Russian financial crisis in 1998

See Article History Asian financial crisis, major global financial crisis that destabilized the Asian economy and then the world economy at the end of the s.

Russian financial crisis in 1998

In the first half ofthe Russian economy showed some signs of improvement. However, soon after this, the problems began to gradually intensify. Two external shocks, the Asian financial crisis that had begun in and the following declines in demand for and thus price of crude oil and nonferrous metalsseverely impacted Russian foreign exchange reserves.

The Russian government decided to keep the exchange rate of the ruble within a narrow band, although many economists, including Andrei Illarionovurged the government to abandon its support of the ruble. On 12 Maycoal miners went on strike over unpaid wages, blocking the Trans-Siberian Railway.

On 14 August the exchange rate of the Russian ruble to the US dollar was still 6. Additionally, on 15 Julythe State Duma dominated by left-wing parties refused to adopt most of the government anti-crisis plan so that the government was forced to rely on presidential decrees.

If the ruble threatened to devalue outside of that range or "band"the Central Bank would intervene by spending foreign reserves to buy rubles.

For instance, during the year prior before the crisis, the Central Bank aimed to maintain a band of 5. Similarly, it would sell rubles if the market exchange rate threatened to drop below 5.

The inability of the Russian government to implement a coherent set of economic reforms led to a severe erosion in investor confidence and a chain reaction that can be likened to a run on the Central Bank.

Investors fled the market by selling rubles and Russian assets such as securitieswhich also put downward pressure on the ruble. At the time, the Moscow Interbank Currency Exchange or "MICEX" set a daily "official" exchange rate through a series of interactive auctions based on written bids submitted by buyers and sellers.

Russian financial crisis in 1998

When the buy and sell prices matched, this "fixed" or "settled" the official MICEX exchange rate, which would then be published by Reuters. The MICEX rate was and is commonly used by banks and currency dealers worldwide as the reference exchange rate for transactions involving the Russian ruble and foreign currencies.

On 2 September the Central Bank of the Russian Federation decided to abandon the "floating peg" policy and float the ruble freely.

Russian financial crisis - Wikipedia

By 21 September the exchange rate had reached 21 rubles for one US dollar, meaning it had lost two thirds of its value of less than a month earlier.

The moratorium imposed by the Joint Statement expired on 15 Novemberand the Russian government and Central Bank did not renew it. Inflation[ edit ] Russian inflation in reached 84 percent and welfare costs grew considerably.

Russian financial crisis in 1998

Many banks, including InkombankOneximbank and Tokobank, closed as a result of the crisis.The Russian Financial Crisis of An Analysis of Trends, Causes, and Implications Summary Since May of , Russia has been caught in the latest, and likely the most serious, in . Currency Crisis: The Russian Default of Abbigail J.

Chiodo and Michael T. Owyang A currency crisis can be defined as a specula-tive attack on a country’s currency that can a devaluation can be transmitted via world financial markets to other susceptible countries. Any combi-.

Asian financial crisis - Wikipedia

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Russian financial crisis - Wikipedia