Russian Financial Crisis of 1998: An Econometric Investigation

This article aims at deriving lessons from the Russian financial crisis through examining the root causes of the crisis based on a probit model incorporating 20 monthly macroeconomic and financial sector indicators spanning the period 1988:1 – 1998:8. The results turned out to be as expected. Strong evidence emerged suggesting that the significant variables are foreign direct investment/GDP, inflation, world oil prices, real interest rates, current account/GDP, GDP per capita, foreign exchange reserves, stock prices, real exchange rate, and export growth. Signs of the variables were mostly in line with what one would have expected, except public debt, bank reserves / bank assets, real interest rates, and lending and deposit rate spread.