Monetary Policy and Economic Development in Transitional Economies

The extent to which a central bank can choose and implement appropriate monetary, financial stability and payment system policies varies considerably across countries. In the transitional economies, expertise formed one serious constraint in the early years. Not only was expertise scarce in the central bank but also within the financial sector as a whole. Rapid transformation from a monobanking system into a two-tier banking system faced not only lack of expertise and experience but also little understanding of fundamental economic concepts such as opportunity cost and time value of money.