The Relationship Between the Exchange Rate and Inflation in Russia

Kataranova, Maria

doi:10.2753/pet1061-1991530303

Cited by 11 publications

(14 citation statements)

References 6 publications

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“…There are several papers focusing on exchange rate pass-through in specific CIS countries, mainly Russia. The studies for Russia, for example, provide quite a wide variety of estimates for ERPT (Dobrynskaya and Levando, 2005;Beck and Barnard 2009;Kataranova, 2010;Ponomarev et al, 2014). The estimates of ERPT to CPI for USD range between 5-40 % after one quarter, and between 20-90 % after four quarters.…”

Section: Literature Reviewmentioning

confidence: 99%

“…For emerging economies, the evidence is mixed, but it seems that depreciation may lead to stronger ERPT than appreciation and that large devaluations are associated with stronger than proportionate ERPT (Mihaljek and Klau, 2008;Razafimahefa, 2012;IMF, 2015). Among CIS countries, asymmetric effects have been found at least for Russia (Kataranova, 2010;Ponomarev et al, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

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The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors

Comunale

Simola

2018

Research in International Business and Finance

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This empirical study considers the pass-through of key nominal exchange rates and commodity prices to consumer prices in the Commonwealth of Independent States (CIS), taking into account the effect of idiosyncratic and common factors influencing prices. In order to do that, given the relatively short window of available quarterly observations (1999-2014), we choose heterogeneous panel frameworks and control for cross-sectional dependence. The exchange rate passthrough is found to be relatively high and rapid for CIS countries in the case of the nominal effective exchange rate, but not significant for the bilateral rate with the US dollar. We also show that global factors in combination with financial gaps and commodity prices are important. In the case of large rate swings, the exchange rate pass-through of the bilateral rate with the US dollar becomes significant and similar to that of the nominal effective exchange rate.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors

Comunale

Simola

2018

Research in International Business and Finance

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“…The current literature contains numerous studies on the link between exchange rate and inflation. Choudhri and Hakura (2006) for 71 developing and industrial countries, Ca'Zorzi et al (2007) for 12 emerging markets, Kataranova (2010) for Russia, Leigh and Rossi (2002), Kara and Öğünç (2008) and Arslaner et al (2014) for Turkey, Caselli and Roitman (2016) for 28 emerging markets are just some case studies that we observed at first glance in the context of developing and emerging market economies. Choudhri and Hakura (2006) studied with a large dataset for 71 countries, 52 of which are developing countries, covering the period 1979-2000.…”

Section: Empirical Literature On the Exchange Rates−inflation Nexusmentioning

confidence: 49%

Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships

Şen

Kaya

Kaptan

et al. 2019

The Journal of International Trade & Economic Development

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This study attempts to establish the possible existence of the long-run interrelationship between interest rates, inflation, and exchange rates in five fragile emerging market economies (Brazil, India, Indonesia, South Africa, and Turkey), what is so-called by Morgan Stanley 'Fragile Five'. To do so, we utilize Li and Lee's (2010) Autoregressive Distributed Lag (ADL) test for threshold cointegration and apply it to sample countries' monthly time-series data from 2013:1 to 2018:12. Overall, our primary results are threefold: First, there seems to be a long-run positive relationship between actual rates of inflation rates and nominal interest rates supporting the validity of the ex-post Fisher hypothesis for all the sample countries. Second, the sample countries' data supports the presence of a cointegrating relationship between interest rates and exchange rates for the case of Brazil, India, and Turkey but not for the case of Indonesia and South Africa. Lastly, without exception, exchange rates and actual rates of inflation in all the sample countries examined tend to co-move in the long-run, implying that the depreciation of their currencies creates inflation through raising the prices of imported goods. The results above are widely compatible with both theoretical expectations and the results of the most previous empirical studies on the long-run interrelationships between interest rates, inflation, and exchange rates in the literature.In this study, we employ Li and Lee's (2010) Autoregressive Distributed Lag (ADL) test for threshold cointegration as the method of estimation. This estimation method has several superiorities compared to its rivals. First, the ADL test does not require the classification of variables into I(1) or I(0). Other cointegration procedures, such as those proposed by Engle and Granger (1987) and Johansen (1988), require checking the order of the integration of variables by using unit root tests and all variables in the model must be integrated of the same order. Second, the ADL test provides better performance in small sample sizes. Lastly, it allows for estimating the long-and the short-run parameters of the model simultaneously. Since the ADL test can overcome these three critical problems, our empirical results contribute to the understanding of the research questions that we seek to find answer in this study.The remainder of the study is organized as follows: The following two sections provide a comprehensive background to the study, focusing on not only the theoretical aspects of the possible relationships between interest rates, inflation, and exchange rates but also their empirical aspects respectively. The proceeding section lays out the econometric analysis of the study. As for Section 4, it first reports the estimation results, and then justifies them. Section 5, the final section, summarizes and concludes.

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“…Inflation targeting noticeably reduces exchange rate pass-through to inflation, thus causing fluctuations of the national currency's exchange rate to have only a slight effect on consumer prices. Moreover, international experience shows that an inflation targeting regime is compatible with a managed floating exchange rate regime (Kataranova, 2010). But, it should be noted that, the international experience, which permits, the compatibility of the targeting regime of inflation with floating exchange rate, failed in Georgia and the mentioned regime cannot slow down to increase the consumer prices.…”

Section: Discussionmentioning

confidence: 99%

Influence of inflationary tax on the regional economy of Georgia and the national bank's monetary policy

Verulidze¹

2019

Economic Science for Rural Development

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Georgian economy is facing many challenges, including the high degree dependency of the consumer market on the import and inflation caused by the depreciation of the national currency. Such situation has become permanent and has acquired the function of hidden tax burden, which significantly delays the development of the real economic sector of the region. The aim of the research is to identify the influence of inflationary tax on the regional economy and their connection with monetary policy, to analyse the inflationary targeting mechanism, to identify the specifics of anti-inflation regulation and the role of the National Bank in the process of price stabilization. Theoretical and empirical methods used in the article reveal that correlation between national currency depreciation against USD and inflation has established. The article highlighted that despite the monetary policy of the National Bank being implemented in the mode of inflation targeting and undergoing in the terms of a floating exchange rate, the inflationary pressures caused by the depreciation of the national currency continues to be, particularly, on the goods of the primary consumption. Bloomberg Electronic Trading System in order to determine the exchange rate doesn't not function properly in the country. To ensure sustainable development of the economy, the National Bank should considerably improve the mechanism of exchange rate determination through the Bloomberg Electronic Trading System, and in order to reduce dependency on imports, it is crucial to elaborate mechanisms to develop and stimulate the production process based on the local resources.

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The Relationship Between the Exchange Rate and Inflation in Russia

Cited by 11 publications

References 6 publications

The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors

The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors

Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships

Influence of inflationary tax on the regional economy of Georgia and the national bank's monetary policy

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