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The Outcome of Directed Lending in Belarus: Mitigating Recession or Dampening Long-Run Growth?


  • Dzmitry Kruk
  • Kiryl Haiduk


This study analyzes the effects of directed lending upon total factor productivity and GDP growth in Belarus over the period of 2000-2012. In theory, directed lending can enhance physical capital accumulation and make the access to credit easier, but empirical studies often show that it leads to unproductive hoarding of capital and financing of lower-yielding projects. This study seeks to explore which of these effects has dominated in the Belarusian economy during a last decade. We find that expansion of directed lending has negatively affected TFP dynamics and thus negatively contributed to the rates of economic growth. However, the detected negative impact of directed lending on total factor productivity was enfeebled by the expansion of market loans. In the future, this link between directed and market loans could cease to exit due to liquidity constraint commercial banks face. If continued, directed lending may cause a more severe negative impact on TFP, and consequently undermine long-run economic growth.

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  • Dzmitry Kruk & Kiryl Haiduk, 2013. "The Outcome of Directed Lending in Belarus: Mitigating Recession or Dampening Long-Run Growth?," BEROC Working Paper Series 22, Belarusian Economic Research and Outreach Center (BEROC).
  • Handle: RePEc:bel:wpaper:22

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    Cited by:

    1. Alex Miksjuk & Sam Ouliaris & Mikhail Pranovich, 2015. "The Game of Anchors; Studying the Causes of Currency Crises in Belarus," IMF Working Papers 15/281, International Monetary Fund.
    2. Dzmitry Kruk & Kateryna Bornukova, 2013. "Belarusian Economic Growth Decomposition," BEROC Working Paper Series 24, Belarusian Economic Research and Outreach Center (BEROC).
    3. Amat Adarov & Kateryna Bornukova & Rumen Dobrinsky & Peter Havlik & Gabor Hunya & Dzmitry Kruk & Olga Pindyuk, 2016. "The Belarus Economy: The Challenges of Stalled Reforms," wiiw Research Reports 413, The Vienna Institute for International Economic Studies, wiiw.

    More about this item


    Belarus; financial repression; directed lending; economic growth; transition economies; cointegration; vector error-correction model;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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