Introduction

Abstract

Post-socialist Russia’s first attempt to achieve the transformation towards a stable open market economy failed in August 1998 when the government and the central bank chief had to step down in the context of a massive Ruble devaluation in combination with a unilateral debt moratorium and a forced restructuring of shortterm government GKO bonds. While in early 1998 it seemed that Russia — recording an inflation rate of below 10% and a deficit-GDP ratio of roughly 7% — was close to declaring victory in its transformation approach as was cited even earlier in economic literature (ASLUND, 1995), the politico-economic crisis of August/September 1998 revealed that most of the transformation elements had been parts of a Potjomkin-type transition. The first-time slow growth of 0.4% in 1997 was not followed by a desirable acceleration of output; rather negative growth for 1997/98 is to be expected. Indeed in 1997 there was no growth of the official economy since this figure includes an estimate for the growth of the shadow economy.