Sectoral Effects of Bank of Russia Disinflation Policy

Evgeny L. Goryunov ()
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Evgeny L. Goryunov: Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow 119571, Russia

Finansovyj žhurnal — Financial Journal, 2018, issue 6, 21-33

Abstract: Usually disinflation policy leads to decline in economic activity in medium term. Later, inflation expectation decrease and money circulation normalization will lead to interest rate decline and widening of a planning. These effects, both positive and negative, affect various industries differently. In this paper the author aims to assess sectoral consequences of disinflation policy, which has been recently implemented by the Bank of Russia.Economic theory predicts the following. Firstly, tight monetary policy hits industries producing investment goods, since demand for that type of goods in sensitive to interest rates change. Secondly, procyclical industries suffer. Thirdly, interest rate hike constrains loans to small and medium enterprises more than to large ones. Furthermore, real exchange rate appreciates during disinflation policy and therefore worsen terms for exporters. All these effects, except real appreciation of ruble, are present in Russian economy. Along with that mortgage lending is widening and long-term interest rates are decreasing.

Keywords: monetary policy; sectoral effects; transmission mechanisms; yield curve; mortgage lending; small and medium enterprises (search for similar items in EconPapers)
JEL-codes: E21 E22 E23 E32 E43 E51 E52 E58 E65 L16 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:180602:p:21-33

DOI: 10.31107/2075-1990-2018-6-21-33

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