IDEAS home Printed from https://ideas.repec.org/a/bkr/journl/v82y2023i1p137-144.html
   My bibliography  Save this article

The Russian Rouble Crisis of December 2014: An Alternative View

Author

Listed:
  • Valery Smirnov

    (Bank of Russia)

Abstract

This paper looks into the causes of the crisis in the Russian foreign exchange market that occurred in December 2014. At the macroeconomic level, these include the decline in oil prices coupled with the massive repayment of foreign debt and the significant demand for foreign currency from households. In terms of flows in the foreign exchange market in mid-December, this was reflected in high demand for foreign currency from Russian banks seeking to satisfy their customers’ orders to purchase foreign currency, while the supply was limited due to a reduction in sales of foreign currency by exporters and the halt of foreign exchange interventions by the Bank of Russia. All this eventually contributed to the disruption of the normal operation of the foreign exchange market on 16 December, when insignificant fluctuations in the demand for foreign currency caused a considerable change in the exchange rate at minimum trading volumes. The subsequent normalisation of exchange rate movements was achieved by raising the key rate to 17%, which stabilised expectations for the exchange rate and inflation, as well as FX repos, the volume of which later grew significantly. Thus, explanations of the rouble volatility in December 2014 based on the analysis of the microstructure of the foreign exchange market and explanations looking at the macroeconomic reasons underlying those events are mutually complementary hypotheses rather than competing ones.

Suggested Citation

  • Valery Smirnov, 2023. "The Russian Rouble Crisis of December 2014: An Alternative View," Russian Journal of Money and Finance, Bank of Russia, vol. 82(1), pages 137-144, March.
  • Handle: RePEc:bkr:journl:v:82:y:2023:i:1:p:137-144
    as

    Download full text from publisher

    File URL: https://rjmf.econs.online/upload/iblock/96b/The-Russian-Rouble-Crisis--of-December-2014--An-Alternative-View.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ca' Zorzi, Michele & Longaric, Pablo Anaya & Rubaszek, Michał, 2021. "The predictive power of equilibrium exchange rate models," Economic Bulletin Articles, European Central Bank, vol. 7.
    2. Anna Obizhaeva & Gennady Piftankin, 2023. "The Russian Rouble Crisis of December 2014: Structure and Liquidity of a Foreign Exchange Market," Russian Journal of Money and Finance, Bank of Russia, vol. 82(1), pages 104-136, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rubaszek, Michał & Beckmann, Joscha & Ca' Zorzi, Michele & Kwas, Marek, 2022. "Boosting carry with equilibrium exchange rate estimates," Working Paper Series 2731, European Central Bank.
    2. Bacchetta, Philippe & Chikhani, Pauline, 2020. "On the Weakness of the Swedish Krona," CEPR Discussion Papers 15468, C.E.P.R. Discussion Papers.
    3. Claire Giordano, 2021. "How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(3), pages 365-404, July.
    4. Biagio Bossone, 2021. "Exercising Economic Sovereignty in Today's Global Financial World: The Lessons from John Maynard Keynes," Working Papers PKWP2120, Post Keynesian Economics Society (PKES).
    5. Piotr Dybka, 2020. "One model or many? Exchange rates determinants and their predictive capabilities," KAE Working Papers 2020-053, Warsaw School of Economics, Collegium of Economic Analysis.
    6. Felix Kapfhammer & Vegard H. Larsen & Leif Anders Thorsrud, 2020. "Climate risk and commodity currencies," Working Paper 2020/18, Norges Bank.
    7. Fišera, Boris & Horváth, Roman, 2022. "Are exchange rates less important for trade in a more globalized world? Evidence for the new EU members," Economic Systems, Elsevier, vol. 46(1).
    8. Petropoulos, Fotios & Apiletti, Daniele & Assimakopoulos, Vassilios & Babai, Mohamed Zied & Barrow, Devon K. & Ben Taieb, Souhaib & Bergmeir, Christoph & Bessa, Ricardo J. & Bijak, Jakub & Boylan, Joh, 2022. "Forecasting: theory and practice," International Journal of Forecasting, Elsevier, vol. 38(3), pages 705-871.
      • Fotios Petropoulos & Daniele Apiletti & Vassilios Assimakopoulos & Mohamed Zied Babai & Devon K. Barrow & Souhaib Ben Taieb & Christoph Bergmeir & Ricardo J. Bessa & Jakub Bijak & John E. Boylan & Jet, 2020. "Forecasting: theory and practice," Papers 2012.03854, arXiv.org, revised Jan 2022.
    9. Biagio Bossone, 2021. "Global Capital, the Exchange Rate, and Policy (In)Effectiveness," Working Papers PKWP2113, Post Keynesian Economics Society (PKES).

    More about this item

    Keywords

    crisis; liquidity; foreign exchange market; financial stability;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bkr:journl:v:82:y:2023:i:1:p:137-144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Olga Kuvshinova (email available below). General contact details of provider: https://edirc.repec.org/data/cbrgvru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.