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Transmission of foreign monetary shocks to a small open economy under structural instability: the case of Russia

Anna Kruglova, Konstantin Styrin () and Yulia Ushakova ()
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Anna Kruglova: University of Washington (Bank of Russia at the time of participating in this study)
Konstantin Styrin: Bank of Russia, Russian Federation
Yulia Ushakova: Bank of Russia, Russian Federation

No wps38, Bank of Russia Working Paper Series from Bank of Russia

Abstract: This paper studies the transmission of monetary policy shocks in the U.S. to a small open economy by estimating their effect on lending based on bank-level balance sheet data of Russian banks for 2000-2018. To identify the causal effect at the bank level we exploit heterogeneity across banks in terms of their reliance on cross-border funding. We find evidence that the effect of U.S. monetary policy shocks has been statistically and economically significant. Surprisingly, the magnitude of the effect remained roughly the same even after the monetary policy in Russia transited from exchange rate to inflation targeting. This finding suggests that a free floating regime does not attenuate the effect of foreign monetary policy shocks on domestic lending.

Keywords: monetary policy; international spillovers; cross-border transmission (search for similar items in EconPapers)
JEL-codes: E52 F34 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mac, nep-mon and nep-tra
Date: 2018-12
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