The Russian Financial Crisis of 1998 - 2163 Words

Introduction A financial crisis can be characterized by the rapid decrease in the value of financial institutions or assets. It is also common for investors to panic and withdraw money from their savings or sell off investments in anticipation of the depreciation in their value. This can be clearly seen in the Russian Financial Crisis of 1998. In the midst of making the transition from communism to capitalism, the Russian economy experienced more trouble than it had anticipated. This became not only a fiscal issue but also became very social and political. The people of Russia experienced exceptional hardships. This paper will illustrate the major shocks to the Russian foreign exchange reserves. These shocks include the Asian Financial Crisis of 1997 and the decline in demand and price for Russia’s top exports. The role played by foreign investors in the crisis and what effects these players had on the devaluation of the ruble will be analyzed. The Russian Financial Crisis of 1998 caused the devaluation of the ruble and ultimately forced the Russian Central Bank to default on its own debt. The government’s attempts at saving the country from crisis were in vain and lead to the call for resignation of President Boris Yeltsin. Background After 1991, Russia decided to make the move from communism to capitalism. This was projected to bring prosperity in Russia, the likes of which had never been seen. This move by President Boris Yeltsin meant that he renounced his affiliationShow MoreRelatedRussian Financial Crisis (1998)4161 Words   |  17 PagesTopic 3: Russian financial crisis (1998) 1.0 Introduction Affected by the Southeast Asian financial crisis, Russia suffered from the financial crisis in May 1998 followed the crisis in October 1997. The crisis initially reflected on currency market and security market. As a result, foreign capital about one-third of the total amount of Russian national debts faced large-scale capital flight; exchange rate depreciated and stock market suffered a large setback; re-lending interest rate onceRead MoreThe Collapse Of The Soviet Union1649 Words   |  7 Pagesinstability and continued to weaken throughout the 1990s. The situation escalated until the point of financial collapse on August 17, 1998, resulting in a 90-day suspension on payment to foreign creditors, a default on domestic debt, the devaluation of the ruble and as a consequence, an increase in all debts denominated in foreign currencies. 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With the development of currency, came international trade. â€Å"Banks and the ruling classes started buying currencies from other nations and created the firstRead MoreFinancial Crisis Across The World Since Currency Essay2229 Words   |  9 PagesThere has been a financial crisis across the world since currency came about. It started with the barter system which allowed people to trade goods and services, but this sometimes proved to be more dif ficult than beneficial. Then around 600 B.C., coins and currency came about. Since then currency went from being precious metals to paper money. With the development of currency, came international trade. â€Å"Banks and the ruling classes started buying currencies from other nations and created the firstRead MoreIntroduction. With Russia Being One Of The Largest Countries849 Words   |  4 Pageshas taken a big turn in evolving drastically over the years. In terms of the Russian Federation, they have a GDP of 2.097 trillion USD and a GNI of 3.328 PPP dollars. The currency in which Russia utilizes on a day-to-day basis is called the Russian ruble. One Russian ruble would be equivalent to 0.018 USD when converting currencies. With its former name being the Soviet ruble, it was changed in 1992 to adhere to the Russian Federation as the ending of the collapse of the Soviet Union occurred. SpeakingRead MoreRussian Federation and United Kingdom: Comparison of Economy1660 Words   |  7 Pagesï » ¿CONTENT INTRODUCTION The report gives information about main macroeconomic models which were applied to Russian Federation and United Kingdom. It consists of three parts. First part is dedicated to the identification of macroeconomic models for Russia and UK. The second part is about main macroeconomic changes between 2005 and 2012 in Russia and UK. Finally, effects of increase in interest rate by Bank of England to Russia and UK wereRead MoreRussian Crisis6897 Words   |  28 PagesA 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, suchRead More The Causes and Consequences of the Russian Crisis of 1998 Essay2215 Words   |  9 Pages The causes and consequences of the Russian crisis of 1998 The period 1995 to mid-1997 was boom time for Russia’s financial markets. The value of the Russian bonds and stocks soared, with the participation of foreigners in these asset markets increasing rapidly. International investors’ optimism about the country’s future was lifted by stabilization policy that followed the advice of Western institutions. Russian crisis of 1998 were caused due to a number of factors, the investor risk aversion