Money demand in post-crisis Russia: De-dollarisation and re-monetisation
AbstractEstimating money demand functions for Russia following the 1998 crisis, we find a stable money demand relationship when augmented by a deterministic trend signifying falling velocity. As predicted by theory, higher income boosts demand for real rouble balances and the income elasticity of money is close to unity. Inflation affects the adjustment towards equilibrium, while broad money shocks lead to higher inflation. We also show that exchange rate fluctuations have a considerable influence on Russian money demand. The results indicate that Russian monetary authorities have been correct in using the money stock as an information variable and that the strong influence of exchange rate on money demand is likely to continue despite de-dollarisation of the Russian economy.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 14/2007.
Length: 32 pages
Date of creation: 29 Jun 2007
Date of revision:
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More information through EDIRC
money demand; vector error correction models; dollarisation; Russia;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-07 (All new papers)
- NEP-CBA-2007-07-07 (Central Banking)
- NEP-MAC-2007-07-07 (Macroeconomics)
- NEP-MON-2007-07-07 (Monetary Economics)
- NEP-TRA-2007-07-07 (Transition Economics)
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