A Minimalist Model for the Ruble During the Russian Invasion of Ukraine

Guido Lorenzoni () and Iván Werning

No 29929, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This note isolates an overlooked economic force for the Ruble to appreciate in response to international sanctions limiting exports to Russia. The economic intuition is that when Russians are unable to buy the mix of foreign goods they wish, then foreign goods becomes less attractive, increasing the demand for domestic goods; to reestablish an equilibrium a real appreciation is needed to raise the relative price of domestic goods and incentivizing the accumulation of foreign assets and the import from non-sanctioning countries. We also review well-known forces for a depreciation (e.g. Russian export reduction). Our analysis emphasizes that the exchange rate is an inadequate signal of welfare impacts and the effectiveness of sanctions.

JEL-codes: E0 F3 F31 F4 F51 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-cis, nep-int, nep-mac, nep-opm and nep-tra
Note: EFG IFM ME
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Published as Guido Lorenzoni & Iván Werning, 2023. "A Minimalist Model for the Ruble during the Russian Invasion of Ukraine," American Economic Review: Insights, vol 5(3), pages 347-356.

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