Russia's Fiscal Pattern Redux: Testing an Old Hypothesis with the New Data

Wednesday, January 9, 2002

Several episodes at the end of fiscal year 2001 illustrate the systemic features of Russia’s post-Communist economy.1 They show how the liberalized and privatized network of enterprises determines fiscal and monetary policy through the system of trade arrears. We described this system in detail in chapter 1 of From Predation to Prosperity and relayed its origin in chapter 2. The chapters ended in mid-2000. The new episodes and the national data extend this pattern through the end of 2001. They form an important test of our earlier-stated hypothesis. The data assembled below indicate that the pattern is consistent month by month for ten years, from the beginning of reforms in early 1992 through the end of 2001. We will line up the new episodes in the first section and in figures 1 through 3 and consolidate their flow of funds in figure 4. We will briefly discuss their fiscal implications in the second section and suggest their short-term cause in the third section. We will summarize the systemic cause and national data in the fourth section and in figures 5 and 6.