FOREIGN-EXCHANGE MARKETS IN RUSSIA - UNDERSTANDING THE REFORMS

This paper analyzes and interprets the changes that took place in Russ ia's exchange rate system during 1992. The multiple exchange rate regi me that existed in Russia prior to July 3, 1992, created strong incent ives for exporters to refrain from repatriating foreign exchange earni ngs, induced both importers and exporters to participate in unofficial markets for foreign exchange, and encouraged international barter tra nsactions. Efforts to manage the exchange rate through heavy foreign e xchange intervention were unsuccessful. The July 3, 1992, unification of the multiple exchange rate system provides important and general le ssons for rectifying undesirable conditions caused by poorly implement ed exchange rate policy. [JEL F3, F4, N2, P5]