A meeting of the Academic Board of the Gaidar Institute took place

On April 18, a meeting of the Academic Board of the Gaidar Institute took place.
Alexandra Bozhechkova, Candidate of economic sciences, Head of Laboratory of Monetary Policy of the Gaidar Institute, delivered principal presentation “Approaches to the analysis of currency policy of the RF Central Bank”.

Alexandra Bozhechkova started her presentation with a review of peculiarity of the exchange rate mechanism in the Russian Federation prior and after global financial crisis. If Ruble strengthened in real terms as a result of the inflation growth under fixed currency exchange rate, then, fluctuation of nominal rate, rather than inflation, contributed to a greater extent to the fluctuation of real currency exchange rate along with improvement of flexibility of the mechanisms of the exchange rate and switch to the pattern of inflation targeting.  

The expert has estimated the impact of currency intervention on the dynamics of Ruble exchange rate made by the Ministry of Finances since 2017: according to A. Bozhechkova, purchase of currency for Ministry of Finances deter potential Ruble strengthening. However, strengthening of the real exchange rate has an ambivalent impact on economic activity: the trend and the extent of this impact significantly depend on the sources of strengthening, i.e. productivity shocks, terms of trade, capital inflow and other factors as well as on the mechanisms of this impact determined by the trend of specialization, market channels, etc.

In addition, the speaker highlighted that an interest rate spread has an increasing influence on the process of the Ruble exchange rate in Russia and abroad. Apart from that, there was a reduction of susceptibility observed towards dynamics of currency exchange rate against oil prices resulted from the new enforced budget rule. Based on the 2019 econometric research by Andrey Polbin and co-authors and on Russian data, A.Bozhechkova drew the conclusion that a model possessing Markovian switch of the modes identifies periodically the regime of inflexible exchange rate in the recent years, based, however, probably on currency interventions by Ministry of Finances.
Yuri Ponomarev, Candidate of economic sciences, Senior researcher, Industrial Organization and Infrastructure Economics Department, Center for Real Sector of the Gaidar Institute, Head of IORSI RANEPA Center for infrastructure and spatial studies, presented a supplementary report “Analysis of impact of the Ruble currency exchange rate on prices in Russia”. He considered retrospective of the efficiency estimation of the transfer of currency exchange rate to prices for goods and services in Russia compared to developed and developing countries and real efficiency estimation of this transfer in Russia for three main “stages” of pricing in economy, i.e. prices for imported goods, ex-works prices set by manufacturers of industrial products and end-user consumer prices.

The speaker pointed out that effect of this transfer is incomplete for every level of prices under consideration and still exceeds the level of the developed countries. However, major part of the process of adaptation to new exchange rate after its change takes place in the first three-six months. The remaining features of the transfer effect in Russia, i.e. its asymmetry and significant differentiation by industries as well as significant decrease by almost 1.5 times for the end-user consumer prices in the effect of transfer in absolute terms over the last 4–5 years compared to previous periods were highlighted, which to some extent can be associated with the transfer to inflation targeting and changes in monetary/credit policy in recent years.

Fillip Kartaev, Doctor of Economic sciences, Head of Department of Mathematical Methods of Economic Analysis, Faculty of Economy, MSU after M.V. Lomonosov, took part in the discussion of presentations. He has highly assessed them, underlining comprehensive judgement of the agenda. He said:”It is clear that presentations made only the top of the research iceberg”. He has also expressed his proposals on amendments to be made in the course of further consideration of these topics.

Sergey Drobyshevsky, Scientific Director, Gaidar Institute, thanked the experts for work they did and participants of the meeting who expressed their thoughts on further revision of presentations and underlined that data of the research will form the basis of future reports to be submitted to the next Gaidar Forum in 2020.

Presentations to reports: