Modeling the dynamics of the exchange rate of countries-exporters of raw materials in the context of inflation targeting

Моделирование динамики валютного курса стран-экспортеров сырья в условиях инфляционного таргетирования

Bozhechkova, Alexandra (Божечкова, Александра) (), Kiyutsevskaya, Anna (Киюцевская, Анна) (), Trunin, Pavel (Трунин, Павел) () and Yakovleva, Irina (Яковлева, Ирина) ()
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Bozhechkova, Alexandra (Божечкова, Александра): The Russian Presidential Academy of National Economy and Public Administration
Kiyutsevskaya, Anna (Киюцевская, Анна): The Russian Presidential Academy of National Economy and Public Administration
Trunin, Pavel (Трунин, Павел): The Russian Presidential Academy of National Economy and Public Administration
Yakovleva, Irina (Яковлева, Ирина): The Russian Presidential Academy of National Economy and Public Administration

Working Papers from Russian Presidential Academy of National Economy and Public Administration

Abstract: The study investigates the key factors of the ruble exchange rate dynamics, analyzes important features of the Russian foreign currency market in the context of inflation targeting, and budget rule. The first part of this study presents the main theoretical approaches to modelling the dynamics of the nominal exchange rate, including behavioral models of the exchange rate, models with the yield curve and liquidity risk. The key factors of long-term and short-term dynamics of the exchange rate, including terms of trade, differential interest rates, etc. are discussed. The second section presents the results of an analysis of the mechanisms and degree of influence of the budget rule on the dynamics of the exchange rate in commodity-exporting countries that target inflation. We present the results of assessments of the degree of deviation of the exchange rate from fundamental values, and identify the risks and consequences of the functioning of the economy under revaluation / underestimation of the exchange rate. The third part of the study presents the results of modelling the nominal ruble exchange after the transition to inflation targeting using VECM-, DOLS- and ARDL-approaches. It is revealed that the key factors of the ruble exchange rate dynamics include oil price, interest rate differential, VIX volatility index, as well as the operations of the Ministry of Finance of Russia to purchase foreign currency.

Pages: 72 pages
Date: 2020-05
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Persistent link: https://EconPapers.repec.org/RePEc:rnp:wpaper:052021

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