Lessons from the Russian Crisis of 1998 and Recovery

doi:10.1017/CBO9780511510755.012

9 - Lessons from the Russian Crisis of 1998 and Recovery

Published online by Cambridge University Press: 25 July 2009

Brian Pinto ,

Evsey Gurvich and

Sergei Ulatov

Edited by

Joshua Aizenman and

Brian Pinto

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Brian Pinto: Affiliation:
Economic Adviser Economic Policy & Debt Department, Poverty Reduction and Economic Management Anchor, The World Bank
Evsey Gurvich: Affiliation:
Head Economic Expert Group, Ministry of Finance of The Russian Federation, Moscow
Sergei Ulatov: Affiliation:
Economist Poverty Reduction and Economic Management Department, Europe and Central Asia Region, The World Bank
Joshua Aizenman: Affiliation:
University of California, Santa Cruz
Brian Pinto: Affiliation:
The World Bank

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Summary

ABSTRACT: This case study covers events from mid-1995, when Russia's quest for single-digit inflation began, to the end of 2002. The focus is on Russia's 1998 crisis and subsequent recovery. These events offer valuable lessons for countries facing simultaneous problems of unsustainable public debt dynamics and low international liquidity – a list that in recent years has included Argentina, Brazil, and Turkey. Lessons include implications for the appropriate design of rescue packages, moral hazard, and factors driving postcrisis recovery. This study presents a framework that may make it possible to distinguish between a first-generation and second-generation crisis by juxtaposing economic fundamentals and market signals. This could help in making the judgment about whether a soft landing scenario supported by the announcement of a fiscal-structural reforms package and liquidity injections from the international financial institutions (IFIs) is feasible, or whether the abandonment of the exchange rate target and even a possible debt restructuring may be unavoidable.

THE RUSSIAN MELTDOWN: IMPLICATIONS FOR OTHER CRISIS EPISODES

In February 1998, Russia attained its goal of single-digit inflation set under the stabilization program that began in mid-1995. Only six months later, it experienced a comprehensive macroeconomic collapse, involving its exchange rate, the banking system, and public debt. This occurred soon after a large rescue plan put together by the international financial institutions (IFIs) took effect.

Type: Chapter
Information: Managing Economic Volatility and Crises
A Practitioner's Guide
, pp. 406 - 438

DOI: https://doi.org/10.1017/CBO9780511510755.012 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2005

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