Russia's Financial Markets Boom, Crisis and Recovery 1995-2001: Lessons for Emerging Markets Investors
- Morten Balling()
From 1995 to 2001 Russia witnessed an asset market boom, a deep financial crisis, and a surprisingly forceful recovery. An event study of this episode provides important insights for Emerging Market investment and Russia's medium-term prospects. The initial surge in bond and stock prices in 1995-97 owed to a highly ambitious monetary stabilization program, which compressed inflation much faster than other transition economies. Due to high dollarization, disinflation was based on the exchange rate. The program produced rapid real appreciation and a persistent need for capital inflows, while weak economic structures and lack of domestic political support prevented accompanying fiscal consolidation and foreign direct investment. The gap between stabilization ambition and structural reality made the currency increasingly vulnerable. Also, the program did not provide a politically viable "emergency exit" from the exchange rate target corridor. Devaluation was postponed through heavy international support. The ultimate crisis escalation in August 1998 resulted in a partial government default and steep devaluation. However, the economy responded from 1999 with relief to the real depreciation, entering a phase of sustained expansion. Also, the crisis escalation united the political spectrum around a new fundamental consensus on economic policy. Post-crisis governments prioritized fiscal consolidation over disinflation. The more stable political and economic environment spurred broader economic reform from 2000, particularly in the areas of public finances and investment conditions. Together with persistent commitment towards international integration this heralds a long-term convergence of Russia's economic structures with those in Central and Western Europe.
|This book is provided by SUERF - The European Money and Finance Forum in its series SUERF Studies with number 2003/5 and published in 2003.|
|Contact details of provider:|| Postal: SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria|
Phone: +43/1/404 20 7216
Fax: +43/1/404 20 7298
Web page: http://www.suerf.org
More information through EDIRC
|Order Information:|| Postal: SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cem Karacadag & Michael W. Taylor, 2000.
"The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures,"
Chapters in SUERF Studies,
SUERF - The European Money and Finance Forum.
- Cem Karacadag & Michael W. Taylor, 2000. "The New Capital Adequacy Framework - Institutional Constraints and Incentive Structures," SUERF Studies, SUERF - The European Money and Finance Forum, number 8 edited by Morten Balling.
- Cem Karacadag & Michael W Taylor, 2000. "The New Capital Adequacy Framework; Institutional Constraints and Incentive Structures," IMF Working Papers 00/93, International Monetary Fund.
- David T. Llewellyn, 2002. "The Future for Small & Regional Banks in Europe," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- Rolf Skog, 1997. "Does Sweden Need a Mandatory Bid Rule? A critical analysis," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- John Calverley & Sarah Hewin & Kevin Grice, 2000. "Emerging Stock Markets After the Crisis," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- Peter R Haiss & Gerhard Fink, 1998. "Seven Years of Financial Market Reform in Central Europe," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:erf:erfstu:27. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dragana Popovic)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.