The Russian economy and the current crisis (original) (raw)
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Since 1992, the rhetoric of Russian economic reformers has been one of full-speed ahead to a freemarket economy. The reality, however, has diverged significantly from this rhetoric at both a broad "rules of the game" level and specific "policy within rules" level. The resulting ambiguity of the economic environment and the lingering effects of the previous system which is supposed to be reformed has led to a continued deterioration of the Russian economy. This paper offers a modified defense of "shock therapy" as a path to a cure for Russia's economic malaise, as opposed to the cure itself.
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In 1997, Russia’s economic growth was positive for the first time since the formation of the Russian Federation in 1991. Nevertheless, the country’s fixed exchange rate regime together with its fragile fiscal position appeared to be unsustainable when the international markets got affected by spillover effects of financial distress elsewhere in the world. In the course of 1998, the outbreak of a severe banking, currency and sovereign debt crisis could not be prevented. The economic crisis of 1998 in Russia was one of the most severe economic crises in the history of Russia. The main causes of the economic crisis were: a huge national debt of the country generated by the collapse of the Asian economies, the liquidity crisis, low global commodity prices that constitute the basis of Russia's exports and, above all, populist economic policy and the building of the pyramid of GSB (Government Short-Term Bonds).
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ABSTRACT Since 1992, the rhetoric of Russian economic reformers has been one of full-speed ahead to a free-market economy. The reality, however, has diverged significantly from this rhetoric at both a broad “rules of the game” level and specific “policy within rules” level. The resulting ambiguity of the economic environment and the lingering effects of the previous system which is supposed to be reformed has led to a continued deterioration of the Russian economy.