TY - BOOK ID - 133491862 TI - Financial Globalization and the Russian Crisis of 1998 AU - Pinto, Brian AU - Ulatov, Sergei PY - 2010 PB - Washington, D.C., The World Bank, DB - UniCat KW - Access to Finance KW - Bailout KW - Banking crisis KW - Banks & Banking Reform KW - Credibility KW - Currencies and Exchange Rates KW - Currency KW - Debt Markets KW - Debt obligations KW - Emerging market KW - Emerging Markets KW - Exchange rate KW - External debt KW - Face value KW - Finance and Financial Sector Development KW - Globalization KW - Gross domestic product KW - Inflation KW - Inflation rate KW - International Bank KW - Market access KW - Private Sector Development KW - Public debt KW - Real interest KW - Real interest rates KW - Repo KW - Solvency UR - https://www.unicat.be/uniCat?func=search&query=sysid:133491862 AB - Russia 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 USD 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. ER -