The Impossible Trinity» rule in the context of international experience

2019 ◽  
pp. 90-96
Author(s):  
M.P. Tskhovrebov ◽  
A.S. Tanasova
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Empirical Studies ◽  
Theoretical Development ◽  
External Shocks ◽  
Cross Border ◽  
Relevant Today ◽  
Russian Economy ◽  
Monetary Authorities ◽  
Increased Sensitivity

The article is devoted to the «Trilemma» of the policy of the monetary authorities, or the «rule of impossible trinity». This policy compatibility rule, formulated more than 50 years ago, remains relevant today. Its reliability is generally confirmed by a number of empirical studies, although there are also suggestions on the need to adjust this economic and theoretical development. The corresponding discussion also affects the policy of the Bank of Russia (mega-regulator), which carries out inflation targeting in conditions of the free movement of cross-border capital and the use of a floating ruble exchange rate. Regarding the effectiveness of this policy, carried out in the presence of increased sensitivity of the Russian economy to external shocks, the authors express certain doubts.

Estimation of welfare costs of inflation: The case of Russia

2019 ◽  
pp. 55-69 ◽  
Author(s):  
Sergey M. Drobyshevskiy ◽  
Natalia V. Makeeva ◽  
Elena V. Sinelnikova-Muryleva ◽  
Pavel V. Trunin
Keyword(s):  
Inflation Targeting ◽  
Empirical Studies ◽  
Welfare Costs ◽  
Economic Agents ◽  
Academic Literature ◽  
Russian Economy ◽  
Theoretical Approaches ◽  
Real Gdp ◽  
Quantitative Estimates ◽  
Positive Effect

This paper is devoted to the estimation of welfare costs of inflation, taking into account the peculiarities of the Russian economy. Theoretical approaches that are used in the literature to analyze the costs of inflation are discussed in the paper. It also provides an overview of the empirical studies of this topic. Research found in academic literature shows that the results of quantitative estimates are extremely sensitive to the choice of the functional form of the money demand equation, as well as to assumptions that are made to simplify the analysis, some of which do not fit Russian data. As a result, we have modified the standard approaches to estimating welfare costs of inflation, taking into account the monetization growth in Russia, and provide quantitative estimates of the magnitude of welfare costs of inflation. The results indicate a significant gain for economic agents in terms of real GDP with a decrease in inflation, which is regarded as a positive effect from the inflation targeting policy.

On the limits of the possibility of inflation targeting

2017 ◽  
pp. 71-87
Author(s):  
K. Korishchenko ◽  
N. Pilnik
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Econometric Model ◽  
Oil Prices ◽  
Policy Regime ◽  
Russian Economy ◽  
Exchange Rate Management ◽  
Price Growth ◽  
Main Factors ◽  
Main Determinants

The purpose of this article is to identify the main determinants of consumer price growth in the Russian economy. To achieve this goal, the degree of influence on inflation of the monetary policy of the Bank of Russia, tariff regulation and ruble exchange rate has been determined in the course of the work. The econometric model of inflation formation is used as a research tool depending on the dynamics of the main factors. The article explores the reasons for the significant growth in the volatility of the dollar and, as a consequence, its impact on consumer inflation. According to the presented model, the main volatility generators are the volatility of oil prices and the policy regime of exchange rate management.

Prospects of the Initiation of Inflation Targeting in RF

2008 ◽  
pp. 46-57 ◽  
Author(s):  
A. Ulyukaev ◽  
S. Drobyshevsky ◽  
P. Trunin
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Economic Performance ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Monetary Authorities ◽  
The Exchange Rate

Bank of Russia officials have recently declared the possibility of switching to the inflation targeting regime in the medium run. The article considers benefits and shortcomings of monetary policy regime as well as the economic performance of the inflation targeting countries. The authors conclude that Russia now starts meeting conditions crucial for the success of inflation targeting. In such circumstances Russian monetary authorities have an opportunity to weaken the exchange rate goal in favor of the inflation goal.

Macroeconomic Preconditions of Realizationof a New Growth Model

2012 ◽  
pp. 4-24
Author(s):  
S. Drobyshevsky ◽  
S. Sinelnikov-Murylev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Average Price ◽  
Growth Path ◽  
Direct Control ◽  
Russian Economy ◽  
Monetary Authorities ◽  
Budget Policy ◽  
Stable Growth

The model of the Russian economy that was formed in 2000s does not match a new stable growth path, though it helped to calmly overcome the crisis of 2008 and 2009. The state needs to provide stability in the fields being under its direct control: in the budget and monetary policy. In the budget policy we consider advantages and drawbacks of a New Budget Rule, which is based on long-term average price of oil. In the monetary sphere we vote for the policy of transition to inflation targeting and priority of low inflation against other goals of monetary authorities.

scholarly journals CROSS-BORDER REGIONAL RESILIENCE: CONCEPTUAL AND EMPIRICAL NOTIONS

2019 ◽  
Author(s):  
T. Makkonen ◽  
T.J. Hokkanen ◽  
J. Korhonen ◽  
A. Malkamäki
Keyword(s):  
Regional Development ◽  
Empirical Studies ◽  
Current Level ◽  
Barrier Effect ◽  
External Shocks ◽  
Linear Fashion ◽  
Regional Resilience ◽  
Cross Border ◽  
Novel Approach ◽  
Promising Avenue

The benefits of crossborder cooperation for regional development have been widely accepted. The progress towards open borders and increased interaction across the border is, thus, seen as a beneficial process for crossborder regions. This process does not, however, proceed in a linear fashion from low to high crossborder integration. Rather, at times the barrier effect of the border is decreased (debordering) and at times increased (rebordering). These changes in the permeability of the border are many times caused by external shocks. However, the crossborder regions need to find ways to cope with these external shocks in order to maintain their current level or to transform themselves into a higher level of crossborder cooperation. This discussion resonates with the concept of regional resilience. Here the concept is applied in a crossborder context to formally define a novel approach, namely crossborder regional resilience, to address the issues of: 1) how resilient are crossborder regions against rebordering and 2) how robust are crossborder cooperation networks against failures in crossborder connectivity. Existing empirical studies along the Finnish Russian border point towards a conclusion that crossborder cooperation in the area is not particularly vulnerable to network failures and that regional actors are constantly trying to cope with recent debordering developments to maintain crossborder cooperation. These findings and the discussion on the theoretical backgrounds of the concept point towards a promising avenue for further research. The issue has also started to attract the attention of policymakers, which further underlines the topicality of addressing resilience in crossborder contexts.

scholarly journals Inflation Target In Emerging Countries: Modeling Exchange Rate Issues

2011 ◽  
Vol 1 (4) ◽  
Author(s):  
Javier A. Reyes
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Emerging Countries ◽  
Basic Relation ◽  
Font Size ◽  
Inflation Target ◽  
Monetary Authorities ◽  
Exchange Rate Movements ◽  
The Exchange Rate ◽  
Pass Through

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">The idea of inflation targeting in emerging countries is not a new one. There have been papers that favor or reject the idea of implementing such a system in these countries for mainly institutional reasons. This paper does not deal with these normative arguments. Emerging countries are implementing IT regimes and therefore it is necessary to understand how it should be done and what problems can arise. Therefore this paper focuses on exchange rate issues for inflation targeting. These issues have their root in the basic relation that exists in emerging countries between inflation and the exchange rate, a relation known as the &ldquo;pass through effect&rdquo;. The simple setup used in this paper shows how the monetary authorities implementing an IT regime must intervene in the exchange rate market in order to comply with the inflation target. The central bank intervenes in order to avoid exchange rate movements that would affect the overall inflation rate through the pass-through effect. These results mean that the dirty floating or fear of floating hypothesis should be modified when applied to countries implementing IT, since their intervention (or dirty floating activities) may be justified.</span></span></p>

scholarly journals Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

2020 ◽  
Vol 9 (2) ◽  
pp. 67-85
Author(s):  
Borivoje Krušković
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Least Squares ◽  
Inflation Targeting ◽  
Empirical Studies ◽  
Exchange Rate Policy ◽  
Exchange Rate Targeting ◽  
Stepwise Method ◽  
Rate Policy ◽  
The Impact

AbstractThis paper analyses the effects of two alternative monetary strategies (exchange rate targeting and inflation targeting) on economic growth and employment. On the panel of 18 countries for the period from 1996 to 2013, I tested the hypothesis that countries in exchange rate targeting have a higher rate of GDP growth and lower inflation rate. In order to test the impact of exchange rate policy on economic growth and prices, I applied dynamic panel two stepwise method of least squares (2SLS method) and they were evaluated by two independent regression equation. In order to allow the comparison of results related to exchange rate targeting, the effects of the introduction of inflation targeting in the unemployment rate were also estimated using the panel method two stepwise least squares (2SLS method). Results of empirical studies show that countries with inflation targeting have a lower rate of economic growth and higher unemployment.

Impact Of External Shocks And Monetary Policy On Russian Economy

2014 ◽  
pp. 122-139 ◽  
Author(s):  
R. Lomivorotov
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Financial Markets ◽  
Commodity Prices ◽  
External Shocks ◽  
Policy Changes ◽  
Russian Economy ◽  
The Impact ◽  
The U.S

This paper investigates the impact of external and internal shocks on the Russian economy. We have factored in the U.S. monetary policy changes, dynamics of commodity prices, and volatility of global financial markets as the main sources of external shocks. We have also examined the influence of the monetary policy of the Bank of Russia, on economic growth, inflation, and ruble exchange rate.

Macroeconomic Preconditions of Realizationof a New Growth Model

2012 ◽  
pp. 4-24 ◽  
Author(s):  
S. Drobyshevsky ◽  
S. Sinelnikov-Murylev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Average Price ◽  
Growth Path ◽  
Direct Control ◽  
Russian Economy ◽  
Monetary Authorities ◽  
Budget Policy ◽  
Stable Growth

The model of the Russian economy that was formed in 2000s does not match a new stable growth path, though it helped to calmly overcome the crisis of 2008 and 2009. The state needs to provide stability in the fields being under its direct control: in the budget and monetary policy. In the budget policy we consider advantages and drawbacks of a New Budget Rule, which is based on long-term average price of oil. In the monetary sphere we vote for the policy of transition to inflation targeting and priority of low inflation against other goals of monetary authorities.

scholarly journals Exchange rate parities and Taylor rule deviations

2022 ◽  
Author(s):  
Christina Anderl ◽  
Guglielmo Maria Caporale
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Taylor Rule ◽  
Monthly Data ◽  
Policy Frameworks ◽  
Adjustment Speed ◽  
Monetary Authorities ◽  
The Usa ◽  
The Uk

AbstractThis paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January 1993 to December 2020 for five inflation-targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeting ones (the USA, the Euro Area and Switzerland). Both a benchmark linear VECM and a nonlinear Threshold VECM are estimated; the latter includes Taylor rule deviations as the threshold variable. The results can be summarized as follows. First, the nonlinear specification provides much stronger evidence for the PPP and UIP conditions, the estimated adjustment speed towards equilibrium being twice as fast. Second, Taylor rule deviations play an important role: the adjustment speed is twice as fast when deviations are small and the credibility of the central bank is higher. Third, inflation targeting tends to generate a higher degree of credibility for the monetary authorities, thereby reducing deviations of the exchange rate from the PPP- and UIP-implied equilibrium.

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