Exchange Rate, Inflation and Industrial Policy

V. Polterovich and Vladimir Popov
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V. Polterovich: Central Economics and Mathematics Institute, RAS, Moscow, Russia
Authors registered in the RePEc Author Service: Виктор Меерович Полтерович

Journal of the New Economic Association, 2016, vol. 29, issue 1, 192-198

Abstract: The dynamics of the exchange rate of the Russian ruble is considered in the context of the discussions on the optimal exchange rate regimes. It is shown that the dominant focus on the stability of the nominal exchange rate was erroneous. Since the prices in Russia grew faster than in the countries - its trading partners, this policy led to an overvaluation of the real exchange rate and caused the shock devaluations in 1998, 2008 and 2014-2015. It is argued that the best regime for Russia is the "dirty float" aimed at maintaining relatively low and stable real exchange rate. This implies the periodic devaluation of the nominal rate. This implies the periodic devaluation of the nominal exchange rate. The suggested policy entails accumulation of foreign exchange reserves that stimulates export oriented growth. These reserves can also become a source of investment in case of appropriate industrial policy.

Keywords: exchange rate; fear of floating; industrial policy; economic growth (search for similar items in EconPapers)
JEL-codes: F31 F41 F43 L52 O24 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2016:i:29:p:192-198

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