Kiel Working Papers, Kiel Institute for World Economics
No 978:
Russias Debt Crisis and the Unofficial Economy
Claudia M. Buch, Ralph P. Heinrich, Lusine Lusinyan and Mechthild Schrooten
Abstract: Russia's foreign debt problems worsened substantially
after the financial crisis of 1998. The paper focuses on the key role of
the government in servicing foreign debt and promoting institution building
by showing how foreign debt influences the choice between official and
unofficial taxation. The enterprise sector is assumed to reallocate its
resources between domestic investment and capital flight. It is discussed
under which conditions debt rescheduling may create incentives for the
government to promote institution building. The results of this paper shed
light on the conditions under which the recent agreement with the London
Club to write off substantial amounts of former Soviet debt can be
successful.
Keywords: Foreign debt, debt restructuring, Russian Federation; (follow links to similar papers)
JEL-Codes: F34; H63; (follow links to similar papers)
38 pages, April 2000
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