The disintegration of the ruble zone: Driving forces and proposals for policy change
This paper examines the irreversible process of the ruble zone disintegration. Theoretical fundamentals of a common currency area, with modifications incorporating a mechanism of transition from central planning, are discussed. The key reason for the ruble zone break-up is the discontinuation of indirect transfers that were provided mainly by Russia via underpricing energy exports to other republics. Being cut-off from such transfers and unable to finance rising trade deficits with Russia, the independent stales wish to disconnect their economies from the ruble /.one. Among other economic arguments for leaving the ruble zone presented by the former Soviet republics are: a desire to insulate their economies from the ruble zone inflation, and a willingness to collect seigniorage revenues from printing their own currencies. The paper critically evaluates these and several other arguments. The abrupt break-up of the ruble zone causes interruptions in supplies of essential materials and consumer goods, and an income downfall among the republics. The foundation for a new inter-state payments mechanism is proposed in order to cushion these negative effects. A system of independently traded currencies with flexible exchange rates is viewed as a reasonable, yet distant solution.
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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.:
- Orlowski, Lucjan T., 1992.
"Direct transfers between the former Soviet Union central budget and the republics: Past evidence and current implications,"
Kiel Working Papers
543, Kiel Institute for the World Economy (IfW).
- Orlowski, Lucjan T, 1995. "Direct Transfers between the Former Soviet Union Central Budget and the Republics: Past Evidence and Current Implications," Economic Change and Restructuring, Springer, vol. 28(1), pages 59-73.
- Orlowski, Lucjan T., 1992. "Direct transfers between the former Soviet Union central budget and the republics: Past evidence and current implications," Kiel Working Papers 543, Kiel Institute for the World Economy.
- Casella, Alessandra, 1990.
"Participation in a Currency Union,"
CEPR Discussion Papers
395, C.E.P.R. Discussion Papers.
- Tarr, David G., 1993. "How moving to world prices affects the terms of trade in 15 countries of the former Soviet Union," Policy Research Working Paper Series 1074, The World Bank.
- Dornbusch, Rudiger, 1992. "Lessons from Experiences with High Inflation," World Bank Economic Review, World Bank Group, vol. 6(1), pages 13-31, January.
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