Monetary policy rules and indterminacy

In recent papers it is shown that in the presence of price stickiness, investment and capital accumulation activity, active monetary policy (MP) rules can lead to indeterminacy under various assumptions about the structure of the model. We analyze the conditions for real indeterminacy to occur in the model with capital accumulation. The key assumption is that we add response to output to the monetary policy rule. In our paper we show that adding Current or Expected Output to MP rule substantially changes the conditions for real indeterminacy to occur. In contrast to some existing research we show that under current-looking with respect to output MP rules indeterminacy is almost impossible; under forward-looking with respect to output MP rules indeterminacy is almost impossible under active MP rules and very likely to occur under passive MP rules. We also show that stability conditions are almost not sensitive to changes in capital share in output and aggregate markup. We provide the nominal determinacy analysis and show that active and forward-looking MP rules with respect to output giveMacroeconomics; Monetary Econimics; Indeterminacy

The inflationary consequences of real exchange rate targeting via accumulation of reserves

The paper investigates the ability of monetary authorities to keep the real exchange rate undervalued over the long run by implementing a policy of accumulating foreign exchange reserves. We consider a model of a three-sector, small, open economy, where the central bank continuously purchases foreign currency reserves and compare them to Russian and Chinese economies in recent years. Both countries appear to pursue reserve accumulation policies. We find a clear trade-off between the steady state levels of the real exchange rate and inflation. After calibration, the model predicts an 8.5% real undervaluation of the Russian currency and a 13.7% undervaluation of the Chinese currency. Predicted inflation is found to match observed levels.real exchange rate targeting; foreign exchange reserves; Dutch disease

The Inflationary Consequences of Real Exchange Rate Targeting via Accumulation of Reserves

The paper investigates the ability of monetary authorities to keep the real exchange rate undervalued over the long run by implementing a policy of accumulating foreign exchange reserves. We consider a model of a three-sector, small, open economy, where the central bank continuously purchases foreign currency reserves and compare the results to Russian and Chinese economies in recent years. Both countries appear to pursue reserve accumulation policies. We find a clear trade-o between the steady state levels of the real exchange rate and inflation. After calibration, the model predicts an 8.5% real undervaluation of the Russian currency and a 13.7% undervaluation of the Chinese currency. Predicted inflation is found to match observed levels.Real exchange rate targeting, foreign exchange reserves, Dutch disease

Can Oil Prices Explain the Real Appreciation of the Russian Ruble in 1998-2005?

The paper investigates whether the 80% real appreciation of the Russian ruble in 1998-2005 can be explained by the increase in oil revenues in a calibrated general equilibrium model. It is shown that the oil prices alone cannot account for the appreciation with forward-looking permanent-income consumers, unless the oil price increase is assumed permanent. Accounting for the increase in the volume of oil exports, however, can help, provided that the increase is assumed to be permanent.Real exchange rate; Commodity prices

Monetary Policy in an Economy Sick with Dutch Disease

The paper studies monetary policy in an economy, in which the manufacturing sector is ousted completely by the presence of a large natural resource industry. Thus, the economy produces only non-tradable goods, which can complement or substitute imported goods, and the primary shock to the economy comes from the fluctuations in the world price of the exported commodity. A model of such an economy is calibrated using parameters relevant for Russia, which is an example of an economy sick with Dutch Disease, and several conventional policy rules are considered. It is shown that in absence of a well-functioning fiscal stabilization fund, it may be optimal for monetary authorities to respond to the real exchange rate, as the Bank of Russia allegedly does, using purchases of foreign reserves as the policy instrument. The logic of these actions is to replace the absent fiscal stabilization policy. In case monetary policy is conducted using an interest rate instrument, there should be no reaction to the real exchange rate and only slight one - to inflation.Dutch disease, Monetary Policy, Russia

Determination of the Real Exchange Rate of the Ruble and Assessment of Long-Run Policy of Real Exchange Rate Targeting

The equilibrium real exchange rate of the Russian ruble is estimated for the period from the early 1995 to the early 2008. According to the methodological approach proposed by Edwards (1988), the equilibrium real exchange rate is a function of a set of fundamental variables (a so-called "reduced form equation"). In order to estimate an equilibrium real exchange rate, a set of fundamentals was selected: terms of trade; productivity differential; fiscal policy variable. Estimation was performed in a co-integrated VAR framework using the Johansen co-integration test. The speed of adjustment of the actual real exchange rate to the equilibrium real exchange rate as well as the influence of monetary policy and private capital flows on the short-run dynamics of real exchange rate is explored.Equilibrium exchange rate, cointegrated var framework, real exchange rate misalignment, a half life

Архитектура принятия политических решений в современной России в контексте президентской вертикали власти Владимира Путина

The article considers the main features of the architecture of political decisionmaking in modern Russia in the context of the presidential vertical of power V.V. Putin in terms of possible methodological approaches for their analysis and research. The political and psychological characteristic of the decision-making style of the President of the Russian Federation as the dominant subject in the process of forming the political agenda and its main development trends are considered. Non-traditional tools of influence on the mechanism of transformation of the agenda on the Internet are analyzed. In particular, crowdsourcing technologies, the practice of creating petitions and the blogosphere.Artykuł omawia główne cechy architektury podejmowania decyzji politycznych we współczesnej Rosji w kontekście prezydenckiego pionu władzy W. Putina z punktu widzenia możliwych podejść metodologicznych do ich analizy i badań. Uwzględniono polityczną i psychologiczną charakterystykę stylu decyzyjnego Prezydenta Federacji Rosyjskiej jako podmiotu dominującego w procesie kształtowania programu politycznego i jego głównych trendów rozwojowych. Analizowane są nietradycyjne narzędzia oddziaływania na mechanizm transformacji agendy w Internecie. W szczególności technologie crowdsourcingu, praktyka tworzenia petycji i blogosfery.B статье рассматриваются основные черты архитектуры принятия политических решений в современной России в контексте президентской вертикали власти В. В. Путина с точки зрения возможных методологических подходов для их анализа и исследования. Рассматривается политико-психологическая характеристика стиля принятия решений Президента РФ как доминирующего субъекта в процессе формирования политической повестки дня и ее основные тренды развития. Анализируются нетрадиционные инструменты влияния на механизм трансформации повестки дня в интернете. В частности, технологии краудсорсинга, практика созданий петиций и блогосфера