Sovereign default/Addendum: Difference between revisions
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By 1997 Russia's central bank had achieved a major improvement in the country's financial stability, having reduced its inflation rate to 11 percent from its 1994 rate of 224 percent, and its | By 1997 Russia's central bank had achieved a major improvement in the country's financial stability, having reduced its [[inflation]] rate to 11 percent from its 1994 rate of 224 percent, and the depreciation of its [[exchange rate]] to 7 percent from its 1995 30 per cent rate. The [[budget deficit]] had been rising rapidly, however, and debt repayments were absorbing a substantial proportion of tax revenue. There were fears that further use of high [[discount rate]]s to control inflation and maintain its exchange rate within its announced ([[exchange rate#Hybrid regimes|"crawling peg"]]) limits would hamper economic growth and further increase debt repayments | ||
<ref>[http://www.worldbank.org/html/prddr/trans/so99/pg23.htm Tuomas Komulainen: ''Stable Ruble Needs Sound Fiscal Policy'', World Bank Group, 2001]</ref>. To make matters worse, a fall in the world price of oil caused a nearly 18 per cent year-on-year deterioration in Russia's [[terms of trade]] and the [[Bank failures and rescues#The Asian banking crisis|Asian banking crisis]] had drastically reduced investors' confidence in emerging market economies. There were two speculative attacks on the Rouble in the course of 1998 and an unsuccessful negotiation for support from the [[International Monetary Fund]]; and in September the government announced a suspension of debt repayments and the adoption of a floating exchange rate policy | <ref>[http://www.worldbank.org/html/prddr/trans/so99/pg23.htm Tuomas Komulainen: ''Stable Ruble Needs Sound Fiscal Policy'', World Bank Group, 2001]</ref>. To make matters worse, a fall in the world price of oil caused a nearly 18 per cent year-on-year deterioration in Russia's [[terms of trade]] and the [[Bank failures and rescues#The Asian banking crisis|Asian banking crisis]] had drastically reduced investors' confidence in emerging market economies. There were two speculative attacks on the Rouble in the course of 1998 and an unsuccessful negotiation for support from the [[International Monetary Fund]]; and in September the government announced a suspension of debt repayments and the adoption of a [[Exchange rate#floating exchange rates| floating exchange rate]] policy<ref>[http://research.stlouisfed.org/publications/review/02/11/ChiodoOwyang.pdf Abbigail Chiodo and Michael Owyang: ''A Case Study of a Currency Crisis: The Russian Default of 1998'', The Federal Reserve Bank of St. Louis, 2002]</ref>. | ||
<ref>[http://research.stlouisfed.org/publications/review/02/11/ChiodoOwyang.pdf Abbigail Chiodo and Michael Owyang: ''A Case Study of a Currency Crisis: The Russian Default of 1998'', The Federal Reserve Bank of St. Louis, 2002]</ref>. | |||
The magnitude of the default broke previous records and created a further loss of investor confidence with internal repercussions that may even have contributed to a subsequent default by Brazil | The magnitude of the default broke previous records and created a further loss of investor confidence with internal repercussions that may even have contributed to a subsequent default by Brazil | ||
Revision as of 06:28, 19 February 2010
Russia's default, 1998
By 1997 Russia's central bank had achieved a major improvement in the country's financial stability, having reduced its inflation rate to 11 percent from its 1994 rate of 224 percent, and the depreciation of its exchange rate to 7 percent from its 1995 30 per cent rate. The budget deficit had been rising rapidly, however, and debt repayments were absorbing a substantial proportion of tax revenue. There were fears that further use of high discount rates to control inflation and maintain its exchange rate within its announced ("crawling peg") limits would hamper economic growth and further increase debt repayments [1]. To make matters worse, a fall in the world price of oil caused a nearly 18 per cent year-on-year deterioration in Russia's terms of trade and the Asian banking crisis had drastically reduced investors' confidence in emerging market economies. There were two speculative attacks on the Rouble in the course of 1998 and an unsuccessful negotiation for support from the International Monetary Fund; and in September the government announced a suspension of debt repayments and the adoption of a floating exchange rate policy[2].
The magnitude of the default broke previous records and created a further loss of investor confidence with internal repercussions that may even have contributed to a subsequent default by Brazil [3].
Argentina's default, 2001
References
- ↑ Tuomas Komulainen: Stable Ruble Needs Sound Fiscal Policy, World Bank Group, 2001
- ↑ Abbigail Chiodo and Michael Owyang: A Case Study of a Currency Crisis: The Russian Default of 1998, The Federal Reserve Bank of St. Louis, 2002
- ↑ Taimur Baig and Ilan Goldfajn: The Russian Default and the Contagion to Brazil, International Monetary Fund, October 2000
- ↑ Report on the Evaluation of the Role of the IMF in Argentina, 1991–2001, Independent Evaluation Office of the IMF, July 2004
- ↑ Joseph Stiglitz: Argentina's Lessons, Project Syndicate, 29 January 2002