Russian Financial Crisis Research Articles

Contemporary Demographic and Economic Processes in Russia: A Statistical Analysis of Their Interaction

The article analyses the relationships between economic and demographic processes in contemporary Russia.Using index analysis, the author concluded that, in 2006–2018, a decline in the working-age population would have reduced, ceteris paribus, almost one-third of the GDP growth rate if the negative impact of this factor had not been fully compensated by an increase in the employment rate of the working-age population during this period. Growth of fertility in 2007–2015 would have led, if the influence of the situation on the labor market was eliminated, to a decrease in the number of employees by 1.2% (caused by the decline in female labor force participation rate), while fertility decrease after 2015 would have led to an increase in this number by 0.4%. Based on this estimation, it was concluded that the changes in fertility can, in the short term, have any significant impact on employment only in those types of economic activity in which the women of reproductive age make up the overwhelming majority of the employees.It has been suggested that the accumulation of socio-psychological prerequisites for a decline in fertility has led the demographic system, both in Western countries and in Russia, into a state of unstable equilibrium. The global financial crises of 2008–2009 and the 2014–2015 financial crisis in Russia upset this equilibrium and launched a mechanism for fertility decline. It is argued that in the period under consideration, the Russian economy adapted to the turbulence of the external environment more successfully than the demographic sphere

Экспресс-диагностика риска банкротства организаций на базе селективно-индикативной модели

Effective bankruptcy risk diagnostics may prevent a financial crisis in Russia’s national economy. The article introduces a novel express tool for bankruptcy diagnostics based on early recognition of alert signs, crisis fields, and preliminary pre-crisis assessment. The tool is a selective-indicative model with regional and industrial specifications.
 Regional and industrial exhibitors served as benchmark indicators. The empirical material included statistics, reference materials, and financial reports from agricultural organizations in the period of external economic shocks (2014–2022), Kemerovo region, Russia.
 First, the alert signals of bankruptcy risk were identified based on 22 original methods of financial crisis forecasting. After that, they were assessed for practical popularity. The identified default risk signals were linked to the existing criteria of financial insolvency, subjected to economic interpretation, and classified. After fixing the analytical reference vectors, the authors identified the share of each indicator. By determining the latest results of model exponents, they ensured the direction of analytical reference vectors to maximize the disabled function. The next stage involved systematization and synthesis of alert signals into a diagnostic model to be developed into a gradation indicator. After fixing the signal analytical base, the model was tested to formulate conclusions about its adaptability in the current economy.
 The resulting model relied on the share of each alert signal of bankruptcy risk in the rating number. It may improve the quality of predictive diagnostics. As the model needs few exponents, it provides a high-speed crisis analysis.

A systemic crisis: political consequences of the 1989 Tiananmen square events

The article attempts to revise the understanding of the nature of China’s 1989 Tiananmen Square crisis and its consequences in the context of comparison with Soviet/Russian history of 1980-1990s. Several dozens of studies and op-ed pieces focused on the problem earlier (especially in Russian-language literature) but these papers lacked Chinese sources, intended to liken the Tiananmen Square crisis to the Russian agenda, and simplified complicated cause-effects relations of the Chinese historical process. As a result, the conclusions are limited to the question of the necessity of a decisive crackdown on any turmoil or political manifestation as a sole tool to protect one nation’s stability and prosperity. China’s stability and prosperity after the Tiananmen Square Crisis should not be seen as a result of crackdowns. Paradoxically, despite the conservatives’ victory in 1989, China got back to the path of reforms several years after the Tiananmen Square events. It can be attributed to the complex set of internal and external factors, and the freezing of China’s political reforms was just one of them. Moreover, the process was facilitated not only by overcoming its political crisis but also by observing the revolutions of 1989 in Eastern Europe. Faced with the threat of being ousted from power, China’s elites consolidated – a factor that became crucial for the implementation of systemic market reforms in the 1990s. The author concludes that a similar situation was observed in post-Soviet Russia in 1998-2000: the Russian financial crisis and several events including Second Chechnya Campaign became the ‘backbone crisis’ of Vladimir Putin’s presidency.

История одного национального дефолта

This is a contribution to the discussion forum "Conceptualizing Society after the Modern Territorial State and Nation." Ilya Gerasimov uses the case of the 1998 Russian financial crisis to introduce the modern sociological model of the nation-state's systemic demise. Known in Russian primarily as "the default" – a shorthand for "sovereign debt default" – the 1998 financial crisis was first and foremost a crisis of trust in the government and its economic policy. Economics experts have traced the roots of the default all the way to 1991 and the origins of the sovereign Russian Federation. Gerasimov suggests that the 1998 crisis was the first stage in the Russian national project's fundamental default on its promise to build a "normal" democratic state, so that Russia's invasion of Ukraine in 2022 was only the culmination of that systemic failure. From the very beginning, the problem was not the project's Russianness but its normative "normalness."

Economic Adaptability in the Absence of Democratic Corporatism: Explaining Lithuania’s Export Performance*

Viewed in light of democratic corporatism literature, Lithuania is a deviant case. Although it lacks essential institutional prerequisites deemed important for export success and flexible adaptation to external shocks, the small Baltic country has been among the best performers in the European Union on these dimensions. Lithuania has become very internationally integrated and has managed to quickly adjust to numerous shocks, such as the Russian financial crisis of 1998–99, the Global Financial Crisis of 2008–2009, and the COVID-19 pandemic. In this article, we analyse Lithuania’s export specialization and show how particular institutional elements have supported flexible adaptation and competitiveness improvements: we cover the labour market, state’s involvement in terms of domestic compensation and public goods provision, education and skills, and the role of political legitimacy. Lithuania’s case has implications for the literature on the political economy of small states and the debate regarding the middle-income trap.

The Economic Crisis in Russia and the Hedge Funds’ Activities: Retrospective Analysis of the Factors that Caused the Crisis

The economic crisis of 1998 in Russia is still the object of active study by many scientists economists. Financial regulators represented by the Government of Russia, the Central Bank pursued a hasty, inconsistent and ill-conceived monetary policy in the country, sometimes developing into simple speculative operations in the securities market both domestically and abroad. The article describes the methods of statistical and deductive analysis in the study of the Russian financial crisis of 1998, studies the causes of its occurrence, the attempt to determine the mutual influence and relationship of events in the US securities markets and oil markets in developing countries in Southeast Asia with the economic crisis in Russia that influenced in general, to the destabilization of its economy and the weakening of the national currency is made. Therefore, in our opinion, it is necessary to synthesize the mutual influence and interconnection of the Russian crisis of 1998 with the fall in oil prices in Southeast Asian countries and the activities of US hedge companies in order to identify the true causes of the crisis in order to really present its systemic nature. If to pin hopes only on hedge companies as risk insurance entities, this can lead to an increase in the latter.

War in Ukraine: challenges for the global economy

Introduction. As the attack on Ukraine intensified, the United States and other Western countries imposed unprecedented economic sanctions on Russia and declared their support for Ukraine. Problem. Consideringthe far-reaching impact of the humanitarian crisis in Ukraine on international development in the long run, it is extremely important for the international community to implement compre­hensive solutions focused on development priorities. The aim of the article is to study the impact of the war in Ukraine on inflation risks and challenges for the world economy. Methods. The information base of the study was the study of official information and periodicals. Methodological basis of the research: analysis, synthesis, systems approach, statistical methods and abstract-logical methods. Results. The new sanctions regime and the cost of the war are likely to push the Russian economy into a recession worse than the 1998 recession and the Russian financial crisis, accompanied by significant increases in inflation and the cost of living of Russian households. According to our preliminary estimates, Russia’s real GDP will fall by 4–9 % in 2022, while growth will range from –1 % to 2.5 % in 2023. Inflation may rise to 11–17 % in 2022, fall to 6–12.03 % in 2022. A key factor in these projections is that Russia’s oil and gas exports, especially to Europe, are largely continuing, but this may change if sanctions are tightened. In 2021, Russia’s exports of mineral fuels, oils and distillation products amounted to 199 USDbillion. USA, which accounts for 40.5 % of Russia’s total exports and 11.4 % of its GDP. Depending on the duration of sanctions and the possibility of their strengthening, the world economy may be significantly affected during 2022–2023. Conclusions. It is expected that the war in Ukraine will have a significant impact on the economy and consumers in terms of such actions: expanding the supply chain, increasing inflationary pressures, deteriorating economic prospects.

Economic Policy Uncertainty and Energy Prices: Empirical Evidence from Multivariate DCC-GARCH Models

Crude oil and natural gas are crucial to the Russian economy. Therefore, this study examined the interconnections between crude oil price, natural gas price, and Russian economic policy uncertainty (EPU) over the period 1994–2019 using multivariate DCC-MGARCH models. The findings show that there are strong interconnections (co-movement) between the energy prices and EPU in Russia, and that it might be misleading to assume independence or neutrality between the variables. Although Russia is also a crucial player in both the natural gas and the crude oil markets, this study reveals that there is a stronger co-movement of the EPU with gas price than with the oil price. Russia is the largest exporter of natural gas and the second-largest producer; it is plausible that the natural gas price correlates with EPU more than the crude oil price. Further, the correlation between gas price and EPU and the correlation between crude oil price and EPU have similar patterns. Each declines almost in the same period and, equally, increases concurrently. In addition, the results revealed that significant global shocks and crises, such as the 2008 global financial crisis, the 2014–2017 Russian financial crisis, the 9/11 terrorist attack, and the Russo–Ukrainian conflicts, influence the interconnections between the energy prices and Russian EPU.

The Typology of The Global Financial Crisis and the Solution in Islamic Economic Perspective

Economic globalization has triggered more frequent financial crises. Financial crises constantly repeat every specific time. This article reviews the typology of the global financial crisis and the solutions offered by Islamic economics. The research uses a historical approach. Five typologies of the global financial crisis, namely: Speculative bubbles and Crash, Sovereign Default, Balance of payment crisis, systemic banking crisis, and Energy Crisis. The financial crisis typologies of Speculative bubbles and Crash are the Wall Street Crash of 1929 and the Great Depression, Black Monday, Japanese Asset Bubble, Dot-com Bubble, US Saving & Loan Crisis, and the Suprime Mortgage Crisis. The financial crisis typology of Sovereign Default is the Latin American Debt Crisis, the Mexican Peso Crisis, the Asian Financial Crisis, and the European Crisis. The typology of financial crisis Balance of payment crisis is the Mexican Peso Crisis and the Russian Financial Crisis. The financial typology of the energy crisis is the oil crisis. Islamic economics offers a solution so that the financial crisis does not recur in the future. The prohibition of riba, maysir and ghaarar transactions offers a solution to the financial crisis typology of Speculative bubbles and Crash. The principle of equity financing in Islamic economics is a solution to the financial crisis of the Sovereign Default typology. Islamic economics prioritizes the financial sector, which is in line with the real sector as a solution to the financial crisis typology of the Balance of payment crisis. The value of morality (akhlakul karimah) is a solution to the financial crisis because of the moral hazard.

The Impact of Lithuanian Financial Crisis for National Economy: Comparative Study

Emphasizing sustainable economic development preconditions in Lithuania and in order to research the formation of regional policy, the article was made on Lithuania financial crisis impact on the economy, comparative study. It was found that in the literature lacks of general method to compare the different financial crises that have occurred in different regions, countries or at different intervals impact to economic indicators, so was created financial crisis impact on countries economy index, to compare this diferent impact. The study identified three financial crisis which negatively affected Lithuanian economy – “Lithunia banking crisis” (1995), “Russian financial crisis” (1998) and “Global Financial Crisis” (2008). Based on this new index calculations, the financial crisis affect was compared and found that the greatest negative impact on the economy caused the Global financial crisis (2008). Examining the specifics of Lithuania’s economy noted that all of the financial crisis affected the gross domestic product growth, labor market and the country budget balance. Meanwhile, the impact on other macroeconomic indicators of the crisis depended on the crises specifics and was different.

Exchange rate exposure for exporting and domestic firms in central and Eastern Europe

We analyze the exchange rate exposure of firms in Russia and European Union (EU) accession countries from Central and Eastern Europe: Poland, Hungary, and the Czech Republic. We control for potential effects of exchange rate regimes, the subprime mortgage and Russian financial crisis, EU accession, and the turn-of-the-year effect. We find significant exposure for 60% and 52% of firms in the CEEC-3 and Russia, respectively. Magnitude and direction of firms' exposure depends on the currency pair (versus either the euro or U.S. dollar) and differs between CEEC-3 and Russia. Differences may result from dissimilar exposure channels in the respective economies.

Sustainable growth in times of crisis: L’Oréal Russia

Learning outcomes This study enables to critically assess: what constitutes the consequences of a financial crisis to a multi-national enterprise operating in the emerging market of Russia; the decision-making processes behind crisis management and the corresponding search for informational grounds to be used as decision justification; and the role of sustainable development in times of crisis. Case overview/synopsis During the 2014–2015 financial crisis in Russia, L’Oréal Russia managed to increase growth by 7%–15%, strengthening its place as the market leader in the country. First, the case illustrates the way Antonio, the General Manager of L’Oréal Russia, had successfully approached this situation by learning from the shortcomings of the company’s strategy during the 2007–2008 crisis and deciding to take a proactive position concerning stakeholders. Then, upon recalling his success story, Antonio suddenly found himself at the dawn of yet another crisis caused simultaneously by the COVID-19 outbreak and oil prices drop. In the face of uncertainty regarding the applicability of prior crisis management strategy for the new economic and social reality of Russia, Antonio was worried about whether the company would be able to achieve the 2020 sustainable development goals of L’Oréal by the end of the year. The case dilemma involves choices Antonio faced during mid-March 2020 about strategy formulation based on an adjustment to the expected consumer behavior patterns and possible need to rethink sustainable development goals priority. Complexity academic level This case is appropriate for an undergraduate or graduate-level program curriculum for courses dedicated to or including topics related to crisis management, doing business in emerging markets, corporate social responsibility and consumer behavior. Before engaging with the case, the students should be aware of basic management- and economics-related concepts and terms, such as strategy, sustainable development, CSR and economic crisis. Supplementary materials Teaching notes are available for educators only. Subject code CSS 11: Strategy.

The distributional effect of a financial crisis: Russia 1899–1905

ABSTRACT Who pays for financial crises? This paper examines the period between the major Russian financial crisis of 1899–1902 and the Russian Revolution of 1905. Using newly constructed aggregate-level data and narrative evidence, this paper finds that in response to the crisis, the Russian government and industry transferred income and wealth from ordinary workers to industrialists and investors. The recipients of transfers weathered the crisis well and profited during the recovery, while employees’ wages and wealth fell behind.

Formation of optimal capital structure of domestic corporations in times of crisis: Econometric analysis of determinants

Subject. The article addresses building the optimal capital structure in the face of financial globalization, taking into account the ever-changing factors of external economic and geopolitical environment, including the financial crisis. Objectives. The purpose is to perform empirical tests of hypotheses about the nature of corporate financial leverage dependence on traditional determinants during and after the financial crisis in Russia's emerging market. I used a large data set on 49 public companies in seven leading sectors of the Russian economy from 2011 to 2017. Methods. The study employs the correlation and regression analysis. Results. The results of correlation and regression analysis show that the application of traditional theories of capital structure in the current conditions of financial globalization in a developing country is ineffective for forming an optimal capital structure; macroeconomic factors have a significant impact on the formation of corporate capital structures, which is particularly reflected during and after the crisis; the financial crisis has a considerable impact on the capital structure of companies; the determinant of stock market development has a real impact on leverage and plays an important role in financial decision-making after the financial crisis. Conclusions. I revealed inverse relationship between the leverage and variable size of companies after financial crisis, which contradicts to the trade-off theory and corresponds to the pecking order theory. This supports the hypothesis that macroeconomic factors are crucial, but the variable of stock market development has increased essentially as compared to the pre-crisis period.

The Financial Crisis in Russia and its Impact on the Labour Market

The Financial Crisis in Russia and its Impact on the Labour Market

Higher Capital and Liquidity Regulations of Basel Standards Have Made Banks and Banking Systems Become More Prone to Financial and Economic Crises

Basel II and III standards are a regulatory consequence following two major crises in systemic nature, the homegrown Asian crisis of 1997-98 and the global financial crisis of 2007-08. Basel I, despite high expectations and claims by the Basel Committee, failed to prevent the following financial crises from occurring in the 1990s; Finnish and Swedish banking crises (early 1990s), Indian economic crisis (1991), Mexican peso crisis (1994), Turkish economic crisis (1994), Asian crisis (1997-98), Russian financial crisis (1998), Argentine economic crisis (1999-2002), and Brazil crisis (1999). The Asian financial crisis in systemic nature cost global investors a jaw dropping close to one trillion dollars. Replacing Basel I with a Revised Framework did not stop the recurrence of financial crises in the new millennium which have been ever more costly, longer-lasting, and unbearably damaging. Basel II, just like Basel I, failed to avoid the following crises either originated in the U.S. or caused by contagion; the bust of the dot.com bubble (2001-02), mortgage debacle (2006), global financial crisis (2008), and sovereign debt crisis in eurozone (2010-12). Just these four crises cost the world’s economies as much as thirty trillion dollars. The probability of a high-magnitude financial crisis to occur is between 4% and 5%, which means that by 2030 Basel III may have a chance to prove its ability to withstand shocks; in the event of a failure, the extent of financial loses may be the largest ever ($50 trillion?).

The 2014–15 Financial Crisis in Russia and the Foundations of Weak Monetary Power Autonomy in the International Political Economy

ABSTRACTThis article contributes to international political economy debates about the monetary power autonomy (MPA) of emerging market and developing countries (EMDs). The 2014–15 Russian financial crisis is used as a case study to explore why an accumulation of large international reserves does not provide protection against currency crises and macroeconomic adjustments in EMDs. The analysis centres on the interplay between two dimensions of MPA: the Power to Delay and the Power to Deflect adjustment costs. Two structural factors condition Russia’s low MPA. First, the country’s subordinated integration in global financial markets increases its financial vulnerability. The composition of external assets and liabilities, combined with cross-border capital flows, restrict the use of international reserves to delay currency crises. Second, the choice of a particular macroeconomic policy regime embraced the financialisation of the – mainly state-owned – Russian banking sector, thus making it difficult to transform liquidity inflows into credits for enterprises. Russia’s main comparative advantage, hydrocarbon export revenues, is not exploited. The type of economy created due to the post-Communist transition means that provided ‘excessive’ liquidity remains in the financial system and is channelled into currency arbitrage. This factor increases exchange rate vulnerability and undermines Russia’s MPA.

Optimization of the Company Strategic Management System in the Context of Economic Instability

1. Introduction As it is stated in the work of Vershinina et al. (2016) "The rapid development of the financial market requires the improvement of already existing financial institutions and the emergence of new ones". The 2008-2010 global economic crisis and the financial crisis in Russia in 2014-2015 determined the need to develop strategic planning in general and level planning in particular because many companies happened to be unready for unpredictably changing conditions. The problem is that even having qualified specialists in this area and opportunity to organize their involvement, these methods are not adequately used in our country. The authors make the following hypothesis: difficult current macro-economic situation in Russia requires to change the work of enterprises management in terms of forming strategies related to developing the activity of legal entities they control as a whole and forecasting results of the activity on various levels of the enterprise in particular within improving the efficiency of the organization activity in the context of unstable environment. In order to check out the hypothesis, it is necessary to answer a number of questions: * What is a key element of the company management under conditions of instability? * What methodological basis should commercial organizations choose to form their forecasting and development strategies under conditions of turbulence? * What ways can the enterprise use to form the optimal system of strategic management during the effect of unstable conditions? 2. Methodology 2.1. Theoretical and Methodological Basis of the Research The article is based on scientific works and applied developments of Russian and foreign scientists and experts on the researched problems in the area of strategic management of enterprise as a whole and focus on stability of the company competitive advantage under conditions of dynamisms and globalization of markets, in particular. The work used the dialectical method of cognition and system approach to studying the problem. General scientific and special methods of research were used, including analysis, particularly, comparative analysis, synthesis, analogue, classification, as well as historical and logical methods and graph techniques. The informational basis of this work includes statutory and legal acts of the Russian Federation that regulate the activity of commercial organizations. When writing the article, official statistical foreign and Russian informational resources, as well as data from official websites of research and informational business portals, institutes and other organizations were used. 3. Results 3.1. Level Approach in Strategic Planning as a Key Element of the Company Management In order to stipulate the need to use a strategy when managing companies under modern conditions, as well as to reveal the dependence of the company activity success on the way of its development, it is necessary to study the essence of the strategy, its components and tools of formation. Research and methodological sources show a lot of ways to define strategic management that aim at revealing aspects of this difficult management process. Strategic management is the management of the enterprise that is based on the personnel potential, performed on the basis of flexible regulation and timely changes, focuses on production activity related to clients' demands, and allows achieving competitive advantages in the perspective of its development (Bondarchuk V.A., 2007). Taking into account generalization of the existing interpretations of strategic management (Bondarchuk V.A., 2007; Kruglova N.Yu., Kruglov M.I., 2003; Porter M., Michael E., 1998; Grant R., 2012; Utkin E.A., 1994; Ansoff I., 1999; Igoshin N. V., 2008; Dmitrishina and Uskov 2015; Kosinova, et al., 2016; Sibirskaya, et al., 2015; Stroeva, et al. …

Corporate Control Market: Stages, Specific Features, Regulation

Russia’s market for mergers and acquisitions came into being in the early 1990s when mass privatization of state-owned property gained momentum. More specifically, it was not until after the Russian financial crisis of 1998 that mergers and friendly takeovers took place in Russia. Up until then there were ‘acquisitions through privatization’ that can be regarded as a primary manifestation of the initial stage of building a market for corporate control (from 1992 till the onset of the financial crisis of 1998). Reorganization proceeded privatization in 1/3 of cases, was coupled with privatization in 1/3 of cases and followed privatization in 1/3 of cases. Also, the practice of consolidating Russian assets through both M&A and outsider shareholding was adopted in the mid-1990s. In 1998, the equity of about 40% of surveyed enterprises was partially held by outside corporate shareholders, and more than 13% of those enterprises were integrated with suppliers or consumers.

The Russian Financial Crisis and Workers’ Remittances to Tajikistan and the Kyrgyz Republic

In this paper, we estimate the link between remittances and key macroeconomic variables of the host country (Russia) and the world’s most remittance-dependent economies of Tajikistan and the Kyrgyz Republic. We mostly focus on the relationship during the ongoing Russian financial crisis. In particular, we estimate the responses of remittances to a shock in the exchange rate and per capita income in Russia and those of the key macroeconomic fundamentals of Tajikistan and the Kyrgyz Republic to a shock in remittance inflows. The empirical findings show that remittances serve as a channel to transfer the negative effects of the global and the Russian financial crises from the Russian macroeconomic fundamentals to the macroeconomic indicators of Tajikistan and the Kyrgyz Republic.