Russian Economic Framework Essays - Stock Market Crashes

Russian Economic Framework Country Analysis Framework Looking at the Russian Economy Focus of a country framework A country framework for these medium-term considerations should yield results useful for investment planning, policy choice, and financial reimbursement where appropriate. This is the focus of the framework outlined in this paper. This framework does not explicitly cover longer term and global level assessments, although one could use an essentially similar framework for those as well. This paper outlines a framework, not a methodology. It is compatible with many different specific methods. The reason for preserving this flexibility is that there are many methods, reflecting somewhat different traditions in modeling and country expertise, and each of these may have its own field of appropriate use. These methods are also evolving rapidly. Yet it is useful to identify, in the midst of these varied circumstances and rapid evolution, which particular general features are essential, or at least highly desirable, and to state these explicitly. The Harvard Business Notes Framework is very comprehensive but not focused to specific line of industry. 1 Country studies 1.1 Background 1.2 Types of country studies System boundaries Global level Country level Sector level Time frames 1.3 Country framework 2 Comparative analysis 2.1 Comparisons 2.2 Baseline strategies 2.3 Alternative strategies 2.4 Increments Comparison Other baseline strategies Other alternative strategies Comparisons using different alternative strategies 2.5 Scenarios 2.6 Cases High growth scenario Reference growth scenario Low growth scenario 2.7 Using the framework Shifts in strategy Increments in cost Sensitivities Counterfactuals Uncertainties Incentives 2.8 Conclusions and observations Comparative analysis Relevant comparisons Consistent comparisons 3 Desirable additions to the framework 3.1 Net analysis 3.2 System analysis 3.3 Economic analysis 3.4 Integrated analysis 3.5 Comprehensive analysis 3.6 Standardized analysis 3.7 National analysis Today A World Bank report on the Russian Federation states that despite the promise and optimism with which the dissolution of the USSR was greeted, the economic transition has not always sustained that optimism. According to the report, Russia still lacks the enduring economic basis to sustain its growth, and the recent uncertainty in the Russian economy only underlines the fragility of this emerging economy. In the following paper, I will describe the state of the Russian economy, how it got there, prospects for the future and recommendations regarding impact on U.S. investors. Reasons for Current Economy With the fall of the Berlin wall in 1989, and the end of the Cold War, the West was eager to support Russia and all of the former Eastern Block countries in the transition to Capitalism and democracy. In the article ?Money can't buy me love? in The Economist, Washington based Russia-watcher David Satter, states that the West had a dream of ?a strong, friendly Russian government shouldering its shares of the world's problems?. The West supported democrats and reformers in the hope that their ideas would influence their country. In addition, Russia has been the recipient of large amounts of financial aid and loans from the World Bank, the IMF, and various Western governments. According to their respective web sites, since 1992 the World Bank has approved more than $11.29 billion in loans for projects to Russia, while the IMF has loaned more that $15 billion. Unfortunately, while integration with the world economy has resulted in success stories such as Hungary and Estonia, Russia has continued to struggle. Many of the pro-western politicians turned out to be politically inept, and some outright corrupt. In addition, there is a growing mistrust of the Western ideals and ways. In August of last year, the Russian government defaulted on $40 billion worth of debt in ruble bonds, rocking the world's economy. Before this crisis, the Russian economy appeared to be developing quite nicely. They had a growing middle class and the needs of the poor were being met by a small but thriving volunteer sector. Many businesses, in light of competition from foreign firms was beginning to show promise, and was putting more focus on meeting the needs of shareholders, customers and employees. Also the government had a steady tax revenue stream. Since the crisis however, the economy has been shrinking, and the fledgling middle class has been devastated. Russia still maintains a healthy current account surplus of $18 billion, but dues to the lack of confidence in the economy, most of these dollars are being deposited into stable foreign currency accounts outside of Russia in safe havens such as Switzerland. In addition, little of this money shows up in tax revenue for the government. Russia has a remarkably inefficient tax system, which has allowed widespread nonpayment of taxes. Tax revenues last year were running at