Actions and Reactions of Russian Manufacturing Companies to the Crisis Shocks from 2008–2009: Evidence from the Empirical Survey

Abstract

This essay explores the nature of the 2008 crisis and the channels through which it affected the performance of firms in Russia. Based on the findings of a manufacturing industry survey, the evidence suggests that all manufacturing firms were affected by the crisis and that there is no single and dominant transmission channel. Crisis reactions were significantly related to participation in international markets, although participation in trade, in external borrowing or FDI cannot explain recession by themselves. The reversal of growth was mainly caused by demand shock and, following that, by financial constraints. Thus the hypothesis that blames overheating of internal demand in the years prior to the crisis seems to receive statistical backing. Globalised companies, though hit by external shocks, were better prepared to pay the cost and balance the consequences of the crisis.

Notes

The author has benefited from valuable comments, feedback and suggestions by Martin Myant and other participants at the COST Action ISO 902 Systemic Risk and Financial Crisis network workshops and from anonymous referees. I would also like to thank the Basic Research Programme at the National Research University Higher School of Economics (HSE) for financial support and the Ministry for Economic Development of the Russian Federation for making the manufacturing industry survey feasible.

¹ The question was as follows: ‘If your firm encountered problems associated with the crisis, which actions have you undertaken to solve the problems?’.

² There is a possible problem with these findings from the sample selection: the largest holding companies in steel production, which employ more than 10,000 people, were not surveyed. The high vulnerability of steel companies should therefore be interpreted with caution. The sample here is made up from second-rank producers which target mostly local markets and sell to the depressed domestic construction sector.