ABSTRACT
Jeffrey Sachs posited a strong causal relationship between inflation and money growth, noting that money growth had been about 10 percent per month during the first few months of 1992, and that "price inflation fell to around that rate by midyear". The flood of new money from the Central Bank that was intended to keep state enterprises in operation was not matched by a comparable effort to stimulate new business or to support existing private businesses. With money provided by the Russian government, Western countries, and the European Bank for Reconstruction and Development, low-interest loans would be provided for private enterprises in the production sector that showed promise of increasing competitiveness in Russian business. Before June, the Central Bank had followed the government's plan to reduce the rate of increase in the amount of money in circulation. Again, salaries went unpaid, although the amount of money in circulation increased by 10 times during 1992.
