Romanian Financial Markets

Abstract

Romania was a centrally planned economy until 1990. Over 1950 to 1975 large-scale government investments were made into heavy industry and hence productivity increased. Performance was measured against required production quotas rather than quality products that could be exported (Bacon, 2004). Compared to most other Central and Eastern European countries, Romania had little prior experimentation with market practices, so when the change occurred it was even more significant (Bacon, 2004). Romanians initially enjoyed their new economic freedoms and imported consumables previously not permitted. Inflation increased and workers sought higher wages, with consequential negative effects on output (Daianu, 2004). The government also expended large amounts, particularly foreign exchange reserves, prior to elections. Meanwhile, supranationals, such as the International Finance Corporation (IFC), World Bank, International Monetary Fund (IMF) and European Bank for Reconstruction and Development (EBRD), all funded Romania's burgeoning market economy. In 1993, a pyramid-type scheme offering huge returns for money invested for 3 years blossomed and became so large it rivalled gross domestic product (GDP) at the time. Hence the 1990s was a period of instability despite efforts to transform the economy to market practices.

Citation

Skully, M. and Brown, K. (2006), "Romanian Financial Markets", Batten, J.A. and Kearney, C. (Ed.) Emerging European Financial Markets: Independence and Integration Post-Enlargement (International Finance Review, Vol. 6), Emerald Group Publishing Limited, Leeds, pp. 281-321. https://doi.org/10.1016/S1569-3767(05)06012-7