Konstantin Korishchenko, Nikolay PilnikPublished in:
Global Markets and Financial Engineering (Russian version)
– Volume 3, Number 1 (January-March, 2016)

JEL classification: E31, E58, F31

Keywords: capital outflow, consumer price index, foreign exchange rate volatility, russian economy


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Abstract:

The purpose of the article is to identify the main growth determinants of consumer prices in the Russian economy. The authors defined the degree of impact of the Bank of Russia’s monetary policy, tariff regulation and the ruble exchange rate on inflation. The econometric model of inflation formation depending on the dynamics of the key factors is used as a research tool. The authors also used official monthly data of the Bank of Russia and Rosstat for the period from January 2005 to August 2015. A special focus is made on the modelling of volatility development in the Russian currency market, the main factors of which are oil price volatility, capital outflow and the Bank of Russia’s currency policy.

Highlights:

► until 2014 the basic model of the Russian monetary policy was the hybrid one, which was based on exchange rate targeting and accounting of the growth rate of money supply (quantitative targeting)
► when transmitting to the floating exchange rate of the ruble, the Bank of Russia made interest rate the main tool, and exchange rate and the growth rate of money supply were removed from the list of target parameters
► the Bank of Russia’s monetary policy is described through the dynamics of M2 (money supply in the narrow sense)
► the tariff regulation policy is described through the tariff index, which aggregates the changes in gas, electricity, water, heating and transport tariffs
► the period average ruble–dollar exchange rate and dollar monthly volatility were chosen as the currency market indexes
► in 2013–2014 the average share of dollar volatility in the annual inflation index was about 2.2 %; and since January 2015 the pressure of volatility on inflation has reached 7.2 %
► volatility in the currency market is formed on the basis of the volatility in the oil market and capital outflow in the sense of a negative balance of the financial account of the balance of payments

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