Marek D¹browski (ed.) The Episodes of Currency Crises in the European Transition Economies W a r s a w , 20 0 1 No. 40 The views and opinions expressed in this publication reflect Authors’ point of view and not necessarily those of CASE. This paper was prepared for the research project No. 0144/H02/99/17 entitled "Analiza przyczyn i przebiegu kry- zysów walutowych w krajach Azji, Ameryki £aciñskiej i Eu- ropy Œrodkowo-Wschodniej: wnioski dla Polski i innych kra- jów transformuj¹cych siê" (Analysis of the Causes and Pro- gress of Currency Crises in Asian, Latin American and CEE Countries: Conclusions for Poland and Other Transition Co- untries) financed by the State Committee for Scientific Re- search (KBN) in the years 1999–2001. The publication was financed by Rabobank Polska SA Key words: transition economies, crisis, fiscal policy, Bulgaria, Moldova, Russia, Turkey, Ukraina DTP: CeDeWu Sp. z o.o. Graphic Design – Agnieszka Natalia Bury © CASE – Center for Social and Economic Research, Warsaw 2001 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without prior permission in writing from the author and the CASE Foundation. ISSN 1506-1647 ISBN 83-7178-258-6 Publisher: CASE – Center for Social and Economic Research ul. Sienkiewicza 12, 00-944 Warsaw, Poland e-mail: [email protected] http://www.case.com.pl The Episodes of Currency Crises ... Contents Introduction . .6 Part I. The Bulgarian Currency Crisis of 1996–1997 by Georgy Ganev . .7 1.1. The Facts of the Crisis . .7 1.2. Macroeconomic Dynamics . .8 1.3. Microeconomics Behavior . .16 1.4. Politics of the Crisis . .17 1.5. Dynamics and Solution of the Crisis . .18 1.6. Conclusions . .20 Appendix . .21 References . .22 Part II. The Russian Crisis of 1998 by Rafa³ Antczak . .2 3 2.1. The Break-up of the Soviet Union and Collapse of the Rubel Zone . .23 2.2. Attempts to Reform Russia During 1992–1994. The First Currency Crisis in October 1994 . .25 2.3. Further Stabilization Efforts in 1995–1997 – Stagnation and Decline . .27 2.3.1. Real Sector . .28 2.3.2. Structural Reforms . .29 2.3.3. Fiscal Policy . .30 2.3.4. Exchange Rate Regimesn and Monetary Policy . .32 2.3.5. Balance of Payments Performance . .34 2.4. Crisis of August 1998 . .35 2.4.1. Crisis Management . .37 2.4.2. Post-Crisis Recovery . .38 Appendix . .40 Tables . .41 Figures . .47 References . .51 Part III. The Ukrainian Crisis of 1998 by Ma³gorzata Markiewicz . .53 3.1. A Sequence of the Crisis . .53 3.2. Macroeconomics . .54 3.2.1. Fiscal Policy . .54 3.2.2. Public Debt . .54 3.2.3. Monetary and Exchange Rate Policy . .57 3.2.4. Foreign Trade and Balance of Payments . .58 CASE Reports No. 40 3 Marek D¹browski (ed.) 3.3. Macroeconomics . .59 3.4. Political Factors . .59 3.5. Crisis Management . .59 3.6. Consequences of the Crisis and Post-Crisis Recovery . .61 3.7. Conclusions . .61 Appendix: Chronology of the Ukrainian Crisis . .62 References . .63 Part IV. The Moldovan Currency Crisis, 1998 by Artur Radziwi³³ . .65 Introduction . .65 4.1. Crisis Sequencing . .65 4.2. Fundamental Roots of the Crisis . .67 4.2.1. Macroeconomics . .67 4.2.2. Microeconomics . .73 4.2.3. Politics . .75 4.3. Prospect for Future . .76 Appendix: Chronology of Moldovan Crisis . .77 References . .78 Part V. The Turkisch 2000 Financial Market Crisis of Confidence by Marcin Sasin . .79 5.1. Overviev . .79 5.1.1. General Information About the Country and Its Economy . .79 5.1.2. The Monetary Policy . .81 5.1.3. The External Situation . ..