Non-monetary Trade and Differential Access to Credit in the Russian Transition

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.