The unusual rise and fall of non-monetary trade (NMT) in the Russian transition has been a subject of heated debates. Yet, this phenomenon is often viewed as a peculiarity that one cannot explain by economic considerations alone. In this paper we show that the resort to NMT was a rational, albeit spontaneous, reaction of industrial enterprises to the outflow of liquidity, which in turn was precipitated by the combination of persistent budgetary deficit and strict monetary policy. The IMF pledge to stand by if the government became insolvent made this policy credible. Several mechanisms contributed to the development of credit rationing of enterprises. First, the abandonment of implicit guarantees on loans extended to enterprises by the Central Bank of Russia prompted commercial banks to shift credit to other groups of borrowers. Second, when the Federal Government moved to finance its budgetary deficit through open-market operations, it crowded out commercial credit. Third, public money was transferred predominantly to households who partially lent it back to the government. Fourth, the policy of low exchange rate kept the balance of payment close to zero, which prevented the monetary base from growing. The default of August 1998 constituted a clear structural break. It prompted modifications in monetary and fiscal policies. The collapse of the market for state securities led to widespread bank failures. The CBR abandoned its policy of non-intervention in fiscal affairs and cleared debts that the governments and enterprises accumulated. In addition, money supply expanded because increased inflows of foreign currency were incompletely sterilized. The combination of a lesser government presence at credit markets, clearance of debts, and increase in money supply injected liquidity in domestic producers and they abandoned NMT. Statistical evidence supports the claim that NMT was caused by credit rationing experienced by enterprises. A GLS model with four explanatory variables (and dummies accounting for a structural break of August 1998) explains more than 90% of monthly changes in NMT for the period of February 1992 – December 2001. The collapse of the market for government loans appears to be the most significant event accountable for the structural break.
展开▼
