Pinto, BrianUlatov, Sergei2012-03-192012-03-192010-05-01https://hdl.handle.net/10986/3797Russia had more-or-less completed the privatization of its manufacturing and natural resource sectors by the end of 1997. And in February 1998, the annual inflation rate at last dipped into the single digits. Privatization should have helped with stronger micro-foundations for growth. The conquest of inflation should have cemented macroeconomic credibility, lowered real interest rates, and spurred investment. Instead, Russia suffered a massive public debt-exchange rate-banking crisis just six months later, in August 1998. In showing how this turn of events unfolded, the authors focus on the interaction among Russia's deteriorating fiscal fundamentals, its weak micro-foundations of growth and financial globalization. They argue that the expectation of a large official bailout in the final 10 weeks before the meltdown played an important role, with Russia's external debt increasing by $16 billion or 8 percent of post-crisis gross domestic product during this time. The lessons and insights extracted from the 1998 Russian crisis are of general applicability, oil and geopolitics notwithstanding. These include a discussion of when financial globalization might actually hurt and a cutoff in market access might actually help; circumstances in which an official bailout could backfire; and why financial engineering tends to fail when fiscal solvency problems are present.CC BY 3.0 IGOACCOUNTINGACCOUNTING STANDARDSARBITRAGEARREARSASSET QUALITYAUCTIONAUCTIONSBAILOUTBAILOUTSBALANCE SHEETBALANCE SHEETSBALANCE-OF-PAYMENTS CRISESBANK DEBTBANK DEPOSITSBANK PORTFOLIOSBANK SUPERVISIONBANKING CRISISBANKING SYSTEMBANKRUPTCYBASIS POINTSBENCHMARK BONDSBIDBONDBOND SPREADBOND SPREADSBORROWING COSTSBROAD MONEYBUDGET CONSTRAINTSCAPITAL ACCOUNTCAPITAL ALLOCATIONCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETSCASH SETTLEMENTSCENTRAL BANKCOLLATERALCOMMERCIAL BANKCOMMERCIAL BANKSCONSUMER GOODSCORPORATE BONDSCORPORATE GOVERNANCECOUPONCREDIBILITYCREDIT RISKSCREDIT SPREADSCREDIT SQUEEZECREDITORSCRISIS COUNTRIESCURRENCYCURRENCY CRISISCURRENCY DEPRECIATIONCURRENCY MISMATCHESCURRENT ACCOUNT DEFICITCURRENT ACCOUNT SURPLUSCURRENT ACCOUNT SURPLUSESDEBT BURDENDEBT FINANCINGDEBT INSTRUMENTSDEBT OBLIGATIONSDEBT OUTSTANDINGDEBT PAYMENTSDEBT RESTRUCTURINGDEBT SWAPSDEFAULT RISKDEPOSITDEPOSITORSDEPOSITSDERIVATIVESDEVALUATIONDEVELOPING COUNTRIESDIRECTED CREDITSDISBURSEMENTDOLLAR DEBTDOMESTIC CREDITDOMESTIC CURRENCYDOMESTIC INTEREST RATEDOMESTIC INTEREST RATESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSENTERPRISE OPERATIONSEUROBONDEXCHANGE RATEEXCHANGE RATESEXPENDITUREEXPORTERSEXTERNAL DEBTEXTERNAL DEBTSEXTERNAL FUNDINGFACE VALUEFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE SYSTEMFINANCIAL CRISISFINANCIAL LIBERALIZATIONFINANCIAL MANAGEMENTFINANCIAL STABILITYFINANCIAL SUPPORTFINANCIAL SYSTEMFISCAL DEFICITFISCAL DEFICITSFISCAL POLICYFIXED EXCHANGE RATEFOREIGN BANKSFOREIGN CURRENCYFOREIGN CURRENCY DEBTFOREIGN EXCHANGEFOREIGN EXCHANGE RESERVESFOREIGN INTERESTFOREIGN PORTFOLIO INVESTMENTFORGIVENESSFUND MANAGERSGLOBALIZATIONGOVERNMENT BORROWINGGOVERNMENT DEBTGOVERNMENT DEBT MARKETGOVERNMENT FINANCINGGOVERNMENT PAPERGOVERNMENT SECURITIESGROSS DOMESTIC PRODUCTHEDGE FUNDHEDGE FUNDSHOLDINGSIMPLICIT SUBSIDIESIMPLICIT SUBSIDYINDEBTEDNESSINFLATIONINFLATION RATEINTEREST DIFFERENTIALINTEREST PAYMENTSINTERNATIONAL BANKINTERNATIONAL BONDINTERNATIONAL BOND MARKETSINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL INSTITUTIONSINTERNATIONAL SETTLEMENTSINVESTINGLIQUID ASSETSLIQUIDATIONLIQUIDITYLOANLOAN REPAYMENTSLOAN SIZELONG-TERM CAPITALMACROECONOMIC CRISESMACROECONOMIC ENVIRONMENTMACROECONOMIC INSTABILITYMACROECONOMIC STABILITYMACROECONOMIC STABILIZATIONMARKET ACCESSMARKET ECONOMYMARKET PARTICIPANTSMARKET VALUEMARKET YIELDMATURITIESMONETARY POLICYMONEY MANAGERMONEY MANAGERSMORAL HAZARDNON-PERFORMING LOANSNONPAYMENTSOIL PRICEOIL PRICESOUTPUT LOSSOUTSIDE INVESTORSOUTSTANDING STOCKPENSIONPENSION FUNDSPHYSICAL ASSETSPOLITICAL RISKPORTFOLIOPORTFOLIO FLOWSPORTFOLIO INFLOWSPORTFOLIOSPRICE CHANGESPRIMARY DEALERSPRIVATE BANKSPRIVATE CAPITALPRIVATE CAPITAL INFLOWSPRIVATE INVESTORSPROMISSORY NOTESPUBLIC DEBTPUBLIC FINANCESREAL EXCHANGE RATEREAL INTERESTREAL INTEREST RATEREAL INTEREST RATESRENEGOTIATIONREPOREPOSRESERVESRETURNRETURNSRISK MANAGEMENTSAVINGS BANKSECONDARY MARKETSHORT-TERM EXTERNAL DEBTSHORT-TERM INTEREST RATESSOLVENCYSOVEREIGN BONDSSOVEREIGN DEBTSOVEREIGN DEBT PROBLEMSSOVEREIGN LIABILITYSOVEREIGN RISKSTOCK EXCHANGESTOCK MARKETSTOCK MARKETSSWAPSWAPSTAXTAX COLLECTIONSTAX EXEMPTIONSTAX POLICYTAX RATETOTAL DEBTTRADINGTRANCHESTRANSITION COUNTRIESTRANSITION ECONOMIESTREASURYTREASURY BILLTREASURY BILLSTREASURY NOTEUNDERLYING ASSETSWorld Bank10.1596/1813-9450-5312