1. SPILLOVER IN RUSSIA
Sandip shakya
APRIL 30, 2009

2. PRECEDENCE Massive currency depreciation Interrelated markets
Strong ties to the Asian economic crisis

3. IN RUSSIA Breakdown of the Soviet Union Traumatic transition
Rapid inflation
Steep output decline
Unemployment (largely unknown at the time in planned economies)

4. THE TRANSITION Privatization of the entire economy
Financial markets and banking practices largely unknown
Lack of Legal framework for Private economic relations or Corporate Governance
Ambiguous Property rights

5. LACK OF FISCAL MACHINERY
Lack of modern Fiscal machinery for Collection of Taxes
Absense of Domestic Capital markets and cautious foreign investors
Monetary printing press, the only means to finance needed social expenditures

6. REAL OUTPUT GROWTH – RUSSIA AND POLAND, 1991-2003 (percent per year)

7. INFLATION– RUSSIA AND POLAND, 1991-2003 (percent per year)

8. SHRINKING OUTPUT AND MASSIVE INFLATION
Inability to collect taxes
No control over government spending
Burrowing instead of Seigniorage slowed inflation
Decrease in the prices of oil and other key Russian commodity exports
Increase in rates on government burrowing

9. THE IMF Agreement with Russia to back up Russian ruble’s exchange rate
Billions in credit
Fear of a Russian collapse
Nuclear threat

10. RUSSIA’S ACTIONS Mid-August 1998, Abandoned its exchange rate target
Defaulted on debts
Froze international payments
Panic around the world
U.S. Federal Reserve lowered dollar interest rates sharply averting to a worldwide financial collapse