I’m with Duy here; not sure if it’s actually in any textbook, but as I explained yesterday, for aficionados of emerging-market currency crises this is all quite familiar. (Side note: I invented currency crises — not the thing itself, obviously, but the modern literature — in 1979. Really. And business has been good ever since.) When you have big balance-sheet problems involving foreign-currency debt, an interest-rate hike that tries to discourage capital flight damages the economy, and hence those same balance sheets, from another direction, and it’s common, even standard, for the effort to fail. Most notably, tight-money policies were really really unsuccessful during the Asian financial crisis of 1997-8, on which you can read my take here.
Consider the chart, which shows the policy interest rate in Indonesia: during the 1998 crisis this rate was hiked to 70 percent, yet this wasn’t sufficient to stop a plunge in the rupiah to a fifth of its former value. And Indonesia wasn’t invading any of its neighbors, although it did have a failing authoritarian regime.
So Russia isn’t that unusual a story, except for the nukes.