Impact of Institutions on Lending
Dr. Chuluunbaatar Enkhzaya promovierte bei Prof. Dr. Alexander Karmann am Lehrstuhl für Geld, Kredit und Währung der Fakultät Wirtschaftswissenschaften der Technischen Universität Dresden. Sie ist als freiberufliche Beraterin für Regierungen und Unternehmen tätig.
Impact of Institutions on Lending
Introduction (p. 1)
When In the early 1990s the post-communist countries implemented reform programmes to transform their previously centrally-planned economies into marketbased economies, an unprecedented "transition" was set in motion and the economies in transition (EIT) emerged. This change of economic co-ordination should lead to a more efficient use of resources with higher economic output. Closely monitored and financially supported by international organisations, such as the International Monetary Fund (IMF), the process of transition consisted of three main elements: privatisation, liberalisation and stabilisation.
It was assumed that liberalisation of prices and the creation of private property would result in the establishment of many enterprises, and competition between these would lead to an efficient allocation of resources and stabilisation. Yet these big bang reforms implying rapid transition process were nevertheless followed by so-called transition crises - especially in south-east European and central Asian EITs - from which many countries are still suffering.
The liberalisation of prices in Mongolia led to immoderately high inflation, peaking at 325 percent in 1992 and remaining in double-digits until the late 1990s. Aggregate output subsequently started to decline, reaching its lowest level in 1995. Stagnation continued long into the late 1990s before picking up to record a growth rate of 3.9 percent in 2002. Whereas the inflation rate has fallen and growth revived in the meantime, the loss of confidence in the national currency, the Tugrug, is proving difficult to restore. Some studies in this context put the Dollarisation ratio in Mongolia at up to 80 percent (Herr, 2003).
The low degree of macroeconomic achievement was put down to the absence of responsive microeconomic reforms. The global big bang strategy based on Neoclassic theory consisted of macroeconomic policies which assume a market mechanism that functions automatically, as if the market suddenly materialises by magic. The strategy neither considered the time needed to establish the market, nor dealt with this process itself. However, if the economic agents in EITs - enterprises, banks, households, the state - do not behave as economic agents do in market economies, the market mechanism cannot operate as it is supposed to.
Thus microeconomic reforms aimed at establishing the market and inducing supposed market-oriented behaviour need to be adjusted so that macroeconomic reform policies can realise the initial expectations. The economic literature on transition processes deals for the most part with the macroeconomics of transition, yet conditions at the microeconomic level are unfortunately almost ignored or taken for granted.
The existing models - be these Keynesian, Neo-classic or Monetarist - believe in creating market economies overnight. New Institutional Economics (NIE) includes factors constraining the behaviour of economic agents - institutions - into the corpus of Neo-classic theory and legitimates them as objects of economic analysis. Defined as the "rules of the game" by North (1990: 4), institutions constrain individual behaviour and thus define the outcomes which result from individual action (Schotter, 1986: 117).
Both formal institutions - laws and regulations - and informal institutions, such as codes of conduct, canalise individual behaviour. In a world of positive transaction costs - due to market imperfections inter alia - institutions and their design are the root of many problems in the EITs.