Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies

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Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies

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Huang, Haizhou
Marin, Dalia
Xu, Cheng-Gang

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Abstract

This Paper explains both the onset of the financial crisis in 1998 and the striking economic recovery afterwards in Russia and other Former Soviet Union (FSU) economies. Before the crisis banks do not lend to the real sector of the economy, and firms use non-bank finance - including trade credits and barter trade - to finance production. The banking failure arises due to the coexistence of adverse selection in a lemons credit market jointly with high government borrowing. The collapse of the treasury bills market in the financial crisis of August 1998 triggers a change in banks' lending behaviour. As a result output recovers which provides initial conditions for banking development.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3794.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3794

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Paper
- Haizhou Huang & Dalia Marin & Chenggang Xu, 2003. "Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
- Marin, Dalia & Huang, Haizhou & Xu, Chenggang, 2002. "Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies," Discussion Papers in Economics 27, University of Munich, Department of Economics. [Downloadable!]

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G30 - Financial Economics - - Corporate Finance and Governance - - - General
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

This paper has been announced in the following NEP Reports:

NEP-FIN-2003-07-13 (Finance)
NEP-MFD-2003-07-13 (Microfinance)
NEP-RMG-2003-07-13 (Risk Management)
NEP-TRA-2003-07-13 (Transition Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Dalia Marin & Monika Schnitzer, 2000. "Disorganization and Financial Collapse," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
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Other versions:
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Other versions:
- Dalia Marin & Daniel Kaufmann & Bogdan Gorochowskij, 2000. "Barter in Transition Economies: Competing Explanations Confront Ukranian Data," William Davidson Institute Working Papers Series 287, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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Prakash Loungani & Paolo Mauro, 2000. "Capital Flight from Russia," IMF Policy Discussion Papers 00/6, International Monetary Fund.
Other versions:
- Prakash Loungani & Paolo Mauro, 2001. "Capital Flight from Russia," The World Economy, Blackwell Publishing, vol. 24(5), pages 689-706, 05. [Downloadable!] (restricted)
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Other versions:
- Enrico Perotti, 2001. "Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints," William Davidson Institute Working Papers Series 379, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

José Noguera & Susan J. Linz, 2005. "Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia," William Davidson Institute Working Papers Series wp757, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]

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