Money Demand, Bank Credit, and Economic Performance in Former Socialist Economies

January 1, 1994

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Manmohan S. Kumar, and Guillermo Calvo. Money Demand, Bank Credit, and Economic Performance in Former Socialist Economies, (USA: International Monetary Fund, 1994) accessed November 21, 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 examines factors determining the allocation of bank credit to the enterprise sector, and the implications of this allocation for aggregate supply and macro-economic performance, in the former socialist economies. It first develops a model to explain how changes in demand for money by the household sector directly influence the availability of working capital, which in turn determines aggregate output and employment. It then examines factors influencing the allocation of bank credit between enterprises and other borrowers, in particular the government. Finally, the paper discusses relative merits of bank finance and equity capital in financing medium- and long-term investment, and constraints on the development of efficient equity markets.

Subject: Bank credit, Banking, Commercial banks, Credit, Demand for money, Financial institutions, Inflation, Money, Prices

Keywords: Adverse selection, Bank credit, Bank credit, Broad money, Commercial bank, Commercial banks, Credit, Demand for money, Eastern Europe, Enterprise liquidity, Gross investment, Inflation, Insolvent firm, Liquidity accumulation, State enterprise, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/003
Stock No:

WPIEA0031994
ISBN:

9781451841831
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 41, No. 2, June 1994.

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