Financial Crisis, Economic Recovery, and Banking Development in Russia, Ukraine and Other FSU Countries
International Monetary Fund (IMF)
Ludwig-Maximilians-Universität Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)
University of Hong Kong
IMF Working Paper No. WP/04/105
This paper provides a unified analysis for the onset of the 1998 financial crisis and the strong economic recovery afterward in Russia and other former Soviet Union countries. Before the crisis a banking failure arose owing to the coexistence of a lemons credit market and high government borrowing. In a lemons credit market low credit risk firms switched from bank to nonbank finance, including trade credits and barter trade, generating an externality on banks` interest rates. The collapse of the treasury bills market in the financial crisis triggered a change in banks` lending behavior, providing initial conditions for banking development.
Number of Pages in PDF File: 37
Keywords: banking development, institutional trap, financial crisis
JEL Classification: G3, G21, P34, O16, D82working papers series
Date posted: February 15, 2006
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