Effect of Monetary Policy on Investment in Russian Regions

Andrei Shevelev (), Maria Kvaktun () and Kristina Virovets ()
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Andrei Shevelev: Bank of Russia
Maria Kvaktun: Bank of Russia
Kristina Virovets: Bank of Russia
Authors registered in the RePEc Author Service: Marya Igorevna Butakova

Russian Journal of Money and Finance, 2021, vol. 80, issue 4, 31-49

Abstract: This paper assesses the effect of monetary policy on investment in Russian regions. In the first stage of the research, we estimate the responses of regional investment to interbank market rate shocks using structural vector autoregressions. In the second stage, we estimate regression models using impulse responses as dependent variables and explanatory factors as independent variables. The regression calculations are performed using the Elastic Net regularisation technique. We find that regions with higher shares of manufacturing, agriculture, and construction are more responsive to monetary policy shocks. In addition, we identified the high importance of these sectors in explaining the different effects of monetary policy on investment. The results also show that the larger is the share of the mining and quarrying sector in the gross regional product (GRP) and the greater the imports to GRP ratio, the smaller is the absolute change in investment from a monetary policy shock.

Keywords: monetary policy; investment; interbank market rate; transmission mechanism; structural vector autoregression; impulse response functions; Elastic Net; panel vector autoregression (search for similar items in EconPapers)
JEL-codes: C3 E22 E43 E52 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bkr:journl:v:80:y:2021:i:4:p:31-49

DOI: 10.31477/rjmf.202104.31

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