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The Russian government formulated economic changes in the 1990s to facilitate proper functioning of the economy. However, the political climate kept on changing which interfered with proper implementation of fiscal and monetary policies in the economy. The Russian government had two fundamental goals that were independent. One of the goals was economic restructuring while the other one was macroeconomic stabilization. Economic restructuring required the government to establish legal, commercial and institutional entities such as private property and banking institutions. In addition, the government had to establish legal codes for commercial transactions for effective Inflationary pressure. Russian [url=http://www.1855sacramento.com/peuterey.php]peuterey[/url] government formulated macro-economic policies to facilitate stabilization of the economy. However, inflation that was experienced [url=http://www.vivid-host.com/barbour.htm]barbour uk[/url] in the 1990s was one of the factors that hindered effective performance of the macroeconomic policies. The policy measures that were developed to enhance stabilization required a reduction of investment in [url=http://www.1855sacramento.com/woolrich.php]woolrich outlet[/url] public projects, reduction of subsidies both for the consumers and producers and reduction of government expenditure. The major aim of this program was to reduce the deficit on the government budget from 20% of the Gross Domestic Product (GDP) in 1991 to 9% of GDP in 1992 and to 3% of GDP in 1993 (U.S. Library of Congress, 2010). Government budget deficit was caused by increased government expenditure which had increased money supply in the Russian economy. The other strategy that was adopted by the government to reduce the budget deficit was imposition of new taxes and the upgrade of taxation system to collect more revenue from the people. The budget deficit in 1991 resulted from the fact Russia was a communist state and therefore government expenditure had increased significantly thereby increasing money supply in the economy (Europa Publications Limited, 2003, p. 280).
The classical economists have argued that increase in money supply in an economy is inflationary since the practice reduces the purchasing power of the currency (Reinert, Rajan, & Glass, 2008, p. 948). This [url=http://www.mxitcms.com/tiffany/]tiffany[/url] means that the political environment in Russia had [url=http://www.mquin.com/giuseppezanotti.php]giuseppe zanotti sneakers[/url] contributed significantly to the increase in government expenditure since the economy operated under communism. Under the monetary policy, the program required the Russian Central Bank (RCB) to avoid issuance of subsidized loans to financial institutions and business enterprises and also limit growth of money supply. This was aimed at reducing the inflation level from 12% monthly in 1991 to 3% monthly in the middle of 1993. However, inflation levels were still high in 1993 since inflationary pressures were still persistent from money velocity. The classical economists use the fisher's equation of exchange to explain the money market. This equation states that MV=PY where M is money supply, V is velocity of money, P is the price level and Y is income (Reinert, Rajan, & Glass, 2008, p. 950). The classical economists assume that money supply is constant and that the economy is at full employment such that out level is also fixed. This implies that Money supply is directly proportional to Price level in the economy. The implication is that when money supply increases, [url=http://www.1855sacramento.com/woolrich.php]woolrich[/url] general price level increases thereby causing inflation. The government is therefore advised to control inflation by reducing the level of money supply in the economy.
In October 1994, inflation rate reduced rue to the tight fiscal and monetary policies by the government [url=http://www.mxitcms.com/abercrombie/]abercrombie milano[/url] (U.S. Library of Congress, 2010). However, the conditioned worsened again due to the restructuring policies by the government that increased money supply in [url=http://www.1855sacramento.com/moncler.php]moncler outlet[/url] the economy. On October 11 1994 the value of the ruble plunged by 27% in the interbank markets which made the day to be referred as black Tuesday (U.S. Library of Congress, 2010). Experts developed certain theories to explain the problem for example the existence of a conspiracy but restructuring policies by [url=http://www.ilyav.com/uggpascher.php]ugg pas cher[/url] the government contributed significantly to the fall of the Russian economy and depreciation of the currency.
Russia undertook economic reforms in the 1990s following the macro-economic problems [url=http://www.mquin.com/giuseppezanotti.php]giuseppe zanotti pas cher[/url] that were experienced. Inflation rate had risen exorbitantly in the Soviet Union. In addition, exchange rates in the Soviet Union had also increased following depreciation of the local currency. The government therefore formulated stabilization policies to ensure that the economy performs effectively. It was also important for the government to formulate restructuring policies to facilitate economic growth. This was done through provision of credit that was subsidized to business enterprises which created problems in the economy. This is because the goals of stabilization and restructuring policies are contradictory and as such they cannot be achieved simultaneously. The Russian government failed to carry out the two macroeconomic changes independently. The inflationary pressure in the Soviet Union could not be managed through a reduction in money [url=http://www.thehygienerevolution.com/barbour.php]barbour[/url] supply at the beginning of 1990s since there was a large quantity of foreign deposits in the economy which was increasing money supply.

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