This dissertation examines the phenomenon of foreign bank entry and its impact on the capacity of states to pursue their goals in the financial sector. In contrast to the extensive literature on international short-term capital flows, political economists have neglected this important and growing aspect of globalization. Hungary and Poland are two similar cases with banking sectors dominated by foreign banks. They are also engaged in postcommunist reform. Yet, their capacity to regulate and effectively transform their banking sector varies considerably. Based on numerous interviews of the countries' finance ministers, central bankers, regulators, and foreign and domestic bank managers, this dissertation argues that the sequencing of state building and foreign bank entry affects the structure of state-bank relations and thus the state's transformative capacity in the financial sector.
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