Impavido, Musalem, and Tressel assess empirically the e The impact on stock market depth and liquidity is impact of contractual savings institutions portfolios nonlinear: it is stronger in countries where corporate (pension funds and life insurance companies) on information is more transparent. securities markets, for example, depth and liquidity in o There is evidence of a significant heterogeneity the domestic stock market, and depth in the domestic among countries: contractual savings have a stronger bond market. They discuss how the institutionalization impact on securities markets in countries where the of savings can modify financial markets through the financial system is market based, pension fund lengthening of securities' maturities.contributions are mandatory, and international The results are the following: transactions in securities are lower. * An increase in assets of contractual savings -The authors do not find that the impact of institutions relative to domestic financial assets has a contractual savings institutions on securities markets is positive impact on the depth of stock and bond markets explained by the overall level of development, education, on average. demographic structure or the legal environment.This paper-a product of the Financial Sector Operations and Policy Department-is part of a larger effort in the department to study the effects of contractual savings on financial markets. Copies of the paper are available free from the

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about dcvelopment issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.In today's financial system, complex financial institutions are connected through an opaque network of financial exposures. These connections contribute to financial deepening and greater savings allocation efficiency, but are also unstable channels of contagion. Basel III and Solvency II should improve the stability of these connections, but could have unintended consequences for cost of capital, funding patterns, interconnectedness, and risk migration.

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Countries in Central, Eastern, and Southeastern Europe (CESEE) experienced a credit boombust cycle in the last decade. This paper analyzes the roles of demand and supply factors in explaining this credit cycle. Our analysis first focuses on a large sample of bank-level data on credit growth for the entire CESEE region. We complement this analysis by five case studies (Latvia, Lithuania, Montenegro, Poland, and Romania). Our results of the panel data analysis indicate that supply factors, on average and relative to demand factors, gained in importance in explaining credit growth in the post-crisis period. In the case studies, we find a similar result for Lithuania and Montenegro, but the other three case studies point to the fact that country experiences were heterogeneous.