DOI: 10.32609/j.ruje.12.118859

Authors: Angelina E. Shpilevaya, Mikhail Y. Gareev, Kristina V. Nesterova, Andrey V. Polbin

Abstract: This paper presents a dynamic overlapping generations general equilibrium model for the Russian economy to assess the economic and fiscal effects of the 2018 pension reform, which raised the statutory retirement age. The model incorporates realistic demographic projections, variable labor supply responses, and exogenous scenarios for oil prices. It evaluates the impact of the reform across a range of future demographic and external conditions by comparing post-reform trajectories of macroeconomic aggregates, public deficits, and tax rates with baseline scenarios without reform. The results show that raising the retirement age moderately reduces consumption in the short run but leads to more robust growth in output, investment, government spending, and exports in the long term. Pension reform improves fiscal sustainability by lowering the required budget-balancing VAT rate and pension fund deficit, especially under adverse demographic conditions or low oil prices. The fiscal effect of reform is muted in optimistic demographic scenarios with strong labor force growth, but remains significant when population aging intensifies fiscal pressure. These findings highlight the importance of structural reforms for long-term macroeconomic stability and underscore the critical role of demographics and external shocks in shaping pension system performance.

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DOI: 10.32609/j.ruje.11.146303

Authors: Heba Helmy

Abstract: We aim to show how any variants of a unified currency among BRICS Plus countries are challengeable, by probing the disparate influence of the positive and negative alterations in the crude oil’s international price on the real effective exchange rates. The paper applies the nonlinear autoregressive distributed lag approach to separate oil price upswings from downswings and assesses how such changes asymmetrically affect the real effective exchange rates of BRICS Plus members in the short and long runs using monthly time series variables from January 2000 until July 2023. Our findings reveal that in the short run, the asymmetric impacts of the positive and negative oil price changes on the real effective exchange rates appear in all BRICS Plus countries. In the long run, Brazil and Argentina confirmed the asymmetric impact of oil price changes on their real effective exchange rates, while the symmetric impact is confirmed in Russia, the United Arab Emirates, and Ethiopia. Our findings prove that a unified currency or a unified monetary union is a very challenging idea, as continuous appreciations or depreciations of the local currencies of BRICS Plus countries will have to be implemented to preserve their alignment with the composite currency unit. Moreover, the asymmetric responses will induce diverse policy recommendations concerning the oil pricing. Our study comes to fill a vital lacuna in the literature as it is the first study to probe the asymmetric association between the oil’s international price and the real effective exchange rate in the BRICS Plus countries.

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DOI: 10.32609/j.ruje.10.121368

Authors: Elena Daniela Sarau

Abstract: This study investigates the role of economic sanctions within contemporary national security strategies, focusing on their impact, motivations, and implications for sender states. Utilizing a mixed-methods approach, the research combines qualitative and quantitative methodologies to comprehensively analyze unilateral and autonomous economic sanctions imposed by the U.S. and the EC/EU between 1950 and 2019. The comparative and descriptive analysis examines 97 sanctions episodes, including 60 unilateral U.S. sanctions and an original dataset of 37 EC/EU autonomous economic sanctions episodes. The findings reveal that economic sanctions imposed by both entities generally yield positive economic outcomes for sender states. Endogenous motivations such as economic security concerns, geopolitical interests, and domestic political considerations emerge as significant drivers behind the deployment of sanctions. Economic sanctions are perceived as a strategic tool serving political objectives while enhancing economic security of sender states. Tangible benefits, including strengthened negotiating positions and domestic support, underscore the instrumental role of sanctions in advancing sender states’ interests globally. In summary, this research contributes valuable insights into the complex dynamics of economic sanctions and their implications for sender states. The study offers pertinent guidance for policymakers, scholars, and practitioners navigating global security and economic governance challenges by examining economic sanctions’ motivations, impacts, and implications within contemporary national security strategies.

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DOI: 10.32609/j.ruje.10.128666

Authors: Shweta Sikhwal

Abstract: This paper quantifies the spillover effects of economic policy uncertainty (EPU) in the United States on emerging market economies (EMEs). Using a generalized method of moments (GMM) estimation of a panel vector autoregression (PVAR) model on a dataset of 39 EMEs from 2005 to 2019, we find that increased U.S. EPU significantly raises the consumer price index (CPI) and negatively impacts the real GDP of these economies. Additionally, heightened U.S. EPU leads to a depreciation of emerging market currencies and a reduction in short-term interest rates. We employ a news-based EPU index developed by Baker et al. (2016) and conduct robustness checks using forward orthogonal transformation, an alternative EPU index, and by addressing the potential endogeneity of the oil price uncertainty (OPU) index. Our findings highlight the adverse effects of U.S. economic policy uncertainty on key macroeconomic variables in emerging markets, underscoring the importance of stable economic policies and robust institutions to mitigate these impacts.

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DOI: 10.32609/j.ruje.9.103780

Authors: Agus Dwi Nugroho, Imade Yoga Prasada, Zoltan Lakner

Abstract: The EU has agreed to sanction Russia by prohibiting bilateral trade, including food imports. This study aims to determine the impact of EU sanctions on EU19 food imports from Russia. The two-stage least squares (TSLS) and propensity score matching (PSM) were used to analyze EU19 food import data from January 1999 to October 2022. According to the findings of this study, the sanctions have no impact on EU19 food imports from Russia. The sanctions were only recently imposed so they have not had a significant impact on bilateral trade between the EU and Russia. On the other hand, EU19 is trying to be realistic about the implementation of sanctions due to their reliance on Russian food. Our findings provide a new perspective for the development of a non-tariff-barrier theory in which sanctions or other trade barriers are ineffective in countries that rely heavily on other countries.

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DOI: 10.32609/j.ruje.8.98242

Authors: Evgeny Y. Vinokurov, Marina V. Grichik, Taras V. Tsukarev

Abstract: The ongoing international reserve paradigm based on trust will experience a major transformation despite being convenient, flexible and low-cost. The underlying issue is a loss of trust. Due to the massive financial sanctions imposed on Russia and other states, traditional reserve currencies have lost their footing, compromising confidence in international reserves. Consequently, countries will need a comprehensive revision of their reserve asset management options. This paper overviews these options, which range from trade-offs to non-orthodox solutions. In total, we list twelve options, which can be categorized into three groups according to their novelty and “degree of orthodoxy­.” The first group implies countries can expand the use of available instruments, i.e., investments in gold, renminbi, and currencies of friendly countries, and enlarge the network of swap lines and the toolbox of sovereign wealth funds. In the second group, options call for the introduction of new mechanisms for international reserves functions, such as accumulating physical resources and private cryptocurrencies­, issuing stablecoins by central banks, and building up assets of regional financing arrangements. The third group includes options to shift the energy standard (currency) paradigm and establish a synthetic international currency or form a macroeconomic paradigm with no international reserves. Furthermore, applying our analysis, we move beyond Russia and look at the issue from the perspective of the Shanghai Cooperation Organization members and observers, as it is a leading platform where countries openly discuss this matter.

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DOI: 10.32609/j.ruje.8.89717

Authors: Shweta Sikhwal

Abstract: We examine, using a monthly dataset from 2007 to 2020, the US interest rate shocks’ effects on exchange rates, broad money aggregates, and foreign exchange reserves in emerging market economies (EMEs) post global financial crisis. To evaluate the impact of unconventional monetary policy initiatives, we employ Wu-Xia’s shadow interest rates. There are two parts to the methodology. The first part focuses on the identification of the unanticipated US interest rate shock in a SVAR model. In the second part, we incorporate the US interest rate shock into the panel structural VAR to analyze its impact on 29 countries from various regions. A positive shock to US interest rates depreciates the exchange rate of EMEs against the US dollar. According to our findings, it results in a decline in the broad money aggregate and foreign exchange reserves. The findings are consistent across multiple EME regions.

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DOI: 10.32609/j.ruje.8.95949

Authors: Leonid M. Grigoryev, Ekaterina A. Kheifets

Abstract: In 2020 the energy transition path was distorted by the COVID-19 pandemic which caused a sharp economic decline and a fast global recovery in 2021. Unlike that period, the years between 2001 and 2019 illustrated a different type of energy evolution for developed and developing countries regarding primary energy consumption. During this period the composition of energy balances of these two major groups demonstrated dramatic disparity, notably marked by the high share of coal in developing countries. The shock of 2020 led to a belief in expediting the transition to green energy, but in 2021 the economic recovery revived demand for oil and coal, dashing hopes for the growing renewable energy sources sector in the European Union that year. The return of coal, however, to the EU energy sector and stable demand for motor fuel globally led to the restoration of the GHG emission growth against the backdrop of the climate policy implementation failure. The current energy transition is denoted by features such as the flat oil demand in developed countries, the flat global demand for motor gasoline and the growing demand for diesel. The econometrics of demand for two motor oil products are quite opposite. For gasoline we have almost all hypotheses met: the negative influence of climate policy and oil prices, strong effect of dummies for shock of 2020 and 2021, and naturally 0.3 coefficient at GDP growth rate. Nevertheless, for diesel everything is exactly the opposite — only 0,4 coefficient at GDP and practically nothing else. This effect shows the strong role and trend for cargo use of diesel fueled trucks in the global economy. The high income of oil and gas majors in 2021 did not secure the investment upturn. A mature oil industry receives substantial profits for its investors, supplying dividends, and buying back debts without enlarging production capacities. At this point climate policy expectations of phasing out fossil fuels in the foreseeable future operated as a braking mechanism against reinvesting oil incomes. Moreover, at this junction we can observe governments’ limited capacity to pursue policies toward multiple objectives simultaneously: modest energy prices, energy transition and securing the sufficient capital formation for energy. The continued fusion of the economic upturn and energy transition will be dependent on demand and supply matching in the oil markets. It is also possible that the sanctions policies of 2022 may aggravate the situation, triggering high prices and uncertainties.

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DOI: 10.32609/j.ruje.5.49435

Authors: Suman Bery, Filippo Biondi, Sybrand Brekelmans

Abstract: The G20 has become the preeminent forum for international economic coordination. Twenty years after its creation, the paper reviews its performance with respect to the coordination of macroeconomic policies. The retrospective assessment focuses on two main questions: (i) Have the G20 summits succeeded in promoting macroeconomic policies with positive cross-border consequences, while preventing the opposite? (ii) To what extent has expanding the G7 to a diverse group of emerging and developing economies significantly changed the discourse and affected substantive outcomes? We argue that the G20 played a key role during the crisis of 2008, but policy coordination has been problematic since. Our review suggests that the G20 Presidencies of the emerging economies have made considerable efforts to shape the agenda toward issues of their interest, but have not always prevailed, notably on issues of global financial governance.

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DOI: 10.32609/j.ruje.5.38073

Authors: Nurilla Abdushukurov

Abstract: In this paper, the discussion centers on the possible effects of currency crises on different economic indicators, with special attention to economic growth and foreign direct investment. There is insufficient research on this topic to draw any firm conclusions about the associations between currency crises and aforementioned variables. In fact, it appears that the impact of currency crises on economic growth and foreign direct investment is negative respectively. However, this study indicates that foreign direct investment can be positively correlated with currency crises as contrary to the common belief. The current study analyzes these relationships through dynamic panel models. The annual panel data for 71 emerging and developing countries are extracted from reliable databases for the time period of 2005–2014. Generalized method of moments estimators are used to obtain efficient and consistent results so as to reach necessary conclusions. The majority of estimated coefficients are significant and unbiased statistically, and also consistent with the economic theories proposed. The main results indicate that the presence of a currency crisis in a particular economy has a negative impact on economic growth, while its effect on foreign investment inflows is most likely positive. Robustness tests demonstrate that used models in the study are both economically and econometrically robust and valid.

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DOI: 10.1016/j.ruje.2017.09.004

Authors: Evgeny Vinokurov, Mikhail Demidenko, Dmitry Korshunov, Mihaly Kovacs

Abstract: After achieving substantial progress in establishing a common customs territory and regulations, customs unions face potential disruptions due to a lack of monetary policy coordination. These disruptions might appear in the form of currency shocks and the ensuing trade conflicts. We approach this issue by looking at the case of the Eurasian Economic Union (EAEU). The volatility of national currencies in 2014–2015 resulted in sizable shifts in competitiveness, culminating in a currency crisis in some member states. This raises the questions of how to gradually achieve a more coordinated monetary policy, what monetary policy options are available, and what would be their relative impact on macroeconomic stability. Using a set of modeling tools and econometric models, we review three monetary regimes, which represent moves from fully independent exchange rate policy through increased policy coordination to joint exchange rate setting.

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DOI: 10.1016/j.ruje.2016.04.002

Authors: Eugene Nivorozhkin, Giorgio Castagneto-Gissey

Abstract: This paper studies the dynamic relationship between returns in the Russian stock market and global equity markets in the aftermath of the 2014 Ukrainian crisis. We apply dynamic goodness-of-fit and bootstrapped regression approaches to study the behavior of global equity indices. Our results reveal a significant fall in the degree of synchronicity between the Russian and global equity returns after the crisis outbreak. The Russian stock market clearly decoupled from both developed and emerging markets, as shown by a 30–50% decline in returns correlation. In view of dramatic increase in synchronicity across the Russian sectoral stock indices after the sanctions were introduced, our results suggest that the economic sanctions imposed on Russia during that period have effectively isolated the Russian equity market from the rest of the world and triggered extensive portfolio outflows from the Russian market. As a result of the economic sanctions and the limited choice of investments in Russia, the decreased co-movement between the Russian and global equity returns is unlikely to provide investors with superior diversification opportunities, whilst the returns of the Russian market in the medium-term will likely continue to be predominately driven by idiosyncratic news.

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DOI: 10.1016/j.ruje.2016.02.002

Authors: Evsey Gurvich, Ilya Prilepskiy

Abstract: This paper examines the impact of the current Western financial sanctions on the Russian economy. Modeling the capital flow components (accounting for the influence of other factors, including falling oil prices) reveals that sanctions have directly affected sanctioned state-controlled banks, oil, gas and arms companies by severely constraining foreign funding and have indirectly affected non-sanctioned companies by reducing inflows of foreign direct investment and causing funding conditions to deteriorate. The overall negative effect on gross capital inflow over 2014–2017 is estimated at approximately $280bn. However, the effect on net capital inflow is significantly lower ($160–170bn) due to Russian companies’ self-adjustment, which is evidenced by their utilization of foreign assets accumulated earlier for debt repayment and an overall decrease in gross capital outflow. The sanctions’ estimated effect on GDP is significant (–2.4 p.p. by 2017, compared with a hypothetical scenario with no sanctions) but 3.3 times lower than the estimated effects of the oil price shock.

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DOI: 10.1016/j.ruje.2015.12.004

Authors: Georgy Idrisov, Maria Kazakova, Andrey Polbin

Abstract: This article analyzes the impact of global oil prices on Russia's economic growth and its growth rate in terms of output. It also reviews the mechanics of the long-term and short-term impacts on output resulting from changes in oil prices. The authors argue that the effect of oil prices on output has decreased dramatically under current economic conditions ever since the period of recovery growth in the early 2000s. The main conclusion of the paper is that, on the basis of classical models, a constant increase in oil prices cannot influence the long-term economic growth rate and only predetermines short-term transitional trends from one long-term equilibrium to another.

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