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Financial crisis, economic recovery and banking development in former Soviet Union economies

Huang, Haizhou, Marin, Dalia and Xu, Cheng-Gang (2003) Financial crisis, economic recovery and banking development in former Soviet Union economies. 42. Centre for Economic Policy Research, London, UK.

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Abstract

This Paper explains both the onset of the financial crisis in 1998 and the striking economic recovery afterwards in Russia and other former Soviet Union (FSU) economies. Before the crisis banks do not lend to the real sector of the economy, and firms use non-bank finance ? including trade credits and barter trade ? to finance production. The banking failure arises due to the coexistence of adverse selection in a lemons credit market jointly with high government borrowing. The collapse of the treasury bills market in the financial crisis of August 1998 triggers a change in banks’ lending behaviour. As a result output recovers which provides initial conditions for banking development.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2003 Haizhou Huang, Dalia Marin and Chenggang Xu
Library of Congress subject classification: H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P34 - Financial Economics
Sets: Collections > Economists Online
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 42
Date Deposited: 05 Jun 2008 13:17
URL: http://eprints.lse.ac.uk/5406/

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