ON ROLE OF INFLATION TARGETING IN RUSSIAN ECONOMY PROGRESS OF LAST YEARS

Abstract

Author of the article gives an explanation of Russian economy slowing down from 4 quarter 2011 till 3 quarter 2013. According to author reasoning the main problem of Russian economy throughout this period of time was growth of real interest rates. The growth of real interest rate is determined by monetary policy, conducted by Central Bank. The main priority of CB is fight against inflation, which is waged by liquidity shrinkage. The bottom-line is fall of inflation and interest rates growth (including lending rate). Real interest rates are growing drastically. In certain branches of economy (for instance manufacturing) real interest rates growth amounted to 10 and more percentage points.CB calls this policy inflation targeting. Besides fight against inflation floating ruble is important feature of this policy. The author made a conclusion that floating ruble when hydrocarbons prices are at historical maximum level is the worst recipe for Russian economy which is strongly dependent from hydrocarbons export revenue. The author compares Russian monetary and budget policy with monetary and budget policy of other countries with distorted export structure, for example Saudi Arabia and Norway. The author came to conclusion that Russian monetary and budget policy combination is unique among countries dependent from hydrocarbons export revenues. Result of this monetary and budget policy is vulnerability toward external shocks, tradable sectors noncompetitiveness, close to zero growth rate of economy and deterioration all branches of Russian economy. Zero net of payment balance while high oil price is economic nonsense. DOI: http://dx.doi.org/10.12731/2218-7405-2014-2-7

Keywords

• inflation targeting, interest rates, recession, stagnation, Dutch decease