Publication detail

The Pros and Cons of Banking Socialism

Author(s): doc. PhDr. Martin Gregor Ph.D.,
Type: IES Working Papers
Year: 2007
Number: 3
Published in: IES Working Paper 2007/03
Publishing place: Prague
Keywords: privatization, banking, transition
JEL codes: D72, D78, E62, H20
Suggested Citation: Gregor, M. (2007). “ The Pros and Cons of Banking Socialism. ” IES Working Paper 3/2007. IES FSV. Charles University.
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: When nominal wage rigidity is large, and banking sector oligopolistic, the benevolent government may prefer to regulate interest rates to boost labor demand. A government of a transition economy may postpone bank privatization to keep credit provision under control, as long as inefficiencies of state ownership are not prohibitive. We model a transition economy where the government initially owns enterprises as well as banks. The economy features constant wage, and strong market power of banks. Under these conditions, we identify when the government has incentive to privatize enterprises and/or banks. We derive conditions under which the banking socialism (the government owns banks, but privatizes enterprises) dominates other institutional modes: socialism, industrial socialism, and capitalism.
Downloadable: WP 2007_3 Gregor


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