This paper tests the proposition that Russian nominal prices were distorted to support bankrupt sectors, which is the foundation of the virtual economy. The input-output table for 1997 is converted from rubles into dollars using American prices as shadow values. Three sectors belonging to the...

In the aftermath of sovereign default of August 1998, the hypothesis of virtual economy in Russia developed by Gaddy and Ickes has gained popularity. The hypothesis states that the country has not moved towards free-market economy but developed a system of implicit price subsidization similar to...