Monetary Policy in the Soviet Union: Empirical Analyses of Monetary Aspects of Soviet Economic Development

232 Pages·2017·4.09 MB·English

by  Yasushi Nakamura (auth.)

Monetary Policy
in the Soviet Union
Empirical Analyses of Monetary Aspects
of Soviet Economic Development
Yasushi Nakamura
Monetary Policy in the Soviet Union
Yasushi Nakamura
Monetary Policy in
the Soviet Union
Empirical Analyses of Monetary Aspects
of Soviet Economic Development
Yasushi Nakamura
Yokohama, Japan
ISBN 978-1-137-49416-0 ISBN 978-1-137-49418-4 (eBook)
DOI 10.1057/978-1-137-49418-4
Library of Congress Control Number: 2017940602
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P
reface
A quarter of century has passed since the Soviet economy collapsed.
Interest in the Soviet economy seems to be waning, although the new
Russian economy is attracting continuous attention. I started studying
the Soviet economy as a postgraduate student in 1980 when the Socialist
system was still towering despite ominous signs of stagnation and disin-
tegration. Over the next 10 years, the entire socialist system abruptly fell
apart; the subject of my study disappeared. Frankly, my interest in the
Soviet economy had also been waning after its collapse, even though I
always felt that I had only partially finished my study. Important ques-
tions, such as whether the Soviet economy was inherently unsustainable,
whether the Soviet strategy for economic development was applicable to
other economies, and what determined the timing of the systemic col-
lapse of 1990, did not seem to have been fully answered. Although these
questions lingered in my mind, it seemed difficult to empirically investi-
gate these questions, because relevant Soviet economic data was lacking.
The opening-up of Soviet archives was indeed a revelation on the ways
to study the Soviet economy further. To a scholar who had been strug-
gling with scant, unsystematic Soviet economic data, the archives, now
open to the public, seemed like a veritable treasure trove. Later, I under-
stood that the Soviet archives are comparable to a huge treasure island
where it was difficult to locate the treasures. However, I may have had
beginner’s luck as I found data both from original archive materials and
from publications collecting archive materials to build a minimum data
set for the analyses in this book.
v
vi PREFACE
This book approaches the Soviet economy from a monetary perspec-
tive and uses new data and methods. I do not believe that the different
approach and new data and methods have fundamentally changed the
previous understanding of Soviet economy; rather, they have strength-
ened and supplemented this previous understanding. In addition, this
book sheds new light on the image of the Soviet economy: The Soviet
economy was fundamentally unsustainable because it lacked a function-
ing mechanism to manage fiat money. It seems almost impossible to
establish a mechanism to manage fiat money, which can coexist with an
administrative command economy that is functioning by material plan-
ning. Soviet authorities and economists had never been successful in
answering how to manage fiat money under material planning. I do not
have any idea how to manage fiat money without using market mecha-
nism either.
If more data become available, it would be possible to analyze the
Soviet economy more thoroughly using rigorous methods; even quan-
titative studies that compare long-term economic development in the
Soviet Union with that in other countries might become possible. The
Soviet economy was a huge experiment that used an entire socioeco-
nomic system as the test bed. I believe that the potential of Soviet eco-
nomic studies to contribute to the advancement of general economics is
still large.
This project on Soviet monetary management was, in a way, a spin-off
of a larger project on Russian historical statistics. This larger project is, in
turn, part of an even larger project by Hitotsubashi University on Asian
historical statistics, which includes 10 Asian countries, the Central Asian
region, and Russia. I am deeply indebted to the head of the Russian his-
torical statistics research group, Masaaki Kuboniwa, and the members of
the group, Ken Ishikawa, Kazuhiro Kumo, Sadayoshi Ootsu, Masayoshi
Shida, Manabu Suhara, Shinichiro Tabata, Tomoko Tabata, and Akira
Uegaki, for discussions, comments, data, and information. I am grate-
ful to Kyoji Fukao, Konosuke Odaka, and Osamu Saito, the project
leaders of Asian historical statistics, for their comments and supports.
I also thank Iikka Korhonen, director of the Bank of Finland Institute
for Economies in Transition (BOFIT), for hosting me as a visiting fel-
low and for discussions and comments, and Laura Solanko of BOFIT for
helpful comments and advice on Soviet foreign trade. Discussions with
Prabir Bhattacharya, Phillip Hanson, Paul Hare, Stefan Hedlund, and
Byung-Yeon Kim were indispensable. Special thanks go to Vice-Director
PREFACE vii
Dr. Sergei Deogtev of the Russian State Archive of Economy (RGAE)
and Dr. Elena Katasonova of the Russian Academy of Science for their
kind support for my work at the RGAE.
This book is partially based on my previous papers: Chap. 3 uses
“Productivity versus elasticity: a normalized constant elasticity of sub-
stitution production function applied to historical Soviet data,” Applied
Economics, 47, pp. 5805–5823, 2015; Chap. 4 uses “Did the Soviet
command economy command money? a quantitative analysis,” Europe-
Asia Studies, 63(7), pp. 1133–1156, 2011; Chap. 5 uses “Soviet bank-
ing, 1922–1987: an analysis of Gosbank balance sheets,” Comparative
Economic Studies, 55(1), pp. 167–197, 2012; and Chap. 6 uses “Money
supply and foreign trade taxes in the Soviet Union: an international com-
parison using new Soviet data,” Journal of European Economic History,
XLIV, pp. 85–120, 2015. Readers who are interested in the techni-
cal details of the methods and the data used in this book may consult
the papers. I thank the publishers for their generous copyright arrange-
ments. This work was financially supported by the Japan Society for
the Promotion of Science (JSPS) Grants-in-Aid for Scientific Research
(KAKENHI), Grant Number 15H01959.
Yokohama, Japan Yasushi Nakamura
c
ontents
1 Introduction 1
2 Historical Background of the Soviet Monetary Policy 13
3 Soviet Productivity Growth 45
4 Performance of Soviet Cash Money Management 75
5 Soviet Banking and Non-cash Money Management 99
6 Money Supply and Soviet Foreign Trade 125
7 Soviet Monetary Policy and Government Debts 151
Appendix: Soviet Data 191
Notes and Sources 199
References 213
Index 219
ix
a
bbreviations
General Terms
CBR the Central Bank of the Russian Federation
CES Constant Elasticity of Substitution
CIA the Central Intelligence Agency
CMEA the Council for Mutual Economic Assistance
DIC Deviance Information Criterion
FTO Foreign Trade Organization
FYP Five-Year Plan
GARF Gosudarstvennyi Arkhiv Rossiiskoi Federatsii (the State Archive
of the Russian Federation)
GNP Gross National Product
GOF Gross Output of Foreign trade
IMF the International Monetary Fund
MCMC Markov Chain Monte Carlo
NEP the New Economic Policy
OECD the Organization for Economic Co-operation and Development
PNI Produced National Income
RGAE Rossiiskii Gosudarstvennyi Arkhiv Ekonomiki (the Russian State
Archive of Economy)
RSFSR the Russian Soviet Federative Socialist Republic
SFEs Special Foreign Trade Earnings
SNA the System of National Accounts
SSSR Soyuz Sovetskikh Sotsialisticheskikh Respublik (the Union of Soviet
Social Republics)
TFP Total Factor Productivity
xi
xii ABBREVIATIONS
TsSU Tsentral’noe Statisticheskoe Uplavlenie (the Central Statistical
Administration)
TsUNKhU Tsentral’noe Uplavlenie Narodonokhzoiaisvennogo Ucheta (the
Central Administration of National Economic Accounting)
Abbreviated Labels of the Data Series
BL All bank loan
CC Cash in circulation
CE Credits to the economy
CFG Credits to the foreign governments
CG Credits to the government
CH Change in cash held by the household sector
CNS Consumption expenditure of the household sector
CTT Custom tax
E Export in domestic ruble
d
E Export in foreign trade ruble
f
FA Foreign assets
FL Foreign liabilities
GBSF S ecret financing of state budget through Gosbank’s purchases
of government bonds
GIPa Actual gross industrial production
GIPp Planned gross industrial production
GOF Gross output of foreign trade
HDP Household deposits at Sberkassa
HGB Government bonds held by the household sector
ILPa Actual industrial labor productivity
ILPp Planned industrial labor productivity
LE Liabilities to the economy
LG Liabilities to the government
MI Monetary income of the household sector
MIWa Actual average monthly industrial wage
MIWp Planned average monthly industrial wage
M Import in domestic ruble
d
M Import in foreign trade ruble
f
NPNI Nominal produced national income
RPNI Real produced national income
RSa Actual retail sales
RSp Planned retail sales
SBE Actual state budget expenditure on the economy
SBEp Planned state budget expenditure on the economy
SBFI Planned state budget expenditure on the state capital investment
SCI Planned state capital investment