Cash Constraints and Credit Corsets: The Chimera of Interenterprise Credit
Author: Timothy Condon and S. Ramachandran Date: 3/1/1995 (PDF, 200KB)
The buildup of interenterprise credit in many Central and Eastern European countries is often seen as a problem that requires a government bailout. Timothy Condon and S. Ramachandran show that arrears rise only temporarily, as the hard budget constraint bites, and then plateau. Therefore, they argue that while governments should monitor the stock of debt to see how quickly enterprises are adjusting, they shouldn't be panicked into bailing them out.