Abstract

The Euro Area economy is recovering after the incidence of the Great Recession, with the leading indicators reaching the pre-crisis levels. This evolution was strongly supported by the New Economic Governance implemented over the past years. On the one hand, the unprecedented expansionary monetary policy of the European Central Bank determined the decline of the real financing costs to record low levels, contributing to the re-launch of the private investments and consumption. On the other hand, the governments adjusted the budget deficits, with positive impact for the investment climate. Last, but not least, several reforms have been implemented across Europe, with positive impact in terms of potential output. The purpose of this paper is to assess the dynamics of the real economic convergence within the Euro Zone during 1996-2017, with a focus on the post-crisis cycle (2013-2017). We employed traditional econometric methods (including the Cobb-Douglas production function) and annual / quarterly statistics from Eurostat database in order to assess the convergence of the structural and cyclical components of the GDP of the Euroland member countries. The main results show a significant increase of the real economic convergence over the past quarters. However, this convergence seems strongly dependent on the expansionary monetary policy, while several structural challenges lie ahead, including the regional polarization and the important differences in terms of implementing the Digital Revolution.

Abstract

The Euro Area economy is recovering after the incidence of the Great Recession, with the leading indicators reaching the pre-crisis levels. This evolution was strongly supported by the New Economic Governance implemented over the past years. On the one hand, the unprecedented expansionary monetary policy of the European Central Bank determined the decline of the real financing costs to record low levels, contributing to the re-launch of the private investments and consumption. On the other hand, the governments adjusted the budget deficits, with positive impact for the investment climate. Last, but not least, several reforms have been implemented across Europe, with positive impact in terms of potential output. The purpose of this paper is to assess the dynamics of the real economic convergence within the Euro Zone during 1996-2016, with a focus on the post-crisis cycle (2013-2016). We employed traditional econometric methods (including the Cobb-Douglas production function) and annual statistics from Eurostat database in order to assess the convergence of the structural and cyclical components of the GDP of the Euroland member countries. The main results show a significant increase of the real economic convergence over the past quarters. However, this convergence seems strongly dependent on the expansionary monetary policy, while several structural challenges lie ahead, including the regional polarization and the important differences in terms of implementing the Digital Revolution.

Abstract

In this paper we estimate the degree of producer price rigidity in the Russian economy and identify the response of various industries to monetary policy shocks, taking into account the heterogeneity of the rigidity parameter. The first part of the paper reviews theoretical approaches to modeling producer price rigidity, including models in which price revisions depend either only on time, or only on the state of the economy, as well as a hybrid pricing model.

Abstract

In this paper we estimate the effects of the Bank of Russia’s monetary policy on the Eurasian Economic Union members. The relevance of the study arises from two points: first, economic integration implies coordination in macroeconomic policy; second, fluctuations of Russian economy as the biggest economy in the region cause fluctuations in the whole EAEU, changing the flows of goods and resources. The purpose of this paper is to identify key effects and channels of cross-border transmission of Bank of Russia’s monetary policy under changing monetary regimes of the EAEU countries. For the empirical model we use quarterly data on EAEU key macroeconomic indicators from 2000 to 2021, the basic method is block-exogenous structural vector autoregression. Our results show that interest rate channel plays the key role in cross-border transmission of monetary policy effects in the region. The exception is the case when the recipient’s country central bank employs fixed exchange rate regime, rendering international interest rate channel ineffective. Another important channel is international trade: monetary policy tightening leads to the contraction of demand for the imported goods, so the exports of the recipient countries decrease. We conclude that despite heterogenous response among the EAEU countries to monetary shocks occurring in Russia, monetary policy tightening decreases economic activity in the whole economic union. The study can be extended in several ways like the analysis of the synchronization in systematic monetary policy decisions in EAEU or detailed estimations of financial channels of international transmission using banking statistics

Abstract

Today, trend inflation is one of the important components of monetary models, as well as an indicator of public confidence in the ongoing monetary policy. In addition, trend inflation is used when forecasting inflation over a long-term horizon. This explains the relevance of this work, which is aimed at illustrating the evolution of trend inflation concept (subject of the study), as well as determination of its place in macroeconomic models. A review of theoretical works analyzing the concept of trend inflation and its relationship with other macroeconomic indicators is aimed at achieving this goal. The study was conducted at the Center for the Study of Central Banking Problems as part of the RANEPA state assignment for 2021 using relevant academic literature and as the major source of information and such methods as descriptive, statistical, graphical analysis, a systematic approach, and comparative analysis. Analysis of trend inflation concept allows the authors to conclude that this indicator represents a long-term inflationary trend and is unobservable. In statistics, prices for food and raw materials characterized by high volatility, as well as the effects of changes in indirect taxes, are excluded from the indicator of general inflation in order to identify a long-term trend in the dynamics of the general price level. In addition, trend inflation concept is widely used in macroeconomic modeling. In the future, this review can serve as a starting point for an econometric estimation of trend inflation for the Russian economy; study of trend inflation factors in Russia; analysis of changes in the magnitude and volatility of this indicator over time; as well as formulation of recommendations for the Russian monetary authorities.

Abstract

The paper examines the property of the core inflation indicator to predict future values of headline inflation, which is a critical task in preparing a medium-term inflation forecast to support decision-making on monetary policy. To test this property (on the example of the core inflation by Rosstat and inflation excluding fruits and vegetables, gasoline and housing and communal services), two approaches were applied. The first approach projected headline inflation based on actual core inflation and the historical relationship between these indicators, and then projected headline inflation based on actual headline inflation. The accuracy of the two headline inflation forecasts was then compared. As a result, it turned out that core inflation indicators, starting from 2011, better predict headline inflation than current headline inflation values over a horizon of up to a year. The second approach answer the question of whether the accuracy of the headline inflation forecast is improved if the core inflation forecast is used instead. To do this, within a certain class of models, a core inflation forecast was built, which was used as a headline inflation forecast, then its accuracy was compared with a forecast based on the same class of models estimated for headline inflation. As a result, it turned out that in the framework of VAR, MA(1) and ARIMA models, the use of a core inflation forecast instead of a headline inflation forecast increases the accuracy. We estimate VAR model and decompose core inflation by factors (output gap, ruble exchange rate, and monetary policy rate). It helps us to estimate the magnitude of the price shock in the 1st quarter of 2022 in Russian economy, which amounted to 6.2 p.p. Our inflation forecast based on the VAR model assumes its acceleration from 1.6% q/q SAAR in the 4th quarter of 2022 to 4.1% in the 1st quarter and 6.0% in the 2nd quarter of 2023, then it followed by stabilization at 7% QoQ SAAR by the end of 2023.

Abstract

In this paper we the synchronization of monetary policy in Eurasian Economic Union. The relevance of the study arises from two points: first, independent monetary policy may be a flexible tool of economic stabilization, so is important for countries; second, fluctuations of Russian economy and global shocks affect all the economies of EAEU, so their monetary policy depends on global and Russian interest rates anyway. The purpose of this paper is to estimate the reaction of EAEU central banks to individual, regional and global shocks. For the empirical model we use monthly data on EAEU key macroeconomic indicators from 2013 to 2021, the basic methods are general method of moments, error correction models and global vector autoregressions. Our results show that the reaction of EAEU countries’ macroeconomic variables to global shocks is by large the same, and spillovers from Russian economy play the key role. We conclude that despite heterogenous production structure, level of capital mobility and financial development the key trends in monetary policy depend on Russian inflation and financial cycle. But the future results will depend on the prospect of trade and financial integration in EAEU under external restrictions. The study can be extended with detailed analysis of capital mobility in EAEU transmission by financial channels.

Abstract

The relevance of the study is determined by the urgent need to assess the potential conditions for the consolidation of public and private resources and the capabilities of the financial sector in the implementation of large-scale investment programs. The purpose of the study is to assess the ability and readiness of key economic agents and the financial system to increase investment activity in Russia. The subject of the study is the analysis of the main trends and features of the formation of investment resources by sources of financing and forms of ownership, characteristics of financial and material potential of investment and construction activities. The analysis of investment activity trends was carried out on the basis of methods of comparative analysis of official statistical data, review of strategic planning documents and regulatory and legislative framework. As a result of the study, general and specific features of investment activity in the period 2015-2021 were identified and systematized. Overcoming the consequences of crisis phenomena in the investment sphere is considered in the paradigm of changing the role and participation of the state, business, population and financial markets in resource mobilization and financing of investment projects. The analysis of trends in the formation of the material structure of investment resources allowed us to draw conclusions about the impact of imports of investment goods and determine the potential of domestic production in solving import substitution problems as a factor of innovation and technological modernization of the economy. The evaluation of the system of anti-crisis measures to support and finance investment projects allowed us to determine the potential for mobilizing budgetary and extra-budgetary sources and the distribution of risks between the state, private business and the population. The scientific novelty of the study consists in summarizing the current data on the state of the investment sphere, the practice of regulatory and organizational and managerial impact and assessing the financial sector's capabilities in consolidating resources. The recommendations based on the results of the study are related to the need to further improve the methods of state stimulation of investment activity and the development of tools for consolidating the resources of the public and private sectors, increasing the coherence of investment programs for industrial, technological, infrastructural and social development, reducing the risks of spatial and territorial differentiation and resource provision of investment programs. 

Abstract

Under the conditions of the inflation targeting regime, monetary policy decisions have an impact on the economy through the financial sector. Given the significant dependence of the Russian economy on the export of oil, it is actual to study the specifics of the financial sector of resource economies and identify bottlenecks that reduce the effectiveness of the monetary policy of the Bank of Russia In this study, using the example of 109 countries for the period 1980-2019, we assessed the degree of influence of resource dependence on the depth and structure of the financial sector. It is revealed that for a group of developing countries, the hypothesis of the "resource curse" of the financial sector is not rejected. This means that in conditions of resource dependence, the depth of the banking sector is decreasing, and the financial sector is more focused on stock markets. In the second part of the study, we investigated the degree of influence of financial sector development indicators on the effectiveness of monetary policy of commodity exporting countries which are also inflation targeters. The results of estimates obtained by the system generalized method of moments indicate that for resource economies, stock market development indicators play an important role in reducing inflation, whereas for non-resource economies, the influence of banking sector parameters prevails. In addition, in the period after the global financial crisis, as a result of increased volatility of world commodity prices there is an increasing role of financial stability indicators in ensuring the effectiveness of monetary policy in a group of developing resource countries. In the future, the study can be supplemented by taking into account, within the framework of econometric models, the sanctions episodes that affect the development of the financial sector in the oil-exporting countries.