Which 1998 crisis followed Russia’s government default on domestic debt and the devaluation of the ruble?

The 1998 crisis caused by Russia’s domestic debt default and ruble devaluation was the Russian financial crisis.

Russia had financed government spending with short-term treasury bills offering high interest rates. Falling commodity prices, weak tax collection, political instability, and the financial contagion that followed the Asian crisis made this debt increasingly difficult to roll over. In August 1998, the government devalued the ruble and announced a moratorium on some domestic debt payments.

The shock damaged Russian banks and caused a sharp fall in Russian financial assets. The crisis also contributed to the failure of Long-Term Capital Management, a major U.S. hedge fund whose highly leveraged positions were threatened by extreme market volatility.

The Russian financial crisis is not the same event as the 1997 Asian financial crisis, although the two were connected through investor confidence and international capital flows. Russia’s later recovery was helped by higher oil prices and the weaker ruble’s support for domestic production.