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Demand for Money During Transition: The Case of Russia


  • Barry Harrison

    () (Department of Economics and Politics, Nottingham Trent University)

  • Yulia Vymyatnina


During the transition to a market economy in Russia, the Bank of Russia assumed responsibility for setting and implementing monetary policy. As transition progressed, this involved establishing annual declining target rates for inflation and intermediate targets for the growth rate of M2 money aggregate. This paper tests the stability of long run and short run demand for money in Russia using M1 and M2 money aggregates. We find some evidence of stability, but the adjustment lag is relatively long and money demand functions demonstrate signs of instability over the period. We conclude that targeting interest rates could be a better policy option for the Bank of Russia.

Suggested Citation

  • Barry Harrison & Yulia Vymyatnina, 2005. "Demand for Money During Transition: The Case of Russia," EUSP Department of Economics Working Paper Series Ec-01/05, European University at St. Petersburg, Department of Economics, revised 22 Nov 2005.
  • Handle: RePEc:eus:wpaper:ec0105

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    References listed on IDEAS

    1. James Payne, 2003. "Post stabilization estimates of money demand in Croatia: error correction model using the bounds testing approach," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1723-1727.
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    More about this item


    transition; demand for money;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money


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