The Russian Financial Crisis: An Empirical Investigation

Abstract

The purpose of this paper is to assess empirically the relative contribution of various domestic and external factors to the Russian financial crisis outburst in 1998. The results of probit estimations suggest that the highest share in the overall crisis probability was associated with external capital flows and the state of international liquidity. The banking sector fragility in spheres of foreign borrowing and domestic lending was another factor mainly responsible for the country's vulnerability to a crisis. The government finance problems and exchange rate misalignments, commonly blamed for the rouble crash, played only a minor role in the crisis eruption.