Devaluation of the Ruble: External Shocks and Internal Problems

• Main Author: Pavel Aleksandrovich Minakir
• Format: Article
• Language: Russian
• Published: Economic Research Institute of the Far East Branch of the Russian Academy of Sciences 2018-09-01
• Series: Prostranstvennaâ Èkonomika
• Subjects: change rate; external shock; transformation crisis; investment outflow; supply and demand balance; external debt; global financial market; Russia
• Online Access: http://www.spatial-economics.com/images/spatial-econimics/2018_3/SE.2018.3.007-018.Minakir.pdf

During the entire post-Soviet period of the Russian economy’ transformation, more or less regular crises of the monetary and financial system were observed, reflecting both the cyclical nature of domestic macroeconomic and institutional processes and the degree of their dependence on the volatility of global macroeconomic parameters. The article explores regularities of currency crises and describes general mechanisms of exchange rate stabilization. It is shown that there are important differences in the equilibrium exchange rate shift observed in 2018, which consist of the prevalence of preventive measures of indirect regulation over the impact of external shocks, which was the main cause of all previous monetary and financial crises. There are three possible explanations to why the ruble continues to devalue despite the lack of fundamental factors of weakening (and why the correction does not happen after the first panic wave). The first is the insurance for raw materials exporters against the loss of revenue due to devaluation of importers’ currencies. This concerns the European currency as well, since the EU is in the risk zone and is involved in the trade war with the USA. The second is that Russia and China are the vanguard of ‘anti-dollar putsch’. However, this anti-dollar crusade has no chance of staggering the dollar’s positions as the world currency any time soon. A considerable part of trade and capital operations will be conducted in dollars. The third is that a certain degree of national currency depreciation is a reserve of increase of money supply in Russia