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Disentanglement of natural interest rate shocks and monetary policy shocks nexus

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  • Kurovskiy, Gleb

    (Bank of Russia; Lomonosov Moscow State University, Moscow;)

Abstract

This paper proposes a novel procedure for uniting the identification of monetary policy shocks and natural interest rate shocks. The Russian economy of the 2014–2019 inflation-targeting period is an empirical application of the approach. The model results allow us to make a number of policy conclusions: (i) unlike other papers on the Russian economy there is no output or price puzzles; (ii) over the past six years, monetary policy in Russia has become more predictable; (iii) the monetary transmission period from the key rate to inflation is six to eight months; (iv) monetary policy explains almost 20% of the inflation dynamics, while the natural interest rate explains around 40% of inflation; (v) the estimated natural interest rate declined from 2014 to 2019 following the global trends of declining interest rates; and (vi) the Bank of Russia follows mandate and reacts to inflation under the monetary policy feedback rule without responding to output fluctuations.

Suggested Citation

  • Kurovskiy, Gleb, 2020. "Disentanglement of natural interest rate shocks and monetary policy shocks nexus," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 59, pages 128-143.
    • Handle: RePEc:ris:apltrx:0403
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    References listed on IDEAS

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    1. Arias, Jonas E. & Caldara, Dario & Rubio-Ramírez, Juan F., 2019. "The systematic component of monetary policy in SVARs: An agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 101(C), pages 1-13.
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    Cited by:

    1. Kramkov, Viacheslav & Maksimov, Andrey, 2024. "Monetary surprises and term structure of interest rates: Identification through heteroscedasticity," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 74, pages 5-34.

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    More about this item

    Keywords

    SVAR; monetary policy; natural interest rate; Russia;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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