Reflection of monetary policy in the Russian economy

Subject. The article discusses risks of a debt trap in the Russian economy. Objectives. The purpose is to identify risks of a debt trap in the Russian economy. Methods. The research is based on general scientific and special economic and mathematical methods. Results. The study highlighted a significant increase in the money supply relative to debt on loans and acquired claims on loans to resident legal entities and individual entrepreneurs, indicating the accumulation of excess liquidity in the financial system that threatens to increase inflationary pressure, reduce ruble’s purchasing power, and make debt servicing more difficult for businesses and the public. High volatility of the money supply to debt on loans ratio makes it difficult for banks to assess credit risks. Banks prefer to invest in low-risk financial instruments thus limiting the lending to small and medium-sized businesses, which slows down the development of entrepreneurship and increases imbalances in the economy. High cost of borrowings inhibits investment activity, increases the debt burden on businesses, and contributes to the formation of a "debt bubble", especially against the background of increasing dependence on government subsidies and concessional financing. Dominating corporate debt over household debt indicates an uneven distribution of financial resources thus limiting the opportunities for SMEs and increasing socio-economic stratification. Conclusions. The identified risks of a debt trap in the Russian economy are of particular value to government authorities, experts and researchers involved in the mechanism of monetary and macroeconomic regulation, and the adaptation of Russian institutions to external shocks and internal challenges.

Over the past few years, the Russian economy has been exposed to many challenges, which include fluctuations in inflation and the exchange rate, as well as all possible sanctions from Western countries, and accordingly, a thorough analysis of the consequences of raising the key rate of the Central Bank of Russia (CBR) is relevant in the process of studying the impact of monetary policy on various sectors of the economy. The purpose of this study is to identify the key factors contributing to an increase in the key rate, and is aimed at assessing the impact of this growth on the business environment and the quality of life of society as a whole. To achieve this goal, it is necessary to consider the consequences of an increase in the rate for small and medium-sized enterprises, as well as for consumer lending, with regard to the financial well-being of the population. The results of this analysis indicate that the positive dynamics of the key rate leads to an increase in the cost of loans, and consequently a decrease in the availability of borrowed funds and a reduction in consumer demand. Such consequences create additional difficulties for the business, leading to a revision of the financial and investment management strategy for the latter. This means that it is important not only to analyze the consequences, but also to offer recommendations for adapting to new conditions, and understanding these processes can become the basis for developing more effective solutions both at the level of an individual business and at the level of public policy. Thus, this study is aimed at updating issues related to changes in monetary policy and helping various economic participants adapt more quickly to new realities.

In modern conditions of the rapid industrial development the banks have to forecast their risks and profitability precisely, to apply information technologies to assess their activities. To evaluate the bank's income, it is necessary to carry out an internal analysis of its assets and liabilities and determine the factors effecting the bank's profitability by managing interest rate risk. The hypothesis of the study is the analysis of the impact on the net interest income and interest rate risk of a commercial bank of factors such as the exchange rate and the key rate of the Bank of Russia (for example, Sberbank, PJSC). There has been studied the impact of the factors (exchange rate and key interest rate of Central Bank of Russia) on the bank's net interest income by using correlation and regression analysis and building a regression model. Many tools are found to be used by the experienced analysts. One of the main tools is GAP analysis of interest rate risk. There have been illustrated the graphs of changes in interest rates of savings and loan associations during the crisis in the United States in the 1950-1960, of realization of interest rate risk with an increase in interest rates, the distribution of assets and liabilities according to the maturity of the balance sheet structure, the impact of changes in the interest rate GAP on net interest income, etc. A matrix of correlations of all variables in the sample (rates of growing values) was constructed. Conclusions are drawn on the need to use hedging instruments (interest rate swaps, interest rate options), as well as of attracting the most reliable data on the state of interest rate risk in the commercial banks.

Abstract: At the time, the August 1998 financial crisis was described as a watershed in Russia's development. This article looks at the reasons the crisis had a minimal effect on Russia's economy and argues that the political effect of the crisis was more marked. The growth that has occurred in the Russian economy since 1998 may mean that a reoccurrence of crisis will not be as benign as the 1998 crisis turned out to be. Keywords: financial political economy, Russia, virtual economy Introduction It is nearly a decade since the August 1998 financial crisis in Russia. At the time, the crisis marked a turning point in the development of Russia's economy. In its immediate aftermath there was some expectation that it would be the prelude to what promises to be a long and painful period of insolvency and crisis, (1) and would lead rapidly to another, more severe, financial crisis. (2) These predictions have not come true. Indeed, Russia's financial crisis experience would seem to be an enviable one: it has not caused a loss of economic sovereignty with international agencies asserting their influence over economic policy as a condition of alleviating the problems of currency collapse and debt default, nor did it presage a period of economic depression. Instead, the power of the Russian state has grown since 1998 and Russia has experienced a near uninterrupted economic recovery since 1999 with gross domestic product (GDP) growth averaging 6.8 percent per annum from 1999 to 2005, growth in industrial production averaging 7 percent per annum from 1999 to 2005, unemployment falling from 13.2 percent in 1998 to 7.7 percent in 2005, and average wages rising from $108 to $301 a month. If the 1998 crisis had an effect on Russia, it was positive. Why was the impact of the August 1998 financial crisis so muted economically in Russia? Russia's economic success since 1998 is not because of any particular negative or positive economic effect of the crisis. The crisis of 1998 was not more devastating or influential because of the peculiarities of Russia's postcommunist economic system and the chief problem of this system, the lack of capital to reform industry and create a more competitive economy with a diversified export structure. This problem endures. This article argues that three factors shaped the influence of the August 1998 financial crisis on domestic forces and the subsequent development of Russia's political economy: the legacies of the USSR, the way that earlier reforms under President Boris Yeltsin benefited a small number of financiers and exporters, and the political fall out of 1998. Each of these was largely responsible for shaping one of the main segments of Russia's political economy: the sectors of the economy--those branches of the economy that produce mainly for domestic consumption and do not receive a great level of foreign investment, the sectors of the economy, and the government/state. Each of these segments of Russia's political economy has a peculiar relationship to the global economy. The national economy is isolated from it, receiving benefits indirectly from the general rise in national wealth from energy exports. Its role is passive; its character and structure in the 1990s meant limited foreign involvement in Russia's economy and little pressure to respond to the 1998 financial crisis in ways that would ensure continued capital inflows from abroad. The transnationalized economy and the state have more active relationships with the global economy and are in competition to facilitate Russia's relationship with the global economy. At the moment the state has the upper hand in this relationship. This might, if recovery carries on long enough, eventually turn into a successful response to Russia's problems. However, Russia's ability to grow depends on moving resources into the national economy to modernize it. If it does not, it will bear the cost of a large, unmodernized industrial sector, just as it did in the 1990s. …

his study investigated the effect of statutory reserve (SRR) on the interest rates in commercial bank, with focus on setting the deposit and loan interest rates and also the effectiveness of SRR in managing the commercial banks general interest rate. Using a mixed method approach, more than five different commercial banks were engaged in this study. The findings of the study revealed that a continuous increase in the central bank SRR has no significant effect on bank deposit interest rates. (p-value-0.1484, χ²= 13.32, 9 df). However, moderate changes in interest rate had influence on the adjustment of the deposit interest rate. This implies that while banks submit to changes in SRR, the elasticity is limited at some point as they consider other factors such as liquidity and competitor offers rather than the rate of SRR. In the similar way, the statutory reserve ratio was found to have a significant effect on Commercial Banks Loans and Advances. The study found that 60% of the commercial banks increase loan interest rates when SRR increases. Hence the study established a significant positive relationship between Commercial Banks Loan rates and SRR changes (p-value- 1.32e-05, S.d -0.966, R2 0.063). The study revealed that SRR is an effective monetary tool policy only at a certain range of rates for regulating the commercial banks (p-value-0.0032, χ² =24.79 at df = 9). The study therefore concluded that statutory reserve ratio has significant effect on both loan and deposit rates changes but a continuous increase in the ratio tends to become non responsive to both deposit and loan rates due to other considerations such as availability of liquidity and competition in the industry. The study recommended that central bank should know the appropriate SRR corridor that would control banks rates and to increase the trading and banking book, banks should develop strategies to attract private sector deposits, to fill the void created by the implementation of the SRR and also come up with innovative solutions. The study further recommended that the Ministry of Finance and the regulator should consider allowing Commercial Banks involved in revenue collection from other sources apart from traditional banking services.

The article is devoted to the research of the theoretical and methodological principles of developing the transmission mechanism of monetary regulation. The aim of the article is to highlight the relevance of approaches to implementing the design of the transmission mechanism of monetary policy, as well as factors that influence its formation, taking into account the cyclical nature of the economy. The modern transmission mechanism of monetary policy, after the transition from monetarism to neoclassical views and neo-Keynesianism, is actually implemented through a change in the interest rate, which is a key tool for managing the economy. The entities of the interest rate transmission mechanism include: the central bank, which forms monetary policy by setting the key interest rate; the financial sector, which includes commercial banks and non-bank financial institutions that transmit changes in interest rates to economic agents; and the real sector of the economy – legal entities and households that respond to changes in the cost of loans, savings and investments. This mechanism is a defining element of monetary policy, as it determines the effectiveness of the transfer of the central bank's regulatory influence to the real sector of the economy. The conducted research allowed us to substantiate the variability of the theoretical approach to developing the design of the transmission mechanism, expanding the influence of its external channel on changing national monetary policy by the factor of possible external shocks. The results of the research on the variability of the transmission mechanism design can be used to improve the monetary policy of the national regulator by implementing adaptive measures to possible external shocks when forecasting inflation expectations in the medium and long term. Based on the results of the research a conclusion was drawn regarding the improvement of the design of the transmission mechanism of the national regulator's monetary policy, in order to enhance the efficiency of its individual channels and policy instruments to ensure the effectiveness of its priority direction – achieving and maintaining price stability and economic development in general.

Subject. The article discusses the financial stability of Russia. Objectives. The study aims to characterize the financial stability of Russia. Methods. The research is based on the application of general scientific and special economic and mathematical methods. Results. The study revealed that the financial stability of Russia is associated with the forced growth of money supply due to the need to increase credit resources and expand the debt market. The role of financial institutions is increasing and new mechanisms for risk redistribution are emerging. The high volatility of inflation and the key interest rate make traditional monetary policy instruments less effective. The periodic budget deficit and difficulties in implementing the monetary policy of the Bank of Russia are largely caused by unprecedented sanctions pressure. The Bank of Russia actively regulates the financial system, maintaining the financial stability of the Russian economy by providing liquidity (increasing the money supply) and changing the key interest rate. The Bank of Russia's policy is aimed at minimizing the consequences of unprecedented sanctions pressure and ensuring the banking sector stability. At the same time, the international aspect remains a key driver of asset growth and additional protection against domestic economic fluctuations. Conclusions. The study directs the monetary authorities to effective implementation of monetary and debt policy in modern Russia through an integrated approach to financial resource management, consideration of internal and external environment, active participation in global processes to minimize negative effects of unprecedented sanctions pressure and maintain sustainable economic growth.

EDB Macroreview, November 2017. Heading for Low Dollarization

, 2017. (EDB Macroreview, November 2017. Heading for Low Dollarization)

Aim. To study the transformations of economic development trends and changes in the priorities of economic policy in the period of modern political and economic turbulence associated with the transition to a new quasi-stable state of the economy — post-normality.Tasks. To consider the features of the modern Russian economic model; to describe the mechanism of the impact of macro shocks of 2020 and 2022 on the Russian and world economy; to characterize the target — postnormal — state of the national and world economy; to offer recommendations for improving economic policy in the new conditions.Methods. The author of the article used both general scientific methods of research, including systemic, retrospective, institutional and macroeconomic (positive and normative) analysis, and specialized methods of studying economic evolution, economic dynamics and statics, situational and scenario modeling, economic statistics and others.Results. In recent years, the conditions of foreign economic interaction of many national economies, especially the Russian economy, have changed. During the post-Soviet period, Russia has consistently and systematically pursued a policy of economic liberalization, in particular, foreign economic liberalization. The first significant blow to the openness of national economies was the COVID-19 pandemic. The second was the sanctions imposed against Russia by the countries of the “collective West”, which gradually affected an increasing number of countries. The essence of these shocks from the point of view of macroeconomic analysis is a jump-like increase in the closedness of the national economy. Under these conditions, it is established that national economies of post-industrial type turn out to be unstable and unviable under the new realities. This should be taken into account in economic policy. Attention should also be paid to the fact that the processes of growing crisis of the currently prevailing model of open economy will inevitably affect not only economic, but also political, cultural and other processes. An attempt to overcome the sanctions on Russia by geographical reorientation of foreign economic interactions can be effective only in the short term, as a tactical measure. Strategically, it will not work, because the flaws of the open economy model, consisting in high (and in some cases — critical) dependence of the national economy on foreign economic interactions, cannot disappear. Therefore, this openness should be reduced in areas critical for national development. Special attention in economic policy should be paid to the issues of social justice, without the solution of which it is impossible to achieve public consensus and ensure the effectiveness of the institutional changes necessary in connection with the transition to post-normality. Conclusions. The modern Russian economy is at another transitional stage of development. In general, constant transformations are a systemic property of the economy, a condition for its existence. At the same time, in modern realities there is a transformation of strategic nature associated with the change of the key feature of the existing economic model — its degree of openness. Although the Russian economy as a whole has been able to adapt to the new conditions of functioning, but this is a tactical adaptation, in the strategic aspect it is not enough for a successful transition to the post-normal stage of development. In this regard, a more balanced and active participation of the state in the management of economic development processes and their regulation is required, subject to the formation of effective economic and other incentives to support such processes for both business and the population. In view of this, it is advisable to take into account the recommendations proposed by the author of the article in the economic policy.

This study examines the impact of monetary policy instruments on the profitability of Nepalese commercial banks from 2013 to 2022. It analyzes the relationship between bank profitability and monetary policy tools such as money supply, treasury bill investments, interest rates, cash reserve ratio (CRR), statutory liquidity ratio (SLR), and bank rate. The study uses a descriptive and correlational research design based on secondary data from twenty Nepalese commercial banks. Data were collected from Nepal Rastra Bank reports and annual bank reports. Descriptive statistics, correlation analysis, and linear regression were employed to assess relationships between monetary policy variables and bank performance measured by return on assets (ROA) and return on equity (ROE). The results show that changes in monetary policy parameters significantly affect bank profitability. The cash reserve ratio had a negative impact on ROE, while the bank rate negatively influenced ROE as well. The money supply exhibited a negative correlation with both ROA and ROE. Effective management of monetary policy instruments can enhance commercial banks' profitability in Nepal. Recommendations include managing CRR levels, maintaining low bank rates, encouraging treasury bill investments, and minimizing SLR to improve financial performance. Keywords: monetary policy, profitability, commercial banks, cash reserve ratio, bank rate

Current economic policy upgrades monetary policy and downgrades fiscal policy. Monetary policy involves the manipulation of the central bank interest rate, with the specific objective of achieving the main goal of monetary policy, which is, in most cases, the inflation rate. Fiscal policy should not be used as an instrument of stabilization policy. This raises two issues. The first is the theoretical underpinnings of this mode of economic policy. The second is the extent the quantitative impact of monetary and fiscal policy in the real world adhere to the principles set out by theory. Both aspects are investigated in this paper. We summarize results drawn from the euro area, the United States, and the United Kingdom. Two important conclusions emerge: the empirical results point to a relatively weak effect of interest rate changes on inflation. Also, monetary policy can have long-run effects on real magnitudes. Fiscal policy does have strong effects after all.

The development of deposit instruments in the Russian financial market in 2022–2025 took place in the context of high key interest rate volatility, sanctions pressure and large-scale digitalization, which required banks to increase flexibility in managing their resource base. Liberalization of the payment environment, primarily through the development of the faster payment system, has changed depositor behavior, simplifying the transfer of funds between banks and stimulating capital migration in search of more favorable interest rates and other conditions for deposit products offered by commercial banks. The purpose of the study is to analyze and evaluate transformation of deposit instruments in the Russian financial market in the context of liberalized payments and transfers. The study aims to identify the degree of sensitivity of deposit interest rates to changes in the key interest rate of the Bank of Russia, as well as to determine the impact of new payment infrastructure formats (in particular, the faster payment system) on depositor behavior, the structure of deposit products and the competitive strategy of banks. Materials and methods. The study uses a comprehensive methodological approach, including correlation and regression analysis, time series modeling using the Gretl package, and comparative structural analysis. The empirical basis was data from the Bank of Russia for 2022–2025, including changes in the key interest rate, deposit volumes, and the structure of the banking sector's deposit portfolio. In order to make a preliminary assessment of the impact made by the key interest rate on individual bank deposits, linear regression equations were made; the ARMAX model with an exogenous factor, the key interest rate, was formed to predict profitability of deposits for a period of 91–180 days. Three monetary policy scenarios were considered: maintaining the rate at 18%, reducing it to 17% and reducing it to 16%. The use of statistical criteria confirmed significance of constructed models and made it possible to generate forecasts of interest rate changes for this type of deposits. Results. In 2025, banks began to adapt to an expected reduction in the key interest rate, putting a gradual decrease in profitability into deposit offers; this is confirmed by the ARMAX forecast for June-August 2025 for three scenarios of key rate changes. The most significant factor determining the structure of the deposit portfolio remains the price of attracted resources, determined by the level of the key interest rate, while the impact of transfer liberalization is indirect but increasing, especially in terms of depositor behavior and the speed of reaction to market changes. Conclusions. Increased mobility of depositors in the context of payment liberalization increases the sensitivity of the deposit base to changes in market rates, which requires banks to manage liquidity more precisely. In conditions of instability and competition for public funds, maintaining a balanced liability structure is becoming a critical element of liquidity management, especially for medium and small banks that do not have a stable inflow of budgetary or corporate resources. The research results can be used both to implement monetary policy measures and to develop strategies for banks to manage their resource base in the face of growing technological competition and changing customer behavior patterns.

In this paper we investigate the role of credit institutions in transmitting monetary shocks to the domestic economy and to the rest of the world output. In modeling the monetary and financial sector of the economy we distinguish between monetary injections via lump-sum transfers to individuals and those via increased credit to the commercial banking sector in the form of discount window operations. Appropriately, we distinguish between the discount rate of the central bank and the lending and borrowing interest rates of commercial banks, which, we assume, are also subject to reserves requirements. We find that a steady state increase in monetary injections via increases in domestic credit leads to an increase in domestic output. On the other hand, we find that an increase in the steady state level of monetary transfers reduces the level of output.

The transmission mechanisms of monetary policy through commercial banks captured great attention by academics and central bankers. Despite the huge volume of research, there is no absolute agreement about the impact of the change in the monetary policy on commercial banks. With reference to the bank lending channel theory, this study aims at detecting the long- and short-run impacts of four monetary policy tools exploited by the central bank of Lebanon to guide banks who are lending to the private sector. The study covered the period January 1992-December 2016 using monthly data. The aggregate credit granted to the resident private sector was used as the dependent variable, while bank capital, money supply, interest rate, and the inflows of non-resident deposits serve as independent variables. The Vector Error Correction Model (VECM) was adopted in this study as it does not require the variables to be originally stationary. This model is able to reveal the potential long-run causal relationship between exploited time series. Moreover, the Wald test was performed as a complementary test to examine the existence of short-run effects on bank credit. The Vector Error Correction Model revealed a long-run impact running from money supply, while the other three variables did not transmit changes in monetary policy towards bank credit. Besides, the Wald test has shown a short-term impact running from non-resident deposits towards bank lending. Additionally, the Granger causality test demonstrated that non-resident deposits have a causal effect on bank credit, thus it helps in predicting the future trend of bank lending. In contrast, both bank capital and interest rate didn't have any significant effect on bank lending behavior in Lebanon on both short- and long-run. The obtained results have important policy implications which suggest that if monetary policy aims at expanding (contracting) bank lending through monetary easing (tightening), it should increase (decrease) money supply to achieve a long-run impact. However, it has to encourage (discourage) the inflow of non-resident deposits to achieve a short-run impact. Additionally, the results suggest that in Lebanon, changes in bank capital and interest rate will not cause shifts in the supply of loans.