The Wild Ride of the Ruble
AbstractThe ruble exchange rate has undergone wide gyrations over the last few years, culminating in a period of rapid appreciation in early 1995. We examine this period, distinguishing between two alternative views, an overshooting view with backward looking expectations, and a portfolio model based on demand for ruble assets. We show that sturdy lag structures between inflation and monetary growth imply that the two models are observationally equivalent in the short run. Using indirect information from other asset markets, however, allows us to differentiate between the two explanations. We find fairly sturdy evidence that expectations regarding future inflation shifted downward in early 1995, suggesting that the subsequent increase in monetary growth to a significant extent satisfied increased real ruble demand, with limited inflation impact. Copyright @ 1996 by John Wiley & Sons, Ltd. All rights reserved.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 1 (1996)
Issue (Month): 4 (October)
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
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- De Melo, Martha & Denizer, Cevdet, 1997. "Monetary policy during transition : an overview," Policy Research Working Paper Series 1706, The World Bank.
- Varshavsky Alexander, 1999. "Macroeconomic Aggregate Model for Analysis of Inflation and Stabilization of the Russian Economy," EERC Working Paper Series 97-109e, EERC Research Network, Russia and CIS.
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