An Interpretation of the Russian Financial Crisis

Slay, Ben

doi:10.1080/10889388.1999.10641112

Cited by 13 publications

(8 citation statements)

References 5 publications

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“…Then a severe financial crisis hit in August 1998. The crisis combined a devaluation of the rouble, default on both domestic and foreign debts, and a collapse of the stock market (Brown, 1999;Buchs, 1999;Sapit, 1999;Slay, 1999). Several events preceded the crisis.…”

Section: Introductionmentioning

confidence: 99%

Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net

Lokshin¹,

Ravallion²

2000

Economics of Transition

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We compare welfare indicators for a nationally-representative sample of Russians interviewed shortly after the 1998 financial crisis with data on the same people two years earlier. Both objective and subjective measures reveal a widespread, though not universal, deterioration in welfare. Current expenditures generally contracted more than incomes. Inequality fell. There were both gainers and losers at all levels. The safety net's response fell far short of what was needed to protect living standards, but it did help prevent even greater poverty. Even without better targeting, a modest expansion of the safety net could have prevented an increase in income poverty in the aftermath of the crisis.JEL classification: I32, I38.

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Section: Introductionmentioning

confidence: 99%

Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net

Lokshin¹,

Ravallion²

2000

Economics of Transition

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“…In private conversations, analysts at local investment banks called this the "Davos effect"-Russia's key policymakers were all in Davos, Switzerland, at the time for the annual World Economic Forum.12 Slay (1999). calls this a global repricing of risk.…”

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confidence: 97%

An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals

Kharas¹,

Pinto²,

Ulatov³

2001

eca

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“…This is largely due to the 'relaxation' in macro stringency as a result of the real devaluation, which has led to an improvement in enterprise liquidity. 31 Further, the government has not been able to borrow commercially, and has reaffirmed its desire to stay the course (see Slay, 1999 for an account of the government's behaviour post-meltdown: hyperinflation was avoided but although there has been no reversal, further reform implementation has been on hold). No new net government borrowing and greater pressure on the energy monopolies to pay taxes means a reduction in the ability to finance implicit subsidies.…”

Section: Enterprise Non-payments = F (Macroeconomic Stringency Micromentioning

confidence: 99%

“…Outcomes were -3.4 per cent for 1996, +0.7 per cent for 1997 and -4.9 per cent for 1999. 3 On the meltdown, seeSlay (1999), andKharas, Pinto and Ulatov (2000). On privatization, see, for example,Black, Kraakman and Tarassova (1999).…”

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confidence: 99%

Give Macroeconomic Stability and Growth in Russia a Chance

Pinto¹,

Drebentsov

Morozov

2000

Economics of Transition

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This paper identifies and investigates conceptual and empirical links among Russia's disappointing growth performance of the mid-1990s, its costly and eventually unsuccessful stabilization, the macroeconomic meltdown of 1998 and the spectacular rise of non-payments. Non-payments developed into a system that flourished in an atmosphere of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation and a microeconomic policy of bailing-out enterprises through soft budget constraints. It embodies a large volume of untargeted, implicit subsidies in the order of 7-10 per cent of GDP, which has stifled growth, contributed to the 1998 meltdown through its impact on public debt and made at best a questionable contribution to equity. The overwhelming priority at this point is to dismantle this system, thereby promoting enterprise restructuring and growth (by hardening budget constraints) and medium-term macroeconomic stability (by reducing the size of the subsidies).JEL classification: E61, E63, E65, P26. 299 second, by signalling the credible implementation of reform, dramatically improve the investment climate. Once this process is launched, it will facilitate the more medium-term tasks of institution building, much the same as in Poland. 4 DefinitionsWe define non-payments to include: (i) arrears, or overdue accounts payable, as well as (ii) all forms of non-cash settlement (NCS), including barter, offsets and veksels. 'Barter' is the exchange of goods, either on a bilateral basis (rare), or on a multilateral basis facilitated by an intermediary (more common). 'Offsets' refer to the cancellation of existing or anticipated mutual arrears, and could occur between enterprises and the budget; between manufacturing enterprises and the energy monopolies (paying energy bills with goods or services); and among manufacturing enterprises as a group. The most common kind of offset is the provision of goods and services in lieu of tax payments, known as 'tax offsets'. A key conceptual difference is that barter is primarily a working capital related transaction, while offsets are a mechanism for settling mutual debts. 'Veksels' are promissory notes issued by enterprises, banks or the government, and involve promises to pay, either in cash or in kind. 5 Three observations are of interest. First, instruments such as multilateral barter based on intermediaries, tax offsets and veksels evolved and spread mainly over Russia's 1995-98 stabilization, reflecting a desire to economize on the use of cash both by the government and by enterprises (as a result of extraordinarily high interest rates, as discussed later). The government's apparent motivation was to replace money printing by the use of money surrogates and borrowing in order to lower inflation. Second, these instruments and the use of intermediaries, frequently owned or controlled by enterprise managers, permit arbitrary pricing combined with profit shifting and side payments. Third, the core transactions of interest are those between manufacturing com...

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An Interpretation of the Russian Financial Crisis

Cited by 13 publications

References 5 publications

Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net

Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net

An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals

Give Macroeconomic Stability and Growth in Russia a Chance

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