Central Bank (RF) Monetary Policy and the Dynamics of the Russian Economy 2015–2017

Abstract

Monetary policy affects a number of key parameters of the economic system largely determine the dynamics of the economy, particularly on interest rates, exchange rate, and amount of money high performance. In the present conditions of the Russian economy direct impact interest rates have no stake on credit and deposit operations of the Central Bank, because they determine the minimum rate of return of assets acceptable to banks. High deposit rate of the Central Bank distorts the asset composition of banks, suppresses their loan and investment activity. Even a small reduction in deposit rates of the Central Bank in 2017 has helped spur the credit policy of banks. The article analyzes the effects of exchange rate changes depending on the currency in which exports and imports are paid. The weakening of the ruble to reserve currencies makes the purchase of Russian exports more profitable for foreign buyers only if the exports are paid in rubles. If the export settlements are made in dollars and other reserve currencies, the weakening of the ruble is beneficial for exporters only at the expense of the domestic economy. The increasing domestic debt exceeding the size of the budget deficit is associated with the reduction of the monetary base, or slowing its growth. In fact, interest-free liabilities of the extended government (reserve money) in this case, replaced with interest obligations (government bonds). The relatively stable size of the money supply, the Central Bank would allow maintaining a sustainable budget deficit, and the increase in the deficit during the depression could be financed by increase in public debt and spending of foreign exchange reserves, in particular – budget funds.