Symposium Summary

Within the past year, the Soviet Union and other countries in Eastern Europe have begun a radical transformation from centrally planned to market-oriented economies. As part of this process, these countries have initiated comprehensive economic reforms, including the development of new financial markets and institutions and the creation of independent central banks. and Romania exchanged views with Western experts on the role of central banks during and after the transition to market-oriented economies. This introduction highlights the issues raised at the symposium. The first section provides an overview of the challenges facing policymakers in the newly liberalized economies and identifies the main issues discussed at the conference. The following four sections summarize the viewpoints of the program participants and their policy recommendations. Overview The purpose of the Bank's symposium was to open a dialogue between policymakers in the East and West. As part of the exchange of information and ideas, policymakers in the Soviet Union and Eastern Europe described economic and financial reforms currently under way in their countries and identified problems to be overcome. In response, Western experts discussed the role of central banks in market-oriented economies and suggested possible solutions to these problems. Challenges in emerging market-oriented economies Policymakers in the Soviet Union and Eastern Europe have a common goal-to transform their economies from a system in which resources are allocated by central planning to a system in which resources are allocated by prices established in competitive markets. Reaching this goal will require considerable institutional changes. Legal systems will have to be altered to establish individual property rights, state ownership of resources will have to be transformed into private ownership, and accounting systems will have to be introduced to accurately determine the financial status of business. Most important, households and firms will have to adapt to a world in which they gain the economic freedom to choose but lose the protection of the state against job loss and bankruptcy. A key element of the reform process in each of these countries is the development of financial markets and institutions. Under central planning, commercial banks and other private financial intermediaries played no role in the allocation of savings and investment. Moreover, the state or central bank served only to channel funds to state-owned enterprises according to the central plan and to finance state deficits by printing money. Currently the Soviet Union and countries of Eastern Europe are in the …