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Demand for Money During Transition: The Case of Russia

Barry Harrison () and Yulia Vymyatnina
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Barry Harrison: Department of Economics and Politics, Nottingham Trent University

No 2005/01, EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics

Abstract: During the transition to a market economy in Russia, the Bank of Russia assumed responsibility for setting and implementing monetary policy. As transition progressed, this involved establishing annual declining target rates for inflation and intermediate targets for the growth rate of M2 money aggregate. This paper tests the stability of long run and short run demand for money in Russia using M1 and M2 money aggregates. We find some evidence of stability, but the adjustment lag is relatively long and money demand functions demonstrate signs of instability over the period. We conclude that targeting interest rates could be a better policy option for the Bank of Russia.

Keywords: transition; demand for money (search for similar items in EconPapers)
JEL-codes: E41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-11-22, Revised 2005-11-22
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