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Transmission of foreign monetary shocks to a small open economy under structural instability: the case of Russia

Author

Listed:
  • Anna Kruglova

    (University of Washington (Bank of Russia at the time of participating in this study))

  • Konstantin Styrin

    (Bank of Russia, Russian Federation)

  • Yulia Ushakova

    (Bank of Russia, Russian Federation)

Abstract

This paper studies the transmission of monetary policy shocks in the U.S. to a small open economy by estimating their effect on lending based on bank-level balance sheet data of Russian banks for 2000-2018. To identify the causal effect at the bank level we exploit heterogeneity across banks in terms of their reliance on cross-border funding. We find evidence that the effect of U.S. monetary policy shocks has been statistically and economically significant. Surprisingly, the magnitude of the effect remained roughly the same even after the monetary policy in Russia transited from exchange rate to inflation targeting. This finding suggests that a free floating regime does not attenuate the effect of foreign monetary policy shocks on domestic lending.

Suggested Citation

  • Anna Kruglova & Konstantin Styrin & Yulia Ushakova, 2018. "Transmission of foreign monetary shocks to a small open economy under structural instability: the case of Russia," Bank of Russia Working Paper Series wps38, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps38
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    Cited by:

    1. Simola, Heli, 2019. "Effects of external shocks on Russian economy," BOFIT Policy Briefs 4/2019, Bank of Finland Institute for Emerging Economies (BOFIT).

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    More about this item

    Keywords

    monetary policy; international spillovers; cross-border transmission;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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