The Russian Ruble Crisis and Its Aftermath

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Case Study: The Russian Ruble Crisis and its Aftermath Overview The case “Russian Ruble crisis and its aftermath” gives a brief description of the crisis that the Russian currency went through after the fall of communism. The case provides a prelude which gives the background of the problem, it then delves into the actual crisis and the issues that happened at that time that shaped the aftermath of the crisis. The fall of communism had split the Soviet Union into different nations, Russia being the largest of them. The Russian government in an effort to decentralize the economy which was crumbling, introduced various programs to transform the country. One such step was to remove price controls, although price controls saw an increase in prices. Inflation was now rising by 30% every month. This kept getting out of control. The reason for this sudden surge in prices was due to the prices being held low during the communist era. Even with a limited number of products that were being produced the rational choice would be for prices to be high. Instead prices were maintained to be low which had a drastic affect on the prices later on. This was the prelude to the crisis. The actual crisis was when the Russian government was forced to borrow from the International Monetary Fund. The IMF loaned the amount of money on various conditions to the Russian Government. The deal also included the pegging of the US Dollar to the Rubles. After various failed attempts at confirming to the conditions, the IMF decided to stop the funding provided and the Russian Economy and Currency were left in shambles, despite the government’s efforts to rescue it. Analysis Q1. What were the causes of the surge of inflation in Russia during the 1990’s? Could this have been avoided? How? The causes of the Surge of inflation were many. The first and foremost cause is that there were not
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