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TRANSMISSION MECHANISM OF MONETARY POLICY IN RUSSIA:
VAR ANALYSIS
A.D. Klovina, student
Supervisor: D.V. Burakov, candidate of economic sciences, associate professor Financial university under the Government of Russian Federation (Russia, Moscow)
DOI: 10.24411/2411-0450-2019-10625
Abstract. Empirical analysis of the transmission mechanism of monetary policy in Russia was carried out by applying a vector autoregression model based on monthly data for 2008-2017. The results of the study confirm the presence of statistically significant impact of oil price shocks and REPO rates on the level of consumer inflation in Russia.
Keywords: Oil prices, REPO rate, inflation, elasticity, transmission mechanism, monetary policy
In a number of CIS countries, the financial market is characterized by a low degree of development. Therefore, a second approach is often used to determine the channel of credit - a narrow channel of credit. The described channel is based on the fact that in this case banks act as holders of deposits and at the same time as a source of borrowed funds. The shock of money supply leads to an increase in the volume of loans, which in turn has a negative impact on the interest rate, increasing output.
There are two different approaches to determining the credit channel of the monetary policy transmission mechanism. One of them is a wide lending channel, in which the imperfection of the financial market plays a key role. This approach is based on the effect of changes in the capitalization of companies, affecting the risk of lending and interest rate risk premium. A broad credit channel is used in the analysis of the transmission mechanism of developed countries.
Empirical analysis of the transmission mechanism of monetary policy in Russia was carried out through the use of vector autoregressive models based on monthly data for 2008-2017. Vector autoregressions are widely used for the analysis of transmission mechanisms and can reveal the reaction of macroe-conomic variables to economic policy shocks.
The vector autoregression model is based on the Dabla - Norris, Floerkemeier [1], 2006 specification and can be written as follows:
where Yt is the vector of endogenous variables;
Zt - vector of exogenous (external to the vector) variables;
Ut is the vector of random errors;
A(L), B (L) - matrices of lag operators.
The model (1) includes main endogenous variables:
• indicator characterizing the volume of production - short-term economic indicator (monthly volume, billion rubles), yt;
• indicator characterizing the price level - consumer price index (month to the previous month, %), pt;
• rate for overnight REPO transactions (per month, %), st;
• nominal exchange rate of ruble to us
dollar, xt:
•
The short-term economic indicator was used as a target indicator reflecting economic activity in Russia. The 1-day REPO rate on transactions was used as an indicator reflecting the conditions on the money market. The consumer price index is used as the general level of prices in the economy. The vector of exogenous variables is represented as follows:
where olipt is the price of brent oil in us dollars per barrel, st - the effective rate of Federal funds in %. These indicators are included in the model as exogenous factors to
account for external shocks (Le, Pfau, 2009), taking into account the openness of the Russian economy, as well as its dependence on oil prices [2].
Figure 1. Impulse response functions of CPI and short-term economic indicator to shocks in
nominal exchange rate of Russian ruble and REPO rate Source: author calculations
Figure 1 shows the pronounced effect of exchange rate movements on inflation. An exchange rate shock of 1 PP leads to a price increase of 0.12 PP in the 3rd month after the shock. The impact on the price level remains statistically significant for almost six months. The weakening of the exchange rate increases output, but the effect is not statistically significant. [3]
By comparing the impulse responses of inflation and the short-term economic indicator to exchange rate and repo shocks, we can see that the impact of the interest rate shock on prices is insignificant and statistically insignificant. [4]
However, an increase in the repo rate by 1 percentage point leads to a decrease in the short-term economic indicator by 0.5 percentage points in the second month after the shock, although the effect is not long-term.
The theoretical conclusion that the exchange rate channel is stronger than the inter-
est rate channel is consistent with other work for transition economies. In general, this is explained as follows.
In significant part of the analyzed sample (2008-2017) the exchange rate regime was fixed. The exchange rate had a significant impact on the economy during the fixed exchange rate period, given the central signaling role of the exchange rate in the economy. This assumption corresponds to the role of the nominal anchor that the exchange rate actually played.
In addition, in Russia the majority of finished goods are imported, therefore, the share of imports in prices is significant. Given the high import intensity of the domestic market and the significant share of imported goods in the structure of population consumption, changes in the exchange rate have an impact on the formation of prices for consumer goods.
References
1. Dabla-Norris, E., Floerkemeier, H., 2006. "Transmission mechanisms of monetary policy in Armenia: Evidence from VAR analysis", IMF working paper. WP/06/248
2. Le, H., Pfau, W., 2009. "VAR analysis of the monetary transmission mechanism in Vietnam" // Applied econometrics and international development, vol. 9-1.
3. Mertens, О., 2014. "Interest rate restrictions policy: possibilities and consequences for Ukraine", Scientific Papers NaUKMA. Economics, 159, 53-57.
4. Roldos, J., 2006. "Disintermediation and Monetary Transmission in Canada", IMF working paper WP/06/84
ТРАНСМИССИОННЫЙ МЕХАНИЗМ МОНЕТАРНОЙ ПОЛИТИКИ В РОССИИ: АНАЛИЗ МОДЕЛИ ВЕКТОРНОЙ АВТОРЕГРЕССИИ
А.Д. Кловина, студент
Научный руководитель: Д.В. Бураков, канд. экон. наук, доцент Финансовый университет при Правительстве Российской Федерации (Россия, г. Москва)
Аннотация. Эмпирический анализ трансмиссионного механизма денежно-кредитной политики в России проводился путем применения модели векторной авторегрессии на основе месячных данных за 2008-2017 годы. Результаты исследования подтверждают наличие статистически значимого воздействия шоков цен на нефть и ставки РЕПО на уровень потребительской инфляции в России.
Ключевые слова: цены на нефть, ставка РЕПО, инфляция, эластичность, трансмиссионный механизм, монетарная политика.
