The effects the 1998 Russian Financial Crisis had on short-term Poverty in Russia

The effects the 1998 Russian Financial Crisis had on short-term Poverty in Russia

Contents

Chapter 1: Introduction3

Background3

Purpose of the Study5

Problem Statement5

Objectives of the Study6

Significance of the Study6

Research Questions7

Limitations of the Study7

Chapter 2: Literature Review8

Investigatation of inequality and poverty tendencies between 1998 and 2000,8

Global consequences of Russia's financial collapse15

Poverty and Employment21

What should be the priorities for social programs?22

References25

Appendix31

The effects the 1998 Russian Financial Crisis had on short-term Poverty in Russia

Chapter 1: Introduction

Background

By mid 1998, the Russian economy was displaying indications of recovery after some years of aggregate economic down turn, and increasing inequality and poverty (Milanovic, 1998a; World Bank, 1995, 1998; Commander et al., 1999). Inflation dropped from 800 percent per annum in 1993 to 15 percent in 1996-7, and fallen to an yearly 6 percent by July 1998. GDP stabilized too, increasing somewhat in 1997 (0.4 percent, the first case of affirmative GDP development since restructures began) and lowering only 0.2 percent in the first five months of 1998 (Government of Russia, 1998).

Then a critical economic crisis strike in August 1998. The crisis combined a devaluation of the rouble, default on both household and foreign liabilities, and a disintegrate of the supply market (Brown, 1999; Buchs, 1999; Sapit, 1999; Slay, 1999). Several happenings preceded the crisis. In October of 1997, world commodity charges -- commodities account for about 70 per cent of Russia's merchandise trade -- begun to drop, partially due to smaller demand from Asia. In genuine periods, the commodity cost catalogue sank to the smallest grade in annals by August 1998. The Russian trade balance worsened sharply.

Turmoil in the Asian markets in August 1998, stimulated disquiet about the likelihood of a new around of devaluations of the Asian currencies. These anxieties disperse to other appearing markets and directed to capital flight. The effort to seashore up the rouble had expanded the household bond yield and depleted foreign reserves. Taxes could yield for only one-half of the T-bills that dropped due each month.

On August 17, 1998, the Russian government devalued the rouble by more than 70 percent and defaulted on its household liability (GKO).[2] The rouble dropped from round 6 per $US in the first half of August to about 21 at the end of 1998. Russian GDP bound by 5 percent in 1998. The disintegrate of the foremost commercial banks competently deprived most Russians of their savings and one time afresh undermined the believe of the community in economic institutions.

For numerous Russians, wants for affirmative change in the mid-1990s turned into a deep sense of despair in the awaken of the 1998 crisis. And the happenings in the drop of 1998 were no question glimpsed by numerous as a signal of even poorer to come. In supplement to the direct riches consequences, the economic disintegrate would no question have directed to anxieties about the future, though some affirmative consequences could furthermore have been anticipated.

However, there were indications of macroeconomic recovery in the year next the ...