Russian Ruble Crisis

In: Business and Management

Submitted By pr22
Words 555
Pages 3
This discussion in turn boils down to the question “what is globalization?” According to me globalization is a word which has its origin from the process of transformation from self-sufficient civilizations to modern countries having specializations and doing trade. Globalizations finding its way back from 3000BC to the most recent times; it can be defined in various ways depending upon time. Gunder Frank’s theory of dependency explains it all. Globalization was always need driven, more was the need more was globalization in terms of trade, people, colonies, power, labor, etc. so it can be said that in a world of self-sufficiency globalization dies, only when the markets are volatile, globalization has its pace and when a particular segment becomes saturated in every economy there would be no exchange of this good or service or technology from one another and the scope for globalization ceases. When each country has a holiday destination like Miami nobody would be ready to come all the way spending more money. This is very much a reason for more south to south trade and south to north trade rather than north to south. With this transition or reform in the economic flow we can say the world is being pulled apart.

The question “the world is still not flat?” is a comparative term and drawing back the lines to the 3000BC, I would say the world is flat.

Russia is a young economy with great scope of development. After its economic reform in 1999 it faced a huge inflation because of improper regularization schemes, much of the nation’s wealth has been concentrated in hands of very few individuals which gave its name as land of billionaires. It has abundant natural resources like oil and metals which accounted for 70% of its exports and 40% of its GDP. It was listed as fastest recovering economy by IMF during 1991 -2000 which was mostly because huge disposable income…...

Similar Documents

The Russian Gdp

...Russian GDP Following the section about Russian output, we now turn to the BRICS country GDP, Inflation, and Monetary Policy. All three of these areas of the Russian economy depend immensely on the product that is 70% of Russian export: Oil. We see that each year there is a dip in the price of oil Russian (for example 1998 and 2008) we see a dip in GDP and a rise in inflation. Hence, the monetary policy set by the Central Bank of Russia is contingent upon the gas price. The Russian GDP has been growing staidly since 2008. We see that before the 2008 global financial crisis, Nominal GDP was on an annual rise of 7%. However, in 2008 the Oil price plummeted from 147.00USD/barrel to 50.00USD/barrel. This caused a government shortfall in the 08-09 fiscal years, and resulted in a sharp dip in nominal GDP from which Russia has yet to recover. However, despite the 2008 crisis, the Russian GDP has been growing 4.3% annually since 2008, as the price of oil continues to rise. In 2011, as Russian citizens are getting back to work, the current GDP per capita is $13,236 USD. The primary problem with the Russian economy is its historically high inflation. Only recently has the Russian economy seen an inflation number in the single digits (3.7% as of Feb. 2012). Nevertheless, in 2011, the inflation rate was a little bit under 10% and is has been in the general 10-15% range since 2004, with the 15% spike in 2008. The reason for the low inflation rate this year is based in three......

Words: 619 - Pages: 3

The Russian Healthcare System

...The Russian Healthcare System Topic: The Russian Healthcare System 1. Introduction 1. History of Russia’s Healthcare System 2. The Russian Government’s Role in Healthcare 2. Body 1. Russian healthcare today 2. Healthcare availability, quality and cost 1. Access to care 2. Employee contribution 3. Private insurance 3. Becoming a healthcare provider in Russia 1. Training 2. Income 4. Hospitals in Russia 1. Rural Health Posts 2. Health Centers 3. Urban Polyclinics 4. Special Focus Polyclinics 5. Pharmaceuticals 1. Availability and affordability 2. Pharmacies in the Russian Federation 3. Conclusion 1. Conclusion The Russia Healthcare System Since the collapse of the Soviet Union the health of the Russian population has declined greatly as a result of social, economic and lifestyle changes. Before the 1990s Russia has a socialist model of healthcare which was centralized and integrated with the government providing free healthcare to all of its citizens. All health personnel were state employees and communicable disease had priority over non-communicable ones. Emphasis was placed on specialist and hospital care. The Russian Federation is the largest country in the world in terms of surface area and it covers an area of 17 million km2 with a coastline of 37653 km. The Russian population......

Words: 3764 - Pages: 16

Russian Business Environment

...Legal Environment The Russian constitution states that Russia shall be a democratic and federal state with a republican form of government based on the rule of law. The Russian Federation is a federal state with sources of including the Constitution, federal laws and laws of subjects of federation. The Constitution is the supreme Russian law and major legislative instrument. The power base in Russia is basically divided between the parliament and the president. The Russian court system is composed of three essentially separate and distinct court systems. They are the: (1) Courts of General Jurisdiction; (2) Arbitrazh (or Commercial) Courts; and (3) Russian Federation (and in a few cases, "subject"-level) Constitutional Courts. (9) With respect to constitutional issues, in the Russian system, if a constitutional issue is encountered during the course of litigation in either the Courts of General Jurisdiction or in the Arbitrazh Courts, the constitutional issue is referred out to the Constitutional Court, adjudicated there, and then reported back to the appropriate non-constitutional court for further proceedings in accordance with the Constitutional Court's ruling. (The Russian Court System) Arbitrazh courts are specialized courts for settling property and commercial disputes between companies and individual entrepreneurs, both Russian and foreign. Arbitrazh courts are granted special jurisdiction over disputes arising out of the application of legislation governing......

Words: 5030 - Pages: 21

Russian Crisis

...A Case Study of a Currency Crisis: The Russian Default of 1998 Abbigail J. Chiodo and Michael T. Owyang currency crisis can be defined as a speculative attack on a country’s currency that can result in a forced devaluation and possible debt default. One example of a currency crisis occurred in Russia in 1998 and led to the devaluation of the ruble and the default on public and private debt.1 Currency crises such as Russia’s are often thought to emerge from a variety of economic conditions, such as large deficits and low foreign reserves. They sometimes appear to be triggered by similar crises nearby, although the spillover from these contagious crises does not infect all neighboring economies—only those vulnerable to a crisis themselves. In this paper, we examine the conditions under which an economy can become vulnerable to a currency crisis. We review three models of currency crises, paying particular attention to the events leading up to a speculative attack, including expectations of possible fiscal and monetary responses to impending crises. Specifically, we discuss the symptoms exhibited by Russia prior to the devaluation of the ruble. In addition, we review the measures that were undertaken to avoid the crisis and explain why those steps may have, in fact, hastened the devaluation. The following section reviews the three generations of currency crisis models and summarizes the conditions under which a country becomes vulnerable to speculative attack. The third......

Words: 6882 - Pages: 28

The Russian Ruble Crisis of 1998

...The Russian Ruble Crisis of 1998 is termed as among the worst financial crisis to hit the Russian economy. The Crisis is believed to have been triggered by a number of factors. The Asian financial crisis of 1997 is a major cause of the crisis as it led to declines in the world commodity prices (Owyang, & Chiodo 2002, p. 7). Just to be appreciated is the fact that Russian economy was heavily dependent on oil. There are other reasons such as the downfall of the Soviet Union in 1991 and the economic difficulties it brought to the Russian nation. Another common cited reason is poor financial policy practices by the Russian government as well as political crisis that were witnessed in the nation earlier that year (Owyang, & Chiodo 2002, p. 7). The Russian financial crisis had various political and economic consequences. First, the crisis compromised the confidence of the citizens of Russian to the government of president Yeltsin. Indeed, facing much opposition in the parliament, Yeltsin was forced to fire Kiriyenko as the prime minister and nominated Foreign Minister Yevgeny Primakov to the position (Tarassova, Kraakman, & Black 2000, p. 12). On the economic front, the Russian crisis led to the collapsing of the Russian stock, bond, and currency market on august 13, 1998. This was a direct result of investors fear that the government could devalue the ruble as well as claims of failure by the government to repay its domestic debts. This paper gives a critical analysis...

Words: 1554 - Pages: 7

Russian

...Managerial decision analysis Property right security in Russian deprivation Edwin Cruz Saint Leo University 1 Introduction Over 70,000 Russian-state owned enterprises were privatized in 1992. A substantial number of the private buyers were from the United States and Western Europe. The reason that drove this “government” decision was to move from a centrally planned economy to a market system. A weakening economy in the late 1990s made the government move back towards state owned enterprise. Prospects of deprivatization have on investment by managers of privatized firms The prospect of deprivatization of private enterprise will likely impact the privatized managers. The fear of losing their position will likely alter their behavior, and affect the manner in which they make decisions or choices. It is possible that “unhappy” managers may be; less productive. Effects of deprivatization on foreign investments in Russia Foreign investors may be hesitant to invest in Russia because deprivatization will revert back all property rights to the state, and in central planning government decides how to use its resources. Property rights therefore are not assigned to a specific person, nor can those rights be transferred; they are not alienable. ...

Words: 660 - Pages: 3

Russian Financial Crisis

...            The Russian financial crisis occurred on August 17, 1998, exacerbated by the global recession caused by the Asian financial crisis in 1997. Russia was highly dependent on exports of raw materials, with petroleum, natural gas, metals and timber accounting for more than 80% of its exports. With the drop in global demand, prices of those commodities began to decline. This resulted in an impact on its foreign exchange reserves since Russia had a fixed exchange rate regime during this period of time, where the ruble was only allowed to move within a narrow band. With the speculative attacks caused by the Asian financial crisis along with the decline in global demand, the Central Bank of Russia stepped in to defend the ruble in the markets. Russia was also experiencing fiscal deficits and declining productivity in its economy.             Foreign capital was initially attracted to the Russian market due to the high interest rates, which was then used to provide internal loans in the country. The Gosudarstvennoe Kratkosrochnoe Obyazatelstvo (GKO) bond interest rates soared to 150% in an effort to prop up the currency and to stop capital flight. Internally, debt on wages continued to grow and financing for major big budget items were impacted as debt grew. The Chechnya War from several years earlier further compounded these problems. Russia also suffered from a political crisis where the entire government was fired in 1998, causing for investor confidence to be further......

Words: 2376 - Pages: 10

Russian

...Russian Literature Russia was the last of the great European nations to produce literature of more than merely a national interest. The reasons for this condition are various. Russia was the last of those nations to feel the impress o the cultural influences that periodically have swept through Western Europe since the Middle Ages. It was not until the time of Peter the Great (1972 - 1735) that she began to take her place in the affairs of Europe; it was the same monarch who made the first efforts to westernize his vast country. Moreover, the Russian language, the very alphabet of which seems fantastic to the Western eye, is quite remote from the languages of Western Europe and from classic Latin and Greek. Early Russian literature is of small interest, being largely of ecclesiastical import. In the later nineteenth and early twentieth centuries, Russian literature, sespite its late awakening, became one of the most imposing bodies of literature of its time, eagerly read and profoundly admired the world over. The Russian have produced a body of literature that tend toward the morbid, the pessimistic, and tragic, but which in its very powered derived from searching the depths of human experiences is one of the greatest literature of Europe. Another marked characteristic of Russian writing is its realism; in contrast to the strong romantic quality of much western literature, Russian books turn their searchlights on the daily lives of men and women. They throw no glamour...

Words: 7058 - Pages: 29

Russian

...contribute to the brand equity of Russian Standard. At first, Tariko’s personal experiences in his early entrepreneurial time helped him accumulate many professional knowledges on wine industry in Russian, which contributes to the brand equity. For example, Tariko was a representative from Martini & Rossi before, and he actually seize the opportunity created by the supply/demand gap at that time, which made him became an exclusive imported in Russia at that time. Two years later, his company had established itself as Russia’s leading importer of upmarket alcoholic drinks, which it helped raise his brand awareness. Moreover, Tariko also developed strong and commanding merchandising skills and relationships with the trade to enhance its marketing strategy on brand equity. For instance, Tariko worked with international advertising experts and brand identity agencies to conduct a survey on the essence of the brand, so that the brand equity could be conveyed to the consumers at last. In result, several methods that meetings with notable Russian and literary personalities, extensive travel throughout Russia, customer focus groups and numerous brand essence and positioning briefs were born to enhance the brand equity in short. After that, Tariko’s brand was able to enjoy rapid success in Russia because the consistency of Tariko’s mission and his company’s marketing strategy. To produce world-class quality vodka while retaining the unmistakably Russian identity was Tariko’s......

Words: 977 - Pages: 4

Russian Lit

...loved again Pushkin expresses his affectionate feelings towards a lady in this poem. He is very much carried away by the beauty of the lady. At the same time, he doesn't want to be very possessive about her. The poet is neither sad nor happy when the lady left him. Even after losing the girl, the poet remains respectful to her. The poet is not selfish and doesn't want to fight to get back the girl. He just wants to carry her in his heart for a while. The greatest test of love is the ability to wish good for the other person even if you lose the person. The poem ‘I love you’ by Alexander Pushkin was originally written in the Russian language. Alexander Sergeyevich Pushkin was a Great Russian poet born in Moscow Russia. Pushkin was believed to be incredibly intelligent and started writing his poems at an early age of 14. He wrote his poems in the Russian language and there have been several translations of his poems. Pushkin used his poems to address his feelings concerning the political views in Russia. Between 1814 and 1817 he published about 130 poems and for this the leaders did not like him much. Pushkin at the age of 27 married Natalya Nikolayevna Goncharova in 1826 who was 16 at the time and they had two kids. Pushkin got into great debt because of his wife’s luxurious life. Pushkin was shot and killed in 1837 by his brother in-law whom he suspected of having an affair with his wife when he confronted him about it. Alexander Pushkin expresses his affectionate......

Words: 7457 - Pages: 30

A Case Study of Currency Crisis

...A Case Study of Currency Crisis: The Russian Default of 1998 Background of Russia Russian Federation was formed in 1991. The country tried to maintain a fixed exchange rate however, Russia had a “fragile fiscal position”(Economic Report)  which turned unstable as the world markets changed. Up until 1997 Russia had slow but eventually a year of positive economic growth, at which point the country started to stumble. Russia launched a reform program in 1992. At the time of 1992, the monetary inherited from Soviet times resulted in an increase over 350 percentage of price level in a month. Rumbles was introduced in July 1992, inflation became the central concern in the relief. With limited foreign reserves, Russia joined the IMF and World Bank on June 1, 1992 and agreed several economic transition programs that would bring fund of billions of US dollars. After 4 years of economic stabilization and control of inflation rate, Russia’s inflation fell from 197% in 1995 to 47.7% in 1996 and 14% in 1997. In 1993, a short debt term instrument, Government Short Commitments (GKO), was introduced. It provided the government with an extra, non inflationary to finance its budget deficit. Russia’s fiscal deficit fell significantly, from 11% of GDP in 1994 to less than 5% of GDP in 1995. CBR’s foreign reserves increased from 4 billion US dollars in 1994 to 14.4 billion US dollars in 1995. However, one third of ruble short-term debt was held by foreign investors. Direct foreign......

Words: 1162 - Pages: 5

The Volatile Russian Ruble

...Penn Foster Economics 1 Project 050477 The Volatile Russian Ruble The Russian ruble’s exchange rate from 2005 to 2010 was filled with its share of extremes when compared against the more stable United States dollar (USD). The United States was more developed, with a more experienced market economy that accommodated a managed floating exchange rate for their currency. Russia’s emerging market economy lacked the structure needed to provide stability to the ruble’s exchange rate due to inadequate monetary policies put in place by an inferior government and an overdependence on crude oil export prices for sustained economic growth. These collective differences are what set the dollar apart as a stronger currency than the ruble during this time period. In 2005, resource rich Russia was experiencing rapid economic growth attributed to a booming demand for crude oil. During this expansionary period, overall unemployment decreased, real wages began rising, and the poverty rate and gap began decreasing. Their economy was on a positive, uphill trend as oil prices kept raising. The ruble, which had been soft pegged to the U.S. dollar since 1995, was becoming stronger as it appreciated against other nations’ currencies. The United States, on the other hand, was contracting their economy in the face of those rising oil prices, war related debts, and devastating natural disasters. With the dollar threatening to depreciate in the open market, Russia’s monetary policy had to......

Words: 928 - Pages: 4

Russian Ruble

...The Russian Ruble Crisis and Its Aftermath The causes of the surge in inflation in Russia in the 1990’s were the Russian government. They implemented economic reform to transform the crumbling economy. But the central element of the plan was to put an end of the price controls, but once the price controls were removed the prices increased. The decline in value of the ruble against the dollar shows that prices began to surge and inflation was high. As a result the supplies were down and Russia was suffering from a limited supply of goods. Many businesses began to fail, so Russia’s government began to pour money into businesses to minimize job loss. The Russian government’s deficit began to grow at a rate that was not manageable. The Russian government was not willing to increase taxes so they printed more money, but as a result it increase inflation. The rate of inflation was out of control and the Ruble was very unstable. When the inflation reached an annual low, the Russian government decided to take action. To reduce the uncertainty, the Russian government requested IMF loans. Also, the Ruble was regulated to stay within a range of 4,300 to 4,900 against the dollar. In return for the loan, Russia agreed to limit the growth in its money supply, by reducing public sector debt, and increasing government tax revenues. Russia’s government continued to spend more while collecting tax revenues that were lower than projected. The Ruble crisis made global......

Words: 383 - Pages: 2

The Russian Crisis of 1998

...Introduction: The purpose of this report is to consider The Russian Crisis of 1998. What events led to this crisis, how it affected ordinary citizens and the effect it had on the world capital markets. We will also discuss the role IMF and other countries played in helping with the crisis. What the Russian government did in order to stabiles the situation and what role politics played in the process. We will use a number of sources in order to complete this report. Question One: What event is recognised as the beginning of the crisis? The Russian crisis begun on August 17th 1998 when the central bank of Russia announced that it would widen the intervention bands from ruble. It meant that the ruble was allowed to fluctuate against dollar. As a result, the exchange rate of the ruble fell steadily which led to a collapse in Russia economy. However, the crisis was not caused by a single event. It was a consequence of a continuing downward trend in Russia economy since its economic reform in 1991. The crisis’s seeds were sown from that day. The main causes of this crisis could be divided into 3 timelines: * Period 1991 – 1996: In 1991, Russia changed from a very strictly centralized economy to a market economy. Up until then, the Soviet played the most important role in subside all the state sectors. It consumed one-third of GDP and supported at least every third man, woman, and child (Roman, G & Robin, M – 1999). When the real prices were introduced, these state......

Words: 4201 - Pages: 17

Financial Crisis

...The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults.[1][2] Financial crises directly result in a loss of paper wealth; they do not directly result in changes in the real economy unless a recession or depression follows. Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus, however, and financial crises are still a regular occurrence around the world. Banking crisis Main article: Bank run When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits (see fractional-reserve banking), it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run may leave the bank in bankruptcy, causing many depositors to lose their savings unless they are covered by deposit insurance. A situation in which bank runs are widespread is called a systemic banking crisis or just a banking panic. A situation without widespread bank runs, but in which banks are reluctant to......

Words: 1030 - Pages: 5