transition

Editorial 
Recent Economic Developments
Developments in Selected Countries 

Studies

Monetary Transmission and Asset-Liability Management by Financial Institutions in Transitional Economies – Implications for Czech Monetary Policy 
Alexis Derviz
The paper deals with the transmission of monetary policy within the financial sector. The objective is to link an optimizing stochastic model of portfolio decisions by a representative financial institution with a number of features that this optimizing behavior implies for monetary transmission and credit conditions in a transitional economy. The main example is the intermediation performance of the Czech financial sector in the years 1993 to 1999. In the theoretical part, the author introduces a discrete time model of portfolio optimizing under uncertainty extended to cover the case of cash flow constraints imposed on a financial intermediary. The current utility is liquidity-dependent. It also depends on a variable that measures the momentary assessment of future cash flows generated by the current items in the balance sheet. This specification has consequences for asset valuation, the term structure of interest rates and the uncovered return parity property of the expected exchange rate. In particular, monetary policy impulses receive different responses than in standard optimizing models, which are reflected either by the term structure of interest rates or by interest rates on new credit. In the empirical part, the author analyzes a number of observations about the function of Czech financial intermediation during transition and identifies those points that are relevant for the transmission mechanism. 

The Development of the Banking Sectors in Russia, Ukraine, Belarus and Kazakhstan since Independence 
Stephan Barisitz
Economic and banking reforms have proved to be particularly difficult in member countries of the Commonwealth of Independent States (CIS). This study attempts to trace, analyze and compare the development of the banking sectors in Russia, Ukraine, Belarus and Kazakhstan since independence. Overall national developments and historic evolutions are outlined, legal foundations, banking supervision, banks’ major sources of assets, liabilities, earnings and related changes, bank restructuring and the role of foreign banks and FDI are dealt with. While up to the mid-1990s, the four countries featured parallel developments in many respects, evolutions started to deviate in the second half of the decade, reflecting mainly differing reform policies. Russia and Ukraine have continued to, in effect, muddle through, experiencing more or less disappointing records. Despite recurring dynamic changes in the Russian banking sector, the situation evolved in an unsustainable way and since the financial crisis of August 1998 has remained in limbo. Although Ukraine avoided succumbing to financial contagion from Russia, its banking system is less developed and subject to stronger state influence. Belarus resorted to state interventionism and reintroduced elements of central planning into the banking sector. Kazakhstan has made some substantial reform efforts and benefited more than others from FDI in banking. Whereas banking sectors in all four countries remain fragile and do not sufficiently fulfill their function of financial intermediation, the Kazakhistani experience shows that serious reform efforts can make a difference. 

The Effects of the EU’s Eastern European Enlargement on Austria -
Austria’s Specific Position 
Jarko Fidrmuc and Thomas Nowotny
This contribution provides a survey of the current stage of discussion in applied economics of the effects of the EU’s Eastern enlargement on Austria. Notwithstanding many differences in methods and results, there is general agreement that the effects of this Eastern enlargement upon Austria would be largely positive in the long run, both according to economic theory and to applied analyses. The integration of the CEECs into the EU will allow resources to be allocated more efficiently both in Austria and in the CEECs. However, the reallocation of resources may cause short-term adjustment costs. From this perspective, Austria has a specific position in the process of the Eastern enlargement of the EU. On the one hand, Austria can gain more than the other EU countries in the long run. On the other hand, adjustment costs, which are directly associated with integration gains, may also be higher in Austria than in other countries in the short run.

OeNB Activities
Lectures organized by the Oesterreichische Nationalbank 
Nominal-Real Trade-Offs and the Effects of Monetary Policy:
The Romanian Experience – Cristian Popa 
Russia between Two Elections:
The Future of the Economy in the Balance – Anita Tiraspolski 
Recent Developments in the Monetary Sphere in Slovenia – Uros Cufer 
Recent Developments in the Hungarian Financial Sector – Ja«nos Kun 
The "East Jour Fixe" of the Oesterreichische Nationalbank -

A Forum for Discussion 
Exchange Rate Policy in Poland from 1990 to 1999: Success and Underperformance – Domenico Mario Nuti 
The Financial Crisis in Russia: What Can Be Done? – Dalia Marin
Economic Behavior of Russian Households Before and After the Crisis – Christian Haerpfer 
Olga Radzyner Award for Scientific Work on Monetary and Finance Themes for Young Economists from Central, Southeastern and Eastern European 
Transition Economies – Invitation to Submit Applications 
Technical Cooperation of the OeNB with Central and Eastern European Transition Countries

Statistical Annex
Compiled by Andreas Nader
Gross Domestic Product 
Industrial Production 
Unemployment Rate 
Consumer Price Index 
Trade Balance 
Current Account 
Total Reserves Minus Gold 
Central Government Deficit 
Gross Debt in Convertible Currencies 
Exchange Rates 
Discount Rates