A case Study of a Currency Crisis: The Russian Default of 1998

THE RUSSIAN DEFAULT: A BRIEF 
HISTORY
After six years of economic reform in Russia,
privatization and macroeconomic stabilization had
experienced some limited success. Yet in August
1998, after recording its first year of positive econ-
omic growth since the fall of the Soviet Union, Russia
was forced to default on its sovereign debt, devalue
the ruble, and declare a suspension of payments by
commercial banks to foreign creditors. What caused
the Russian economy to face a financial crisis after
so much had been accomplished? This section
examines the sequence of events that took place in
Russia from 1996 to 1998 and the aftermath of the
crisis. (For a timeline, see Table 1.)