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Money Demand, Bank Credit, and Economic Performance in Former Socialist Economies

Author

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  • Manmohan S. Kumar
  • Guillermo Calvo

Abstract

This paper examines factors determining the allocation of bank credit to the enterprise sector, and the implications of this allocation for aggregate supply and macro-economic performance, in the former socialist economies. It first develops a model to explain how changes in demand for money by the household sector directly influence the availability of working capital, which in turn determines aggregate output and employment. It then examines factors influencing the allocation of bank credit between enterprises and other borrowers, in particular the government. Finally, the paper discusses relative merits of bank finance and equity capital in financing medium- and long-term investment, and constraints on the development of efficient equity markets.

Suggested Citation

  • Manmohan S. Kumar & Guillermo Calvo, 1994. "Money Demand, Bank Credit, and Economic Performance in Former Socialist Economies," IMF Working Papers 94/3, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:94/3
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    Cited by:

    1. Buiter, Willem H., 1996. "Aspects of Fiscal Performance in some Transition Economies under Fund-supported Programs," CEPR Discussion Papers 1535, C.E.P.R. Discussion Papers.
    2. Coricelli, Fabrizio, 1996. "Finance and growth in economies in transition," European Economic Review, Elsevier, vol. 40(3-5), pages 645-653, April.
    3. Bulir, Ales, 1998. "Business Cycle in Czechoslovakia under Central Planning: Were Credit Shocks Causing It?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 226-245, June.
    4. Patrick Conway, 2002. "Bridging ???the Great Divide???: Countering Financial Repression in Transition," William Davidson Institute Working Papers Series 510, William Davidson Institute at the University of Michigan.
    5. Denisova Irina, 2000. "Credit Channel of Monetary Transmission: the Role of Industrial Interenterprise Arrears," EERC Working Paper Series 99-12e, EERC Research Network, Russia and CIS.
    6. Raiser, Martin, 1994. "Ein tschechisches Wunder? Zur Rolle politikinduzierter Anreizstrukturen im Transformationsprozeß," Kiel Discussion Papers 233, Kiel Institute for the World Economy (IfW).
    7. Martina Copelman & Alejandro M. Werner, 1995. "The monetary transmission mechanism in Mexico," International Finance Discussion Papers 521, Board of Governors of the Federal Reserve System (U.S.).
    8. Luoana D. Santarossa, 2001. "Arrears as a Sign of Financial Repression in Transition Economies - The Case of Romania," CERT Discussion Papers 0104, Centre for Economic Reform and Transformation, Heriot Watt University.
    9. Barran, Fernando & Kegels, Chantal, 1996. "Channels of Monetary Policy in a Transition Country: Hungary," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Keywords

    Demand for money; Investment; interest; bank credit; loans; debt; bank loans;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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