The Efficiency Of Financial Intermediation In Transition Economies Study

Financial market and financial intermediary are the two ways of capital distribution in the financial system. The discussion of efficiency of financial intermediation compares with it of financial market, dividing it into two sides: one is internal efficiency which means if financial intermediation can finish a deal with shortest time and cheapest cost; the other is external efficiency which means if the price of secondary security responds to information and optimize capital distribution.We can use different ways to measure the internal and external efficiency. Without considering time factors, internal efficiency can be measured by calculating cost including transaction cost, participation cost and delegation cost. External efficiency can be measured by the efficiency of capital distribution if price sensitivity omitted, then separate the efficiency of financial intermediation from the whole efficiency of financial system.Comparing with mature market-oriented economy, in transitional economy the internal efficiency of financial economy has different cost of transaction, participation and delegation, while it also has institutional cost which decreases the internal efficiency. In transitional economies the price of secondary security is not sensitive to price, so we only use actual data in transitional economy to calculate its external efficiency, and result shows it is necessary to improve the external efficiency of financial intermediation.