Non-Keynesian Savings of Russians

Dmitrii Timofeev ()
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Dmitrii Timofeev: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: The Russian recession of 2014-2015 began with a run on the ruble and a rise in the rate of inflation, the precise opposite of a Western-type deflationary slump combined with money hoarding. Does this mean that Russians need different micro-model to describe savings and consumption behavior? This study shows that the workhorse log-linearized rational SDF formula with the CRRA utility function still provides a good explanation for the behavior of Russian consumers. It explains dollarization, domestic equity market avoidance, preference for real estate, and, most importantly, a wary attitude towards the ruble. Expectations derived from past and interactive preferences lock the Russian economy in a state of steadfast distrust in the ruble as prone to inflation. At present, one should not expect a Keynesian-type deflationary cycle in Russia. The next recession is likely to be inflationary, requiring monetary tightening. This reasoning is generalized for other emerging countries. A free-floating currency and inflation targeting do not ensure an easy path for countries with recent experiences of high inflation

Keywords: savings; monetary policy; business cycle; recession; Russia; Euler equation; CCAPM; stochastic discount factor (search for similar items in EconPapers)
JEL-codes: D91 E31 G11 G18 P24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015
New Economics Papers: this item is included in nep-cis, nep-mac, nep-tra and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in WP BRP Series: Financial Economics / FE, November 2015, pages - 28

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:49/fe/2015

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