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Russia's Debt Crisis and the Unofficial Economy

Author

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  • Claudia M. Buch
  • Ralph P. Heinrich
  • Lusine Lusinyan
  • Mechthild Schrooten

Abstract

Russia's foreign debt problems worsened substantially after the financial crisis of 1998. The paper focuses on the key role of the government in servicing foreign debt and promoting institution building by showing how foreign debt influences the choice between official and unofficial taxation. The enterprise sector is assumed to reallocate its resources between domestic investment and capital flight. It is discussed under which conditions debt rescheduling may create incentives for the government to promote institution building. The results of this paper shed light on the conditions under which the recent agreement with the London Club to write off substantial amounts of former Soviet debt can be successful.

Suggested Citation

  • Claudia M. Buch & Ralph P. Heinrich & Lusine Lusinyan & Mechthild Schrooten, 2000. "Russia's Debt Crisis and the Unofficial Economy," Discussion Papers of DIW Berlin 208, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp208
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38532.de/dp208.pdf
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    References listed on IDEAS

    as
    1. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    2. Ilan Goldfajn & Rodrigo O. Valdes, 1997. "Capital Flows and the Twin Crises; The Role of Liquidity," IMF Working Papers 97/87, International Monetary Fund.
    3. Buch, Claudia M & Heinrich, Ralph P, 1999. "Twin Crises and the Intermediary Role of Banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(4), pages 313-323, October.
    4. Kamau Thugge & Anthony R. Boote, 1997. "Debt Relief for Low-Income Countries and the HIPC Initiative," IMF Working Papers 97/24, International Monetary Fund.
    5. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    6. Bowe, M. & Dean, J.W., 1997. "Has the Market Solved the Sovereign-Debt Crisis?," Princeton Studies in International Economics 83, International Economics Section, Departement of Economics Princeton University,.
    7. repec:hrv:faseco:30728045 is not listed on IDEAS
    8. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
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    Citations

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    Cited by:

    1. Buch, Claudia M. & Lusinyan, Lusine & Engerer, Hella & Lodahl, Maria & Schrettl, Wolfram & Schrooten, Mechthild, 2000. "Russlands Wirtschaftspolitik setzt auf Investitionen," Kiel Discussion Papers 360, Kiel Institute for the World Economy (IfW).
    2. Mechthild SCHROOTEN, 2003. "Fiscal Federalism And Regional Development In Russia," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 18, pages 53-72.
    3. Bernhard Seidel & Mechthild Schrooten, 2000. "Fiscal Federalism and Financial Resources for Regional Development - Co-operative and Competitive Models: The International Experience - an Example for Russia?," Discussion Papers of DIW Berlin 220, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Foreign debt; debt restructuring; Russian Federation;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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