Abstract:Reliable information on small and medium sized enterprises (SMEs) is rare and costly for financial intermediaries. Therefore relationship banking is often considered as the appropriate lending technique. In this paper we offer a theoretical model to analyze relationship banking and the pricing behavior of banks in a Bertrand competition framework with monitoring costs.We show that the lack of reliable information leads to comparably high interest rates even if a long-term relationship between borrower and bank exists. The paper offers a theoretical explanation why SMEs often are faced with borrowing constraints. (91 words)

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After the collapse in the early transition years, saving rates in Eastern European EU-accession countries have recovered strongly. But is private saving in these countries now driven by the same forces as in the EU? A GMM estimator is applied to analyze the determinants of private saving in both country groups. The main results are: saving rates are rather persistent; income growth increases saving, whereas public saving crowds out private saving. There is evidence that in both country groups domestic saving and foreign capital operate at least partly as substitutes, which is an indicator for international financial integration. The longrun effects of income growth and public saving are larger in the EU-15 than in the EU-accession countries.JEL classifications: C33, E21. an anonymous referee for valuable comments.

Abstract:Reliable information on small and medium sized enterprises (SMEs) is rare and costly for financial intermediaries. Therefore relationship banking is often considered as the appropriate lending technique. In this paper we offer a theoretical model to analyze relationship banking and the pricing behavior of banks in a Bertrand competition framework with monitoring costs.We show that the lack of reliable information leads to comparably high interest rates even if a long-term relationship between borrower and bank exists. The paper offers a theoretical explanation why SMEs often are faced with borrowing constraints. (91 words)