The Costs of Gradual Devaluation

From the FT report on the Russian economy being hit by an 8.8% decline:

Economists linked the sharp fall in January production to the virtual paralysis of the financial system as the government slowly devalued to rouble, creating a lucrative one-way bet for anyone to change roubles for dollars, rather than lend them to the real economy.

“There is no money in the real sector,” said Elena Sharipova, senior economist at Renaissance Capital.

“The banking system is only working to accumulate dollars, not to provide credit. As a result, enterprises are cutting employment, cutting production and trying to save money.”