Table Of ContentRestructuring,
Stabilizing and Modernizing
the New Russia
Springer-Verlag Berlin Heidelberg GmbH
Paul J. J. Welfens • Evgeny Gavrilenkov (Eds.)
Restructuring,
Stabilizing and Modernizing
the New Russia
Economic and Institutional Issues
With 82 Figures
and 70 Tables
Springer
Prof. Dr. Paul J.J. Welfens Prof. Dr. Evgeny Gavrilenkov
University of Potsdam Bureau of Economic Analysis
European Institute for International and Higher School of Economics
Economic Relations (EIIW) Maly Gnezdnikovsky Pereulok 4/2
August-Bebel-Str. 89 103009 Moscow
14482 Potsdam Russia
Germany
http://www.euroeiiw.de
ISBN 978-3-642-63156-6
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Restructuring, Stabilizing and Modernizing the New Russia: Economic and Institutional Issues / P.J.J.
Welfens, E. Gavrilenkov (eds.). - Berlin; Heidelberg; New York; Barcelona; Hong Kong; London; Milan;
Paris; Singapore; Tokyo: Springer, 2000
ISBN 978-3-642-63156-6 ISBN 978-3-642-57257-9 (eBook)
DOI 10.1007/978-3-642-57257-9
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Table of Contents
Introduction
Paul1.1. Welfens and Evgeny Gavrilenkov
Part I The Russian Transformation Crisis
A. The EU and Russia: Strategic Aspects of Transformation
and Integration 7
Paul1.1. Welfens
I. Introduction 7
2. Economic Problems of Russia 8
3. External Support for Russia II
4. Trade, FDI and Growth in a Transitional Perspective 13
5. Visegrad Countries and EU Eastern Enlargement 18
6. Towards a New Strategy for Russia 18
References 22
B. Currency Crisis Theories -
Some Explanations for the Russian Case 25
Tuomas Komulainen
1 . Introduction 25
1. 1 Background 25
1.2 High Capital Mobility and Emerging Markets 26
1.3 The Basic Weaknesses of the Russian Economy 27
2. Currency Crisis Theories 29
2.1 Exchange Rate Determination 29
2.2 First Generation Theories 34
2.3 Second Generation Theories 35
2.4 Spillover-effects and Contagion 36
2.5 Underdevelopment of the Banking Sector 40
2.6 Market Segmentation and Herding Behaviour 44
3. Conclusion 47
References 52
VI Restructuring, Stabilizing and Modernizing the New Russia
C. Banking Sector and Financial Intermediation
in the Russian Transformation Process 57
Ralf Wiegert
I. Systemic Transformation, Growth Requirements
and Financial Stability 57
2. The Role of the Banking Sector 58
2.1 The Russian Financial System 58
2.2 Banks as Financial Intermediaries 64
2.2.1 Some Reasons for the Existence
of Financial Intermediaries 65
2.2.2 Model I: Financial Intermediation and Stable
Macroeconomic Conditions 66
2.2.3 Model II: Financial Intermediation and Unstable
Macroeconomic Conditions 69
2.3 Russian Banks as Financial Intermediaries 73
3. Consequences for the Russian Banking Sector 78
3.1 Issues for Overcoming the Banking Crisis 80
3.2 Political Economy of Financial Reform 82
References 86
D. Institutional Failures of Market Transformation
of the Russian Economy 89
Ruslan Grinberg
I. Introduction 89
2. Examples of Institutional Failures in the Reform Policy in Russia 91
3. The West in the Trap of Self-deception 93
4. Russia Between Old and New Institutions 94
5. The Reform ofinstitutional Basis of Economic Policy in Russia 98
References 100
E. Russian Crisis: Causes, Developments, Contagion and Prospects 101
Vladimir Gligorov and Nidas Sundstrom
I. Introduction 101
2. Constitution and Transformation 101
3. Budgets, Markets and Banks 104
4. Policy Responses and Mistakes 106
5. The Collapse and Contagion 109
6. Russian Prospects 116
7. Conclusion 121
References 124
Table a/Contents VII
Part II Restructuring in Transition Economies
F. Foreign Direct Investment in Russia:
An Engine of Structural Adjustment? 127
Roland Dohrn
1. Statistical Background 128
2. Determinants of FDI and Projections for Russia 133
2.1 Determinants ofFDI 133
2.2 Projections for Russia 137
2.3 Impact of the Reforms 139
3. FDI, Capital Formation, and Structural Change 139
3.1 The Size of Gross Fixed Capital Formation 140
3.2 The Contribution ofFDI to Capital Formation 141
3.3 Sectoral Aspects 142
4. Conclusions 143
Appendix 145
References 147
G. Russian Economy: Structural Change
and Econometric Prospective 149
Georgiy Serebryakov
1. Aggregate Econometric Macro Model for Russian Economy 149
2. RIM -Russian Inter-industry Model 149
3. Modeling and Some Specific Features of Russian Economy 151
4. Economic Growth and Structural Change in 1990-1997 152
5. Issues on Labor and Capital Costs Analysis 156
6. Some Issues in Current Economic Development and
Perspective Model Simulations 158
Appendix 162
References 176
H. Economic Opening-Up, Policy Reforms and Relations
with International Organizations:
A Parallel between Hungary and Russia -
Some Major Differences and Similarities 177
Zsuzsa Ludvig
I. Economic Opening-up and the Role of Foreign
Trade Liberalization 177
2. Relationship with International Organizations 182
VJJI Restructuring, Stabilizing and Modernizing the New Russia
Part III Stabilizing Russia
I. Towards Credible Monetary and Fiscal Policies in Russia 189
Evgeny Gavrilenkov
I. Introduction 189
2. The Impact of Monetary Policy on Macroeconomic
Perfonnance in Present Russia and Some Political Economy Issues 190
3. The Conduct of Monetary Policy in Russia in the Context of
International Experience and Conducting of Monetary
Policy with Different Regimes 197
4. Monetary Policy, Liquidity Problems and Foreign Debt Service 201
References 209
J. Russian Capital Markets and International Financial Flows 211
Michael Vogelsang
I. Introduction 211
2. Some Questions on Recent Financial Crises 211
3. The Model 212
4. Capital Markets and Economy's Wealth 215
5. Exit Tax 216
6. Some Remarks on Tax and Other Capital Controls 217
7. Conclusion 218
Appendix 219
References 221
K. Consumer Prices in Russia and Transforming Official Statistics 223
Cathleen Faber and Hans Gerhard Strohe
Preface 223
I. Some Short Methodological Notes Concerning the Russian CPI 224
2. The Development of Russian CPI within the 90s 227
2.1 A Short Review of the Developments in the Early 90s 227
2.2 The Development of Russian CPI from 1996 to 1999 229
3. A Comparison of CPI Development with
other Economic Indicators 232
3.1 The Indexes of Consumer and Producer Prices 232
3.2 The Index of Consumer Prices and the Official
US$ Exchange Rate 233
3.3 CPI and Subsistence Level 234
Table o/Contents IX
4. Problems Concerning the Statistics of Consumer Prices 236
5. Recommendations 239
References 241
L. The Rationale for Seigniorage in Russia
- A Model-Theoretic Approach 243
Frank Bohn
1. Introduction 243
2. Economic and Political Model Components 244
2.1 Budget Constraints 245
2.2 Inflation, Seigniorage, and the Role of Barter
and Currency Substitution 246
2.3 The Role of Taxation 248
2.4 Credibility and the Role of Government Borrowing 249
2.5 The Role of Political Instability and Polarization 250
3. A Formal Intertemporal Model 251
3.1 Government Objectives and Budget Constraints 252
3.2 Partial Interests and Government Utility 253
3.3 The Revenue Problem of the Government 255
4. Conclusion and Outlook 259
Appendix 260
References 265
M. Overcoming the Russian Banking Crisis:
Theory, Some Empirical Findings and Policy Options 267
Ulrich ThieJ3en
1. Introduction 267
2. Background of the Banking Crises, Economic Costs,
and Approach of the Authorities 268
2.1 Background of the Crisis 268
2.2 Economic Costs of the Banking Crisis 272
2.3 Approach of the Authorities 273
3. Modem Theoretical Findings of the Workings of Financial
Markets and Their Contribution to Economic Growth 276
3.1 The Contribution of Financial Intermediation
to Economic Growth 276
3.2 Theories on Market Failures of Financial Intermediation 277
4. Empirical Findings on the Workings of Financial Markets
with Special Reference to Transition Countries 280
4.1 Growth Promotion 280
4.2 Impediments for Financial Intermediation
in Transition Countries 280
x
Restructuring, Stabilizing and Modernizing the New Russia
4.3 Economies of Scale and Scope and Competition
in Banking 282
4.4 Restrictions on Equity Holdings of Banks 283
5. Policy Options 286
5.1 Could the Banking Crisis of August 1998 Have Been
Prevented Had Western Prudential Regulation
for Banks Been Enforced? 286
5.2 Adaptation of Some Western Prudential Rules 289
5.3 Adoption of a Bank Restructuring Approach
Which Is Comprehensive 292
6. Concluding Remarks 296
References 300
Part IV Modernizing Russia
N. Institutions and Transition: On the Way to a Market Economy -
Theory and Application to Russia 307
Paul JJ Welfens
1. Introduction 307
2. From a Distorted Socialist Environment to Institutions
of a Market Economy 308
2.1 Functions of Institutions 309
2.2 Network Effects 313
2.3 Some Issues of Institution-Building 315
2.4 Normative Issues 317
3. International Institutional Impulses 322
3.1 Theory of Importing Institutions and
Optimal Governance 322
3.2 Other International Institutional Aspects 325
3.3 Russian Problems and Perspectives 325
4. Conclusions 329
Appendix 330
References 332
