Give Macroeconomic Stability and Growth in Russia a Chance. Harden Budgets by Eliminating Non-Payments

Posted: 26 Oct 2002

See all articles by Brian Pinto

Brian Pinto

Independent

Vladimir Drebentsov

World Bank - Moscow Office

Alexander Morozov

affiliation not provided to SSRN

Abstract

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).

JEL Classification: E61, E63, E65, P26

Suggested Citation

Pinto, Brian and Drebentsov, Vladimir and Morozov, Alexander, Give Macroeconomic Stability and Growth in Russia a Chance. Harden Budgets by Eliminating Non-Payments . Economics of Transition, Vol. 8, No. 2, July 2000. Available at SSRN: https://ssrn.com/abstract=264807

Brian Pinto (Contact Author)

Independent ( email )

No Address Available
United States

Vladimir Drebentsov

World Bank - Moscow Office ( email )

Economics Unit
Moscow
Russia

Alexander Morozov

affiliation not provided to SSRN

No Address Available

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