Price and financial stability: Is there a contradiction between these goals of the Bank of Russia?

L. Gadiy, E. Dzhaokhadze, A. Kiyutsevskaya and Maria Chembulatova
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L. Gadiy: JSC "Alfa-Bank", Moscow, Russia
E. Dzhaokhadze: Russian Presidential Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA), Moscow, Russia
A. Kiyutsevskaya: JSC "Alfa-Bank", Moscow, Russia

Journal of the New Economic Association, 2020, vol. 47, issue 3, 67-83

Abstract: After the global crisis, the monetary authorities of many countries were given the additional goal of ensuring financial stability. The complexity of the implementation of this task is associated with the lack of generally accepted definition of quantitative indicators of financial stability. Moreover, there is no consensus on the relation of the main goal for most central banks to ensure price stability and the goal of maintaining the stability of the financial system. Estimates of the correlation of the goals of the Bank of Russia to ensure price and financial stability obtained in this work using dynamic correlations calculated using multidimensional DCC-GARCH models allow us to conclude that the Bank of Russia contributed to the achievement of financial stability providing price stability in 2006-2019, and that contradictions between these goals arise only in adverse conditions. The validity of this conclusion is also confirmed by the results of a regression analysis, which also show that neither the business activity nor the interest rate policy of the Bank of Russia has statistically significant effect on the relation of its goals.

Keywords: monetary authorities; price stability; financial stability; goal conflict; index of financial stability; inflation targeting (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 G18 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2020:i:47:p:67-83

DOI: 10.31737/2221-2264-2020-47-3-3

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