In order to get prepared for participation in the class discussion of the questions, write a summary of the interview in Ex. 10. Follow the plan suggested below:

1. The Hungarian stabilization program.

(Use; austerity, painful, controversial not very popular, negativeimpact on living standards, spending cuts, privatization, FDT)

2. The measures taken.

(Use: to impose, exchange rate, taxation, to devalue)

3. The immediate results.

4. The situation with current-account deficit.

(Use: to be in line with, privatization, to meet the target, capital inflows, to cause problems, to succeed in reducing, open-market operations)

5. Operations of the Central Bank to find resources and stabilize the banking system.

5. Stock market.

(Use: to curb inflation, yields on government security membership, secondary market, rescheduling, maturity, spreads, to be confident)

7. Problems with the social security system.

(Use: to contain the deficit, to collect arrears, to owe) 8. Changes for the better in Hungary.

(Use: to deny, profitability, to do well, market forces)

Ex. 11. Prepare a short talk on the following:

1. The structure of the NBU (Bank of England, the Federal Reserve System), how it provides services to banks, stabilizes the banking system and shares in ecnomic policy-making.

1. The monetary policy pursued in Russia at the present time.

2. Define money and list the assets used as money in different countries.

Ex. 12. Scan the foreign financial newspapers available to you and look for articles about banking in Ukraine and the role of the Central Bank. Present the information in class and comment on it.

READING PRACTICE

Ex. 13.

a) Read the article quickly to find the answer to the following question: Why are serious banking problems inevitable in transition economies?

b) Reread the article more carefully and underline the parts where conditions for avoiding banking problems in transition economies are mentioned.

The number of countries experiencing significant banking problems has increased substantially in recent years. It should be stressed that the problems are hitting industrial and developing countries alike.

The problems arose from weaknesses and distortions in the banking systems and above all from the failure of the central banks to successfully fulfil their principal function of maintaining economic stability through a credible and responsible monetary policy.

Serious banking problems were almost inevitable in transition economies, because uncontrolled and unsupervised growth in commercial bank lending quickly unmasked hidden problems which brought about crises in many of the former centrally-planned economies.

Although the experiences of different countries differ according to each country's circumstances, the following general conclusions with regard to transition economies can be made:

• One of the most important conditions for avoiding serious banking crises is the pursuit of stable macroeconomic policies, which must be priority number one in transition economies.

• The transition process implies a dramatic change in the role and instruments of monetary policy. One cannot deny the fact that by the end of 1994, most countries in transition had shifted, to varying degrees, to market-oriented (indirect) instruments of monetary policy. For example, as a result of reforms in the monetary, exchange and banking areas, the CIS countries have achieved a market-based determination of interest rates.

• Competition in the banking system is important. Entry of foreign banks may offer a means to foster competition, but proliferation of banks is not necessarily a good thing in all countries. Some new banks may be weak and poorly managed. Systematic bank insolvencies have typically been a combination of poor lending decisions, inadequate licensing and supervision procedures. It is very costly and counterproductive to keep unhealthy banks alive. The lender-of-last-resort function involves net injections of liquidity into the economy and thus has a monetary impact that conflicts with the chief objective of monetary policy, that of maintaining stability and low inflation.

Given the small size of the domestic monetary sector, the banking sector is highly sensitive to even minor changes in capital flows. Rapid and uncontrolled increases in banking assets should be discouraged. In some countries the cost of sterilizing capital inflows remains an issue.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
experience	испытывать, знать по опыту	випробовувати, знати по досвіду
hit	поражать, ударять	вражати, ударяти
alike	подобно, одинаково; в равной мере	подібно, однаково; рівною мірою
credible	заслуживающий доверия	той, хто заслуговує довіри
responsible	ответственный	відповідальний
inevitable	неизбежный	неминучий
unmask	вскрывать	розкривати
pursuit of stable macroeconomic policies	проведение стабильной макроэкономической политики	проведення стабільної макроекономічної політики
hidden	скрытый	прихований
one cannot deny	нельзя отрицать	не можна заперечувати
foster	поощрять	заохочувати
proliferation	распространение	поширення
insolvency	неплатежеспособность	неплатоспроможність
licensing	лицензирование	ліцензування
conflict	входить в противоречие	входити в суперечність
sensitive	восприимчивый, чувствительный	сприйнятливий, чутливий
capital flows	финансовые потоки	фінансові потоки

Ex. 14. a) Read the article to find the characteristics of a country's economic system that are taken into account when an exchange rate policy is determined.

b) Reread the article and find the options for an exchange rate policy different countries have these days. Say what they imply.