Devaluation Of Ruble Research Articles

Russian Devaluation in 2014-2015: Falling into the Abyss or Window of Opportunities?

The fall in the oil prices from mid-2014 is causing a decrease in domestic demand and a strong devaluation of the ruble, which in turn promotes the growth of the price competitiveness of Russian producers, stimulates the supply side of the economy (especially in foreign markets, where there is no recession), and thus creates the possibility of offsetting the fall in domestic demand due to the growth of net exports. However, as the analysis of the economic literature, the world experience and current Russian economic trends demonstrates, the joint impact of oil prices and ruble devaluation on the growth rates of the Russian economy, with all its structural problems, can lead to a much more severe recession than the majority of experts, if to judge by average consensus estimates, expect in their forecasts (as of the end of September 2015).

The Banking Sector in October 2014

It is monetary authorities’ resources that became the principal source of growth in banks’ assets in October 2014. Still high frequency of banking license revocations and the ruble devaluation could hardly recover depositors’ confidence in the banking system – growth in the deposit base was close to zero at an annualized rate. Retail lending slowed down amid the deterioration of the credit portfolio quality. Banks’ return on assets kept declining in response to both the resource base appreciation and growth in contributions to the provisions for possible bad loans and other assets.

Инвестиционная деятельность в условиях девальвации курса рубля

Инвестиционная деятельность в условиях девальвации курса рубля

Russian financial crisis, US financial stock returns and the IMF

We find a statistically significant increase in adjusted correlation between portfolio returns during the Russian financial crisis period, especially during the peak of the crisis. We also find that commercial bank and Savings & Loan Institutions (S&L) portfolios lost market value significantly with events, starting with the debt moratorium and ruble devaluation on 17 August 1998. Much of the significant losses were driven by smaller size portfolios of financial institutions. The greater losses were incurred by commercial banks, and most importantly, by smaller commercial banks, S&Ls and investment banks in the third sub-period following the debt moratorium. We also found a form of contagion effect on the portfolio of smaller banks. Moreover, International Monetary Fund help or bailout has been perceived ineffective contributing to any recovery from crisis in Russia.

Resurgent Russian Economy?

On 1 October 2007, two months before parliamentary elections of 2 December 2007 and less than half a year before presidential elections of 2 March 2008, President Vladimir Putin agreed to put his name on electoral ballot sheet of largest Russian party that had always supported him-United Russia-although he had never been a member. In December's parliamentary elections, United Russia received 64 percent of votes, whereas Just Russia-a party that was more left-oriented but also openly supported Putin-received another eight percent of votes. Only two opposition parties managed to overcome seven-percent barrier in proportional representation elections to get their deputies into parliament: Communists (12 percent) and nationalistic Liberal Democratic party (eight percent). Other parties altogether received less than eight percent of votes.Shortly after December 2007, Dmitry Medvedev, then deputy prime minister, became a joint presidential candidate of four parties (United Russia, Just Russia, and two minor parties not represented in parliament) and immediately offered Putin post of prime minister in future government. Putin accepted, making it clear he was going to stay in politics even after his second presidential term came to an end. On 2 March 2008, Medvedev was elected president by an overwhelming majority and nominated Putin as prime minister.Putin's decision to stay on board in a new administration is understandable: he is prohibited from running for a third presidential term by constitution but he remains extremely popular-53 percent of electorate voted for Putin in 2000, 71 percent in 2004, and over 60 percent said they would vote for him in September 2007, even though he was not going to run. The secret of his high popularity is simple: he left country in better shape than when he came into power eight years earlier.PUTIN'S LEGACY: ECONOMIC ACHIEVEMENTSThe stabilization of past eight years was especially impressive, if compared to period of disarray of the rocky The Russian economy lost 45 percent of its output during transformational recession of 1989-98, income inequalities increased significantly, crime rate doubled, and life expectancy dropped from 70 to 65 years. The short-lived stabilization of 1995-98 (when ruble was pegged to dollar and inflation subsided) ended with spectacular currency crisis of August 1998, when ruble lost over 60 percent of its value in several months, resulting in acceleration of inflation, crime, suicides, and mortality rate.However, after 1998 currency crisis, Russian economy started to grow. The average annual growth rate totaled about seven percent in 1999-2007, so now GDP is gradually approaching its pre-recession level of 1989. Real incomes and personal consumption increased even faster-more than doubling in 1999-2007-and have already surpassed pre-recession level of late 1980s. The major push was given by devaluation of ruble in 1998 and by higher world prices for oil and gas later, but Putin can at least take credit for not ruining this growth. Inflation fell from 84 percent in 1998, when prices jumped after August 1998 currency crisis and dramatic devaluation of ruble, to 10-12 percent in 2004-07.Economic growth and high world fuel prices helped government to collect more tax revenues, so government budget moved from a deficit to surplus, and government spending as a proportion of GDP increased since 1999, allowing partial restoration of institutional capacity of state that was lost in 1990s. Moreover, high oil and gas prices in world markets allowed Russia to enjoy high foreign trade surpluses and to accumulate foreign exchange reserves, which increased from less than $15 billion right after 1998 currency crisis to nearly $500 billion at beginning of 2008.By comparative standards, Russian performance is not that impressive. …

Russia and China in the Global Economy

In mid-December 2004, Baikal Finanz, a previously unheard-of Russian firm with no offices and no known officers, won a nontransparent auction to buy Yuganskneftegaz, the major oil production asset of Yukos, Russia's most efficient oil company. The same week Lenovo, a computer firm established twenty years earlier as a venture of the Chinese Academy of Sciences, purchased IBM's personal computer division. Most people looking at Russia and China when Mao died in 1976 assumed that Russia1 was better positioned to become a major player in global technology industries. The Soviet Union was participating in the Apollo Soyuz joint space missions and enjoying the benefits of detente and stability (not yet visible stagnation) under Brezhnev. The USSR was a superpower with many of the requisites for development. In literacy levels and numbers of scientific, technical, and other specialists with advanced education, Russia was far ahead of China's overwhelmingly peasant society just emerging from the chaos of the Cultural Revolution and accompanying isolation.Since Mao's death China has generated high economic growth rates for three decades, fostering internationally competitive industries and lifting a significant number of people out of poverty. Beginning in the late 1980s, Russia experienced severe economic dislocations, and economic growth resumed only after a fall in living standards and the 1998 financial crisis. Most of the growth in Russia since August 1998 is attributable to the ruble devaluation and increased oil prices, raising questions about its sustainability. Despite windfall oil revenues, Russia's growth rate since Vladimir Putin became president has been among the lowest in former USSR countries.Growth based on industry has helped China overtake Russia on a range of human capital and development indicators. Internet and cell phone use among China's urban population is now roughly equivalent to that of Russia's city dwellers. Spending for education and reserach and development as a proportion of national budgets is at least equal. China is an important global player in a growing number of technology industries and in the international economic system, things Russian leaders merely talk about.What accounts for an outcome that contradicts most people's expectations? My argument emphasizes differing approaches to integration with the international economy. China has embraced economic globalization and integration on a scale surpassing many other Asian countries, while Russia remains wary and peripheral. Russia's economy is open, but selling natural resources and arms generates few linkages leading to higher value-added production. Russia's economic integration is thin. China's integration is thick, involving participation in technology chains and participation in entire product cycles. China vastly overperforms in producing value-added products given its level of development; Russia markedly underperforms relative to the industrial base, educational system, and research and development potential inherited from the Soviet era. China joined the WTO in 2001; Russia has been a year or two away from membership since 1993.These differences increasingly influence politics: China's thick integration has fostered regional, sectoral, and institutional interests that defended and expanded the policies of reform and openness; Russia's thin integration generates few countervailing forces to contest renewed administrative domination of the economy.Conventional Wisdom Explanations for China's RisePrevailing explanations for China's economic success emphasize initial conditions and/or specific policies. Initial advantages include an abundant supply of low-cost labor not covered by the welfare system; the decision to begin reforms with agriculture; shorter duration of communist rule; less complete Communist Party penetration of society; qualitative differences in leadership; and communities of co-ethnics willing to provide investment capital. …

Developments in Russian Gas Production Since 1998: Russia's Evolving Gas Supply Strategy

An American geographer and prominent authority on the oil and natural gas industries and resources of Russia and other former republics of the Soviet Union reports on overall trends in Russia's natural gas production in the years following the country's ruble devaluation and financial crisis. The account—based on systematic in-country observations, discussions/interviews with industry executives, and a review of industry sources—focuses on factors affecting domestic supply and demand as well as export capacity (will Russia have enough gas to meet rising domestic demand while fulfilling its export obligations?), regional patterns of production (and performance of Gazprom regional production enterprises), obstacles to the use of associated gas derived from crude oil extraction, and major pipeline construction projects in West Siberia and the Russian Far East. The paper concludes by outlining CERA's forecast for Russian gas production to 2020, also disaggregated by region. Journal of Economic Literature, Classification Numbers: L71, O13, Q40, Q48. 7 figures, 8 tables, 51 references.

U.S. Market Share for Poultry Meat in Russia

This study examines changes in U.S. market shares for poultry meat in Russia after the ruble devaluation of August 1998. In the 1990s, the U.S. captured over 90% of the Russian market for poultry meat imports. Russia accounted for a large segment of U.S. poultry meat exports, about 40%-55%, of dark meat sales in particular. The ruble devaluation drastically reduced leg quarter exports from the U.S. to Russia. Moreover, the U.S. lost 9% of its market share after the economic crisis while Brazilian, Dutch and German exporters captured market shares. Nevertheless, the market for U.S. broiler meat remains strong in Russia.

Putin's Russia: Is It a Doable Project?

IntroductionThe new Russian president repeatedly has claimed that the economic revival of Russia is the principal goal of his administration. After an initial period of uncertainty, the policies that Putin and his aides have chosen to improve the economic performance of the country have become clearer. They are (1) a strong state, able to enforce the rule of law, and (2) a liberal economic policy.Following a drastic output contraction during the first decade of post-communist transformation, Russia has experienced considerable economic growth (ca. 20 percent of GDP in 1999-2001 ; see MERT 2002). The projections for 2002 are in the range between 3.5 and 4.5 percent of GDP increase. The unemployment rate dropped from its peak of 14 percent in early 1999 to 8.5 percent in 2001 (OECD 2002). Inflation also has been reduced.However, skeptical observers claim that the impressive results of 1999-2001 are due to the ruble devaluation in August-September 1998 and relatively high world prices on crude oil and other natural resources. The ruble devaluation stimulated import substitution by Russian manufacturers and, consequently, employment of idle production facilities.1 At the same time, high oil prices created over-profits for Russian exporters and amplified the revenue of the federal budget.To what extent should the recent improvements in the Russian economic performance be attributed to policy measures?2 This question relates to a more policy-relevant one: Can the combination of the strong hand government with liberal policy serve as the means of economic recovery in the near future?The main idea of this paper is to test the viability of project, combining strong hand government with liberal economic policies as a means of economic revival, against the latest empirical data from Russia. Recent empirical research highlights the diversity of policies and institutional frameworks in Russian regions through the 1990s and at the beginning of this decade. The outcomes in terms of gross regional product (GRP) change, investment, and consumption vary significantly as well. Can the interregional variance in economic performance be attributed to the policy factors upon which administration strives to capitalize?The next section presents an overview of Putin's project (that is, two dimensions of the policy of the new administration): government by a strong hand and economic liberalization. Then, to address the question of whether these two trends can contribute to the aspired economic revival, this research draws on the pertinent literature and international experience. The following empirical sections address the above questions as the hypothesis that the combination of the strong hand government with liberal economic policy has been instrumental for socioeconomic development in the post-1998 Russian setting. This hypothesis is tested against the empirical data from seventy-eight regions of Russia.Two Dimensions of Putin's ProjectStrong HandSince Putin became prime minister in 1999, the Russian government has implemented several measures to discipline regional and local authorities. First, seven federal districts were created in May 2000 to supervise the implementation of federal legislation in the regions. Second, the legislators vested the president with the authority to suspend governors from their office if they refused to comply with federal legislation.3 Third, as a result of several amendments to the Law on the Formation of the Federal Council, governors and chairpersons of regional legislatures had to leave the Upper Chamber of the Russian parliament by January 1, 2002, and were replaced by appointed or indirectly elected regional representatives. Simultaneously, the share of the regional governments in the Russian consolidated budget shrank in 1999-2002, after considerable expansion in the previous years.4 Then, the new political party law and pending amendments to the electoral legislation aimed to secure the key role of federal political parties in electoral campaigns, including those at the regional level. …

Russia's Virtual Economy by Clifford G. s> Gaddy Barry W. Ickes (review)

REVIEWS 785 can be warmly recommended to scholars and students of post-Communist transitionand foreign trade. School ofSlavonic andEastEuropean Studies Z. ADAM lUniversity College London Gaddy, Clifford G. and Ickes, Barry W. Russia'sVirtual Economy. Brookings Institution Press, Washington D.C., 2002. xiii + 306 pp. Tables. Notes. Appendices. Bibliography.Index. ?Io.95: $19.95 (paperback). THEepithet 'virtual'in relationto Russia'seconomy was felicitouslyextracted by CliffordGaddy and BarryIckesnot fromthe internetbut fromthe Russian Government's Karpov Commission on non-payments (I996-97), and was firstused by them in a widely cited article in Foreign AffairsI998, of which this book is a much expanded version. It is not without blemishes. The expansion is at times laboured and repetitious. Its 280 pages could with advantage be pruned by at least onethird . The authors are hidebound by academic correctness: they omit the parent articlefrom their bibliographyand locate the book's origin in stodgier material of more recent vintage. They also do not adequately relate their diagnoses of Russia to analogous occurrencesin Westerneconomies, whether developed or developing. Depressed areas, negative value added and rentseeking -cum-corruption-cum-personal-favoursare not new. What is special about Russia is the pervasive interconnectedness of these phenomena rather than theirmere existence or individualdefinitions. Basically,however, the workmarksa strikingadvance in ourunderstanding of Russia's economic condition. What Gaddy and Ickes have done is to develop a unifiedanalysisof elements noted by allthoughtfulRussia-watchers but hithertocatalogued in ratherseparateboxes. The solid foundations of the Russian economy are its mineralsproduction: oil and gas especially,but also some importantmetalsplus diamonds and a bit of coal. Exportsof these items, and correspondingimportsof consumergoods, have been a mainstayof Russianlivingstandardssincethe fallof Communism. This point is not part of the book's theme, but it needs mentioning because it representsvalid economic restructuring,albeit with no reshaping of physical plant. Moreover, the country has run an export surplussufficientto finance a vast accumulation of external assets, most of it accomplished more or less illegally by enterprises, but also some legally by households in the form of foreign-currency holdings. These external assets may be said to constitute domestic investmentcapitalin waiting. There is one other piece of good news. At the end of the I99OS, Russia's crude oil output, having fallen over the preceding decade by 40 per cent, began to recover. This happened not because of ruble devaluation or higher world oil prices, but because Russia's oil tycoons had completed their major corporate misappropriationsand the industry was therefore encouraged to turn more of its attention to oil-fieldmanagement. But don't cheer too soon. There are question marks over the country's ability to maintain its naturalgas output in the years ahead. And meanwhile 786 SEER, 8i, 4, 2003 the bad news begins with the extravagant under-pricing of fuel, and particularlyof naturalgas, in the domestic economy. The comparison here is notwith world market prices, even after netting back for internal Russian transportcosts. If world marketprices for oil and gas allow Russia (like Saudi Arabia)a marginof rent over and above extractioncosts, it is legitimate (even if not necessarilyoptimal)for the authoritiesto distributesuch rent, or part of it, across the population through lower fuel prices at home. What is indefensibleis to allow domestic sellingprices to cover less than the fullcost of extracting and processing the fuel. Yet this has been precisely the situation inheritedfrom the Soviet era, when output quantitieswere not determinedby prices and when the cost of capital in particular(i.e. interest)was ignored on ideological grounds. The inherent subsidyto households arbitrarilybenefits today's generations at the expense of future ones. Much more serious, however, is the wasteful supportaffordedto manypartsof manufacturingindustry.Here, otheraspects of the Soviet legacy become prominent. This is the core of Gaddy and Ickes's analysis.Largesections of Russian manufacturingare in a dire state:spawned by central planning and military considerations, hopelessly mis-structured, wrongly located and uncompetitive, incapable of conversion to market requirementsexcept throughwholesale dismembermentof enterprises.Helping them nonetheless to limp along in this condition has been an insidious network of personal and bureaucraticconnections, both horizontally among enterprisesand verticallythroughthe hierarchiesof politicalauthority.Gaddy and Ickes call it 'relationalcapital'.The Russianterm is blat.In Soviet times it enabled the industrial planning mechanism to function. Today it allows...

Is Russia restructuring?

This paper explores the dynamics of enterprise restructuring in Russia since 1996 using newly available firm-level data from official sources and from original individual business case studies carried out in Russia’s regions. We assess empirically how the patterns of job creation and destruction are related to various aspects of enterprise restructuring across firms in different sectors and regions, and with different ownership forms, size, vintage, and performance characteristics. Our case-study evidence - based on more than 70 business visits - suggests that job destruction has taken place, but in some sectors and regions only to a limited degree, in large part due to institutional and incentive constraints and a still-widespread “socialist” corporate culture. The case studies also indicate job creation has materialized, particularly in sectors where the import-substitution effects of the 1998 ruble devaluation have been most pronounced. This case-study evidence is complemented by analysis of data provided by Goskomstat covering approximately 128,000 enterprises across 24 industrial sectors in all of the country’s 89 regions for 1996-1999. These data suggest that in the aggregate the typical Russian firm has experienced only modest downsizing - about 12 percent - in terms of number of employees. We also find evidence of particular sectors where there has been new entry by smaller firms and exit by larger, mature businesses. Except for a lull in 1998, there has been a steady increase in the rate of job creation; at the same time, job destruction rates have been declining, with a substantial drop in the 1998-99 periods. Employment shifts between regions have steadily increased over time, but across sectors and firm ownership types, employment shifts are “u-shaped”, with a pronounced decline in 1998. Firm size is found to be statistically correlated positively) with profitability; yet restructuring through changes in net employment growth does not appear to be related statistically to profitability. This suggests that there are efficiency improvements needed in Russia’s restructuring process.

ALL FOR ONE … ONE FOR ALL? A PRINCIPAL COMPONENT ANALYSIS OF LATIN AMERICAN BRADY BOND DEBT FROM 1994 TO 2000

We use Principal Component Analysis (PCA) to study the Brady Bond Debt of the four primary Latin American sovereign issuers: Argentina, Brazil, Mexico, and Venezuela. Our dataset covers a period of 5½ years starting in July 1994 and consists of daily sovereign ("stripped") yield levels for the par and discount debt securities of each country. We examine the behavior of the characteristic roots and eigenvectors of the empirical covariance matrices computed sequentially over different periods. We show that, by and large, there exist two statistically significant components, or factors, which explain up to 90% of the realized variance. The eigenvector with largest eigenvalue corresponds to the variance attributable to "regional" ("Latin") risk. The second component strongly suggests the existence of a volatility risk factor associated to Venezuelan debt in relation to the rest of the region. A time-dependent factor analyis reveals that the importance of the variance explained by the factor changes over time and that this variation can be interpreted to some extent in terms of market events. In particular, we investigate the relation between the evolution of the PCA factors with the market dislocations that ocurred during the observation period, including the so-called Tequila effect, Asian flu, Ruble devaluation, and Real devaluation.

All For One... One For All? A Principal Component Analysis of the Latin American Brady Bond Debt from 1994 to 2000

We use Principal Component Analysis (PCA) to study the Brady Bond Debt of the four primary Latin American sovereign issuers: Argentina, Brazil, Mexico, and Venezuela. Our dataset covers a period of 5 years starting in July 1994 and consists of daily sovereign (stripped) yield levels for the par and discount debt securities of each country. We examine the behavior of the characteristic roots and eigenvectors of the empirical covariance matrices computed sequentially over different periods. We show that, by and large, there exist two statistically significant components, or factors, which explain up to 90% of the realized variance. The eigenvector with largest eigenvalue corresponds to the variance attributable to regional (Latin) risk. The second component strongly suggests the existence of a volatility risk factor associated to Venezuelan debt in relation to the rest of the region. A time-dependent factor analysis reveals that the importance of the variance explained by the factor changes over time and that this variation can be interpreted, to some extent, in terms of market events. In particular, we investigate the relation between the evolution of the PCA factors with the market dislocations that occurred during the observation period, including the so-called Tequila effect, Asian flu, Ruble devaluation, and Real devaluation.

The Iron Ore Industry of Kazakhstan: A Research Report

An American specialist on the energy and natural resource industries of the countries of the former USSR examines recent developments in iron ore production in Kazakhstan in light of the financial crisis in Russia, the major export market for Kazakhstan's output. The analysis focuses on the effects of the August 1998 ruble devaluation in Russia on terms of trade between the two countries and also examines demand for iron ore in Kazakhstan and other (non-Russian) foreign markets. Coverage includes a description of the current operations of Kazakhstan's major iron ore producers and examines prospects for improvement in 1999. Journal of Economic Literature, Classification Numbers: F14, L72, Q30. 3 tables, 10 references.