DOI: 10.32609/j.ruje.12.200704

Authors: Alexandra V. Bozhechkova, Evgeny L. Goryunov, Sergey M. Drobyshevsky, Sergey G. Sinelnikov-Murylev, Pavel V. Trunin

Abstract: This article examines the interaction between monetary and fiscal policy in Russia, with particular attention to the fiscal and monetary sources of changes in high-powered money (the monetary base). The decomposition of changes in the monetary base allows us to split the 2000–2025 period into subperiods according to macroeconomic conditions and the policy objectives of the monetary and fiscal authorities. The recent period of 2022–2025 is studied in more detail, since the Russian economy was subject to substantial inflationary shocks, fiscal expansion being one of them. We discuss the effectiveness of monetary policy in that period and the role of fiscal policy in narrowing the room for disinflation. The analysis shows that the Bank of Russia retains the ability to control the money supply despite the easing of fiscal policy. The Bank of Russia had the instruments to reduce inflation, and the persistence of elevated inflation in 2023–2025 can be viewed as the result of a policy stance that was not sufficiently tight; a tighter stance, however, would have exposed the financial and real sectors to the risk of destabilization.

HTML

XML

PDF

DOI: 10.32609/j.ruje.9.111967

Authors: Eugene L. Goryunov, Sergey M. Drobyshevsky, Alexey L. Kudrin, Pavel V. Trunin

Abstract: The paper examines the factors of global inflation acceleration in 2021–2022. We consider primarily the developed economies, where rates of inflation over the last two years have exceeded multi-year highs and have significantly exceeded target levels. We find that the cause of accelerating inflation was an imbalance between aggregate demand, which started to increase rapidly in the second half of 2020 as economies began to adapt to the circumstances of the pandemic, and aggregate supply, which encountered persistent constraints associated with interruptions in global supply chains. Significant support for demand was provided by fiscal stimulus that was unprecedented in scale and was accompanied by policy interest rates reaching extremely low levels, and by active injections of liquidity by central banks. The willingness of governments to implement ultra-expansionary monetary and fiscal policies can to a considerable degree be attributed to the fact that during the previous decade large budget deficits, zero interest rates, and programs of quantitative easing had not resulted in macroeconomic destabilization. We examine the view of many central banks that the inflationary wave would not be long-lasting, which was a crucial reason for delaying the interest rates increase. We consider the conditions in which the leading economies might fall into the stagflation trap.

HTML

XML

PDF

DOI: 10.32609/j.ruje.6.55880

Authors: Marta Domínguez-Jiménez, Niclas Frederic Poitiers

Abstract: This paper analyzes the trends and drivers of inward foreign direct investment in Russia between 2009 and 2019. The EU is the premier provider of FDI into Russia, even though we find that reported values overstate its role given the use of Special Purpose Entities (SPEs). Key drivers of Russian FDI flows are the price of oil and natural resource markets, macroeconomic volatility, monetary policy, sanctions and trade impediments. As FDI is highly concentrated in natural resource rich regions, we argue that a sectoral decomposition understates the importance of fossil fuel extraction. Based on this analysis as well as the literature on growth effects of FDI, we argue that Russia needs more investment into higher-value added activities.

HTML

XML

PDF

DOI: 10.32609/j.ruje.5.35506

Authors: Marek Dabrowski

Abstract: After two turbulent decades (1980s and 1990s) when emerging-market economies were frequent victims of financial crises, in the first two decades of the 21st century their macroeconomic performance improved. Nevertheless, there were three crisis episodes that hit some of these countries: (i) the spill-over effects of the global financial crisis in 2008–2009; (ii) the consequences of the decline in commodity prices in 2014–2016 for their exporters; (iii) the turbulence in Argentina and Turkey in 2018. Currency crises in Argentina and Turkey in 2018 underlined again the key role of prudent domestic policies. Early policy correction can help to prevent a crisis and avoid its economic, social and political costs. If crisis cannot be avoided, the comprehensive anti-crisis package, including up-front monetary and fiscal adjustment, should be adopted as quickly as possible to arrest market panic and reverse negative expectations.

HTML

XML

PDF

DOI: 10.1016/j.ruje.2016.08.002

Authors: Marek Dabrowski

Abstract: Since the collapse of the Soviet Union, its successor states have suffered from cyclical currency crises. The most recent episode of 2014–2016 was caused by a combination of external and domestic factors. The former include tighter US monetary policy, slower global growth, and declining commodity prices, whereas the latter include the former Soviet Union (FSU) economies’ extreme macroeconomic fragility (a legacy of past crises), numerous microeconomic rigidities and structural distortions in addition to governmental deficits. In addition, the Russian–Ukraine conflict dealt a heavy blow to both economies and their neighbors. Effective anti-crisis policies must aim at eliminating all deep-rooted causes of repeated financial and macroeconomic turbulence and must involve deep structural and institutional reforms in the entire region.

HTML

XML

PDF

DOI: 10.1016/j.ruje.2015.12.005

Authors: Valeriy Mironov

Abstract: Falling oil prices are leading to a reduction in domestic demand and lowering of the ruble exchange rate, thus enhancing the price competitiveness of Russian producers and stimulating the supply side of the economy (especially in foreign markets unaffected by the recession). Indeed, all of this create the possibility of offsetting the decline in domestic demand to a varying degree through increased net exports. However, the present study shows that, taking into account all of the structural problems of the Russian economy, the devaluation of the ruble may lead to a more severe recession than anticipated by most experts in their estimates, judging by average consensus forecasts (as of the end of September 2015).

HTML

XML

PDF