The effects of Financial Shock on Russian short-term equilibrium interest rates

Yulia Ushakova () and Dmitriy Chernyadyev
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Yulia Ushakova: Bank of Russia, Russian Federation
Authors registered in the RePEc Author Service: Юлия Ушакова

No note11, Bank of Russia Working Paper Series from Bank of Russia

Abstract: We estimate the impact of the Russia-specific shocks of 2014 on the short-term real equilibrium interest rate. We have used two approaches. The first approach is based on theoretical model calculations. The second rests on empirical estimates based on the results of IMF cross-country research on the sensitivity of the equilibrium interest rate to shifts in investment demand and supply (savings) curves. Our estimates suggest that the 2014 financial shock that restricted external borrowing for Russian issuers triggered 0.6-1.4 pp growth of the short-term equilibrium interest rate. However, the economy adjusted to the financial shock in 2016-2017 thanks to the macroeconomic policy pursued: the CDS risk premium declined, investment resumed growth and the net investment position gradually decreased. As a result, the effect of the financial shock on the short-term equilibrium interest rate has almost entirely vanished Length: 13 pages

Date: 2017-11
New Economics Papers: this item is included in nep-cis, nep-mac and nep-tra
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