Financial Crisis, Economic Recovery and Banking Development in Russia, Ukraine, and Other FSU Countries

By Dalia Marin, Haizhou Huang, Chenggang Xu

June 1, 2004

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Dalia Marin, Haizhou Huang, and Chenggang Xu. Financial Crisis, Economic Recovery and Banking Development in Russia, Ukraine, and Other FSU Countries, (USA: International Monetary Fund, 2004) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Bank credit, Banking, Commercial banks, Financial crises, Financial institutions, Government securities, Government securities yields, Money

Keywords: Baltics, Bank credit, Bank debt, Bank lending, Banking development, Banking sector, Borrowing firm, Commercial banks, Europe, Financial crisis, Firms borrowing, Government securities, Government securities yields, Government security, Institutional trap, Low quality firm, NBF firm, Opportunities firm, Quality firm, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/105
Stock No:

WPIEA1052004
ISBN:

9781451852851
ISSN:

1018-5941

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