Directed lending: Is it an efficient tool to modernize the economy?

30.03.2013 | Economy | Kiryl Haiduk and Dmitry Kruk, BEROC.,

Over the last couple of years the growth rate of potential Belarus’ GDP declined, and the tendency for high and sustainable GDP growth in Belarus is increasingly compromised.

The government intends to revive economic growth by the policy of ‘modernization’, in practice pinned down to a drastic increase in the volume of capital investment, including by the means of directed lending. As the pre-crisis macroeconomic imbalances are at least partially cured, the government seems to be eager to apply a familiar policy tool. However, the empirical analysis of the effects of directed lending on total factor productivity and economic growth casts serious doubts on the efficiency of this policy tool.

You can download the full text of the analysis performed by the BEROC analysts here.

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Directed lending: Is it an efficient tool to modernize the economy?

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