Posted: 7 Dec 2000
This paper identifies and investigates conceptual and empirical links among Russia's disappointing growth performance of the mid-1990s, its costly and eventually unsuccessful stabilization, the macroeconomic meltdown of 1998 and the spectacular rise of non-payments. Non-payments developed into a system that flourished in an atmosphere of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation and a microeconomic policy of bailing-out enterprises through soft budget constraints. It embodies a large volume of untargeted, implicit subsidies in the order of 7-10 per cent of GDP, which has stifled growth, contributed to the 1998 meltdown through its impact on public debt and made at best a questionable contribution to equity. The overwhelming priority at this point is to dismantle this system, thereby promoting enterprise restructuring and growth, (by hardening budget constraints), and medium-term macroeconomic stability (by reducing the size of the subsidies).
Suggested Citation: Suggested Citation
Pinto, Brian and Drebentsov, Vladimir and Morozov, Alexander, Give Macroeconomic Stability and Growth in Russia a Chance. Economics of Transition, Vol. 8, Issue 2, July 2000. Available at SSRN: https://ssrn.com/abstract=241686