Departures from the Ruble Zone: The Implications of Adopting Independent zyx Linda S. Goldberg, Barry W. Currencies Ickes and Randi Ryterman zy 1. INTRODUCTION ollowing the breakup of the former Soviet Union (FSU), Russia and the other FSU sovereign countries were faced with the choice between remaining in a common ruble zone and introducing distinct national currencies. Possessing an independent currency is usually perceived as an important element of national sovereignty. An independent currency is not only seen as a source of national pride; it may also enable a country to pursue an independent monetary policy. The strength of the economic and political temptations for issuing new currencies was clearly evident by the end of 1993, when almost all countries of the FSU had either threatened or embarked upon independent currency initiatives. The status of these currency initiatives is summarised in Table 1. At the end of 1993 the first five countries shown in the table had introduced nearly complete monetary reform, with Kyrgystan, Latvia, Estonia, and Lithuania adopting independent currencies. By the last quarter of 1993, Georgia, Moldova, and Azerbaijan all took important steps towards instituting independent currencies. Ukraine and Belarus also had moved toward currency independence, but more so than the previously noted countries, continued to pursue extensive negotiations with Russia on managing their orderly withdrawal from the zone. Towards the end of 1993 Turkmenistan announced its intention to withdraw from zy 3R LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RAND1 RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank. 0 Basil Blackwell Ltd. 1994, zyxwvutsr 108 Cowley Road, Oxford OX4 IJF, UK and 238 Main Street. Cambridge, MA 02112, USA. 293