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Title: Currency crises in Eastern European transition economies, explaining Russia 1998
Author: Sipilä, Venla Helena
ISNI:       0000 0004 2677 8515
Awarding Body: University College London (University of London)
Current Institution: University College London (University of London)
Date of Award: 2007
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The thesis analyses the Russian currency crisis in August 1998. The crisis is placed in the context of theoretical and empirical literature, taking into account the lessons from the Asian crisis in 1997-1998. The relative importance of economic fundamentals, expectations, structural issues, external effects, liquidity problems and institutional deficiencies as causes for the Russian crisis is assessed. It is found the Russian crisis does not adequately fit any of the existing theoretical approaches. The crises in the currency and financial markets were inseparably intertwined with the fiscal problems. However, the seminal second-generation model of Obstfeld can be used as a starting point for theoretical analysis with some modifications. I demonstrate how these modifications can be implemented to capture the specific conditions of an economy like Russia, i.e., one which is characterised by the shallow financial sector and the inadequate fiscal sector. In our quest to explain the tight link between the currency and the banking sector, we point to the core problems of Russian economic transition, including challenges with structural reforms and institutional development. It is argued that the Russian crisis is best treated as a triple crisis, involving the currency markets, the banking sector and weak public finances. In addition, our analysis helps in assessing Russia's overall economic transition process, while it also has implications for the country's current reform challenges, macroeconomic situation and general economic prospects. The crisis is also put into a more general empirical setting. Following Eichengreen, Rose and Wyplosz, exchange rate pressure indices for 21 Eastern European transition economies in 1992-98 are calculated and the behaviour of key macroeconomic fundamentals during crisis and non-crisis periods is analysed by non-parametric econometric testing. No firm evidence of first-generation patterns is found. On the other hand, the analysis provides cautious support for the finding that intermediate exchange rate regimes are more crisis-prone than either free floats or very tight pegs.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available