Monetary Policy in Russia: Identifying Exchange Rate Shocks

Posted: 1 Oct 2013

See all articles by Brigitte Granville

Brigitte Granville

Queen Mary, University of London

Sushanta Mallick

Queen Mary - University of London; Queen Mary University of London

Abstract

Russian monetary policy has failed persistently to achieve sustained low inflation, both in absolute terms and relative to the peer group of countries similarly exiting from Soviet-style central planning. This paper explores the reasons for this state of affairs by analyzing the kind of monetary policy that has been pursued by the central bank during the period 1995 to 2009. Our contribution is to search for a possible transmission channel between the real interest rate, inflation rate, exchange rate, output growth and foreign reserve growth, after having controlled for the effect of oil price inflation. Using a vector auto-regressive model in error-correction form and using sign restrictions methodology, we show that the monetary authorities’ failure to abate double-digit inflation appears to be driven by the policy of exchange rate targeting, as reflected in our identified exchange rate shocks.

Keywords: Monetary policy reaction function, Exchange rate, inflation, Russia

JEL Classification: C13, E43, E58, P24, P34

Suggested Citation

Granville, Brigitte Evelyne and Mallick, Sushanta, Monetary Policy in Russia: Identifying Exchange Rate Shocks. Economic Modelling, Vol. 27, No. 1, 2010, Available at SSRN: https://ssrn.com/abstract=2333755

Brigitte Evelyne Granville (Contact Author)

Queen Mary, University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Sushanta Mallick

Queen Mary - University of London ( email )

School of Business and Management
Mile End Road
London, England E1 4NS
United Kingdom
+44 20 7882 7447 (Phone)

HOME PAGE: http://skmallick.busman.qmul.ac.uk/

Queen Mary University of London ( email )

Mile End Rd
London, E1 4NS
United Kingdom
+44 20 7882 7447 (Phone)

HOME PAGE: http://skmallick.busman.qmul.ac.uk/

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