The Outcome of Directed Lending in Belarus: Mitigating Recession or Dampening Long-Run Growth?

Dzmitry Kruk and Haiduk Kiryl ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: This study analyzes the effects of directed lending upon total factor productivity and GDP growth in Belarus over the period of 2000–2012. In theory, directed lending can enhance physical capital accumulation and make the access to credit easier, but empirical studies often show that it leads to unproductive hoarding of capital and financing of lower-yielding projects. This study seeks to explore which of these effects has dominated in the Belarusian economy during a last decade. We find that expansion of directed lending has negatively affected TFP dynamics and thus negatively contributed to the rates of economic growth. . However, the detected negative impact of directed lending on total factor productivity was enfeebled by the expansion of market loans. In the future, this link between directed and market loans could cease to exit due to liquidity constrained commercial banks face. If continued, directed lending may cause a more severe negative impact on TFP, and consequently undermine long-run economic growth.

JEL-codes: C32 O16 P34 (search for similar items in EconPapers)
Date: 2013-02-04
New Economics Papers: this item is included in nep-fdg and nep-tra
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Citations: View citations in EconPapers (4)

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Working Paper: The Outcome of Directed Lending in Belarus: Mitigating Recession or Dampening Long-Run Growth? (2013)
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