Social Sciences
4 years ago

Exchange Rates Drive Russian Monetary Policy, Fueling Persistent Inflation Issue

SSRN Electronic Journal
Does Inflation or Currency Depreciation Drive Monetary Policy in Russia
Brigitte Granville, Sushanta Mallick

Paper Summary

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The article examines why inflation persists in Russia after the fall of communism. It looks at interest rates, exchange rates, and money supply. The study finds that in Russia, the official interest rate reacts more to changes in exchange rates than to inflation. This focus on exchange rates has kept inflation a persistent issue. To control inflation, a flexible targeting rule is needed, making interest rates crucial for stabilizing prices.