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European Review of Agriculture Economics Vol 26 (3) (1999) pp.349-370
© 1999 Oxford University Press and the Foundation for the European Review of Agricultural Economics

The impact of financial crisis on Russia's agro-food sector

E Serova, J von Braun1 and P Wehrheim1

Institute for the Economy in Transition, Moscow, Russia
1 Centre for Development Research, University of Bonn, Bonn, Germany
Correspondence to P Wehrheim at: Centre for Development Research, University of Bonn, Walter-Flex-Strasse 3, D-53113 Bonn, Germany
e-mail: p.wehrheim@uni-bonn.de

Summary

Russia's 1998 financial crisis, although a result of home-made causes, was triggered by effects from international financial crises. In the agro-food economy, many households reacted to declining real income and rapidly rising prices by stockpiling food to meet short-term needs. In the medium term, further substitution of inferior for normal products and increased household production will be encouraged. The crisis should increase the price competitiveness of domestic agriculture and the food industry. However, greater price competitiveness may not compensate for the negative impact of the overall declining performance of the Russian economy on the agro-food sector. The sector's potential to adjust to the price signals sent by the crisis is limited by Russia's poor institutional setting and extensive bartering in agro-food exchanges. Along with ad hoc policies to counteract potential food shortages, some protectionist measures were also introduced. Therefore, the crisis may further increase the inconsistency of Russia's agro-food policies.

Keywords: Russia, financial crisis, devaluation, exchange rates, agriculture, food consumption


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