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Shock Therapy? An I (2) Cointegration Analysis of the Russian Stabilization

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Ekaterina VOSTROKNUTOVA

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Abstract

This paper investigates an array of nominal systems for the Russian economy, of domestic price level, import prices, exchange rates, money stock, barter, nominal wages, and output, and conducts I(1) and I(2) cointegration analyses. Post-stabilization monthly data are used, 1995:6-2001:5. The price-wage spiral presence is tested, and the effects of money and real exchange rate. In the last system, barter is introduced, and the effect of that on the comparative Polish-Russian analysis is discussed. It is found that in Russia inflation has had mostly monetary roots, that exchange rate was important for the price dynamics, and that ruble was inefficiently over-valued. While the wage-price spiral was not found in the system without barter, in the system corrected for barter the role of wages significantly increased. The paper concludes with a comparative policy analysis to Poland, which updates the previous version in Vostroknutova (2003).

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2003/16.

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Date of creation: 2003
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Handle: RePEc:eui:euiwps:eco2003/16

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Related research
Keywords: cointegration; I(2); monetary policy; incomes policy; stabilization; Russia;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Josef C. Brada & Ali M. Kutan, 1999. "The end of moderate inflation in three transition economies?," Working Papers 1999-003, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  2. Dominique Desruelle & Alessandro Zanello, 1997. "A Primer on the IMF's Information Notice System," IMF Working Papers 97/71, International Monetary Fund.
  3. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
  4. Frye, Timothy & Shleifer, Andrei, 1997. "The Invisible Hand and the Grabbing Hand," American Economic Review, American Economic Association, vol. 87(2), pages 354-58, May. [Downloadable!] (restricted)
    Other versions:
  5. Brada, Josef C., 1998. "Introduction: Exchange Rates, Capital Flows, and Commercial Policies in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 613-620, December. [Downloadable!] (restricted)
  6. Rautava, Jouko, 2002. "The role of oil prices and the real exchange rate in Russia's economy," BOFIT Discussion Papers 3/2002, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  7. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Kim, Byung-Yeon, 2001. "Determinants of Inflation in Poland: A Structural Cointegration Approach," BOFIT Discussion Papers 16/2001, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  9. Byung-Yeon Kim & Jukka Pirttilä & Jouko Rautava, 2002. "Money, Barter and Inflation in Russia," Macroeconomics 0209009, EconWPA. [Downloadable!]
    Other versions:
  10. Paruolo, Paolo & Rahbek, Anders, 1999. "Weak exogeneity in I(2) VAR systems," Journal of Econometrics, Elsevier, vol. 93(2), pages 281-308, December. [Downloadable!] (restricted)
  11. Peter Christoffersen & Torsten Sløk & Robert Wescott, 2001. "Is inflation targeting feasible in Poland?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 153-174, March. [Downloadable!] (restricted)
  12. Katarina Juselius, 2001. "European integration and monetary transmission mechanisms: the case of Italy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 341-358. [Downloadable!]
  13. Peter Christoffersen & Peter Doyle, 2000. "From Inflation to Growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 421-451, July. [Downloadable!] (restricted)
  14. Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 257-275, June. [Downloadable!] (restricted)
  15. Ekaterina VOSTROKNUTOVA, 2003. "Polish Stabilization: What Can We Learn From the I (2) Cointegration Analysis," Economics Working Papers ECO2003/06, European University Institute. [Downloadable!]
    Other versions:
  16. Juselius, Katarina, 1992. "Domestic and foreign effects on prices in an open economy: The case of Denmark," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 401-428, August. [Downloadable!] (restricted)
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Cited by:
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  1. Liu, Hui & Rodríguez, Gabriel, 2005. "Human activities and global warming: a cointegration analysis," MPRA Paper 9939, University Library of Munich, Germany. [Downloadable!]
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