Pub Date : 2019-09-01DOI: 10.31477/rjmf.201903.122
A. Deviatov
Long time series on gold production and the value of gold, taken from Jastram's book The Golden Constant, are used to estimate a Cagan-type demand function that relates the total real value of gold to its expected rate of return. The model assumes that gold production and a latent scale variable (income or consumption) are jointly exogenous and that the data are measured with error. The data reject the model: the estimates imply that the real value of gold varies a great deal relative to the expected return and depends on it negatively, rather than positively.
{"title":"Estimating а Cagan-type Demand Function for Gold: 1561–1913","authors":"A. Deviatov","doi":"10.31477/rjmf.201903.122","DOIUrl":"https://doi.org/10.31477/rjmf.201903.122","url":null,"abstract":"Long time series on gold production and the value of gold, taken from Jastram's book The Golden Constant, are used to estimate a Cagan-type demand function that relates the total real value of gold to its expected rate of return. The model assumes that gold production and a latent scale variable (income or consumption) are jointly exogenous and that the data are measured with error. The data reject the model: the estimates imply that the real value of gold varies a great deal relative to the expected return and depends on it negatively, rather than positively.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"95 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123589561","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. Andreev, Udara Peiris, A. Shirobokov, D. Tsomocos
We study a small open economy New Keynesian model calibrated to the Russian economy with a banking system that trades secured and unsecured debt. Firms endogenously default on their unsecured debt obligations over the business cycle. We examine the effectiveness of four alternative countercyclical policies that respond to the growth in unsecured credit in the economy. The lean-against-the-wind monetary policy is the most effective in simultaneously affecting the real economy and stabilizing the banking system in response to both oil price and total factor productivity shocks. The countercyclical deposit reserve requirement was found to play a stabilizing role following an oil shock, while the countercyclical capital adequacy requirement helped to stabilize the banking system after a total factor productivity shock.
{"title":"Macroprudential Policy and Financial (In)Stability Analysis in the Russian Federation","authors":"M. Andreev, Udara Peiris, A. Shirobokov, D. Tsomocos","doi":"10.31477/rjmf.201903.03","DOIUrl":"https://doi.org/10.31477/rjmf.201903.03","url":null,"abstract":"We study a small open economy New Keynesian model calibrated to the Russian economy with a banking system that trades secured and unsecured debt. Firms endogenously default on their unsecured debt obligations over the business cycle. We examine the effectiveness of four alternative countercyclical policies that respond to the growth in unsecured credit in the economy. The lean-against-the-wind monetary policy is the most effective in simultaneously affecting the real economy and stabilizing the banking system in response to both oil price and total factor productivity shocks. The countercyclical deposit reserve requirement was found to play a stabilizing role following an oil shock, while the countercyclical capital adequacy requirement helped to stabilize the banking system after a total factor productivity shock.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131127661","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research analyses the influence of commodity prices on financial cycle parameters in commodity-exporting countries – Australia, Brazil, Canada, Columbia, Russia, and Chile – over the past two decades. One of the key issues discussed herein is the degree to which the extensive implementation of macroprudential policies can reduce the dependence of a country on global commodity cycles. Methodologically, this research is based on the Bayesian Structure Vector Autoregressive Model, structurally identified by means of variable recursive ranking and the Cholesky decomposition of the error covariance matrix. Changes in commodity prices are shown to provoke a stronger response from such financial cycle parameters as the sovereign risk premium and currency exchange rate in resource-based emerging market economies (Brazil, Columbia, Chile, and Russia) than in advanced economies (Canada and Australia). In Brazil, Columbia, Chile, and Russia, increases in commodity prices result in acceleration of the over all lending and external debt growth rate, while in Russia and Brazil they also trigger growth in the share of FX loans. In Australia and Canada, lending parameters react negatively to positive commodity price shocks. In the developing countries that apply macroprudential policy extensively (Columbia and Chile), lending dynamics are less dependent on changes in the global terms of trade. To reduce the impact of the commodity cycle on the financial cycle, the economic policy authorities of emerging market countries should develop national financial markets and introduce macroprudental policy tools more extensively.
{"title":"Commodity and Financial Cycles in Resource-based Economies","authors":"M. Tiunova","doi":"10.31477/rjmf.201903.38","DOIUrl":"https://doi.org/10.31477/rjmf.201903.38","url":null,"abstract":"This research analyses the influence of commodity prices on financial cycle parameters in commodity-exporting countries – Australia, Brazil, Canada, Columbia, Russia, and Chile – over the past two decades. One of the key issues discussed herein is the degree to which the extensive implementation of macroprudential policies can reduce the dependence of a country on global commodity cycles. Methodologically, this research is based on the Bayesian Structure Vector Autoregressive Model, structurally identified by means of variable recursive ranking and the Cholesky decomposition of the error covariance matrix. Changes in commodity prices are shown to provoke a stronger response from such financial cycle parameters as the sovereign risk premium and currency exchange rate in resource-based emerging market economies (Brazil, Columbia, Chile, and Russia) than in advanced economies (Canada and Australia). In Brazil, Columbia, Chile, and Russia, increases in commodity prices result in acceleration of the over all lending and external debt growth rate, while in Russia and Brazil they also trigger growth in the share of FX loans. In Australia and Canada, lending parameters react negatively to positive commodity price shocks. In the developing countries that apply macroprudential policy extensively (Columbia and Chile), lending dynamics are less dependent on changes in the global terms of trade. To reduce the impact of the commodity cycle on the financial cycle, the economic policy authorities of emerging market countries should develop national financial markets and introduce macroprudental policy tools more extensively.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128320117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Tatiana Evdokimova, Nordea Bank, G. Zhirnov, Inge Klaver
This paper examines the link between foreign exchange dynamics and inflation in developing countries with respect to the degree of inflation expectation anchoring they employed in 2011–2019. Particular attention is paid to analysis of the inflationary consequences of the considerable weakness of emerging markets’ currencies in summer 2018. Analysis of 2011–2019 confirms that inflation accelerates less in reaction to FX weakness in countries with more anchored inflation expectations. However, similar statistically significant differences were not found during the shock of 2018. One way of anchoring inflation expectations is to make monetary policy more transparent. We have updated the central bank transparency index introduced in Dincer and Eichengreen (2007) and confirm that central bank transparency in emerging markets has considerably improved in recent years. Inflation expectations in these countries have been approaching inflation targets as central banks’ policies become more transparent. We also provide some suggestions for improving the quality of monetary policy communication by the Bank of Russia in order to increase its transparency and consequently contribute to a further decrease in inflation expectations.
{"title":"The Impact of Inflation Anchor Strength and Monetary Policy Transparency on Inflation During the Period of Emerging Market Volatility in Summer 2018","authors":"Tatiana Evdokimova, Nordea Bank, G. Zhirnov, Inge Klaver","doi":"10.31477/rjmf.201903.71","DOIUrl":"https://doi.org/10.31477/rjmf.201903.71","url":null,"abstract":"This paper examines the link between foreign exchange dynamics and inflation in developing countries with respect to the degree of inflation expectation anchoring they employed in 2011–2019. Particular attention is paid to analysis of the inflationary consequences of the considerable weakness of emerging markets’ currencies in summer 2018. Analysis of 2011–2019 confirms that inflation accelerates less in reaction to FX weakness in countries with more anchored inflation expectations. However, similar statistically significant differences were not found during the shock of 2018. One way of anchoring inflation expectations is to make monetary policy more transparent. We have updated the central bank transparency index introduced in Dincer and Eichengreen (2007) and confirm that central bank transparency in emerging markets has considerably improved in recent years. Inflation expectations in these countries have been approaching inflation targets as central banks’ policies become more transparent. We also provide some suggestions for improving the quality of monetary policy communication by the Bank of Russia in order to increase its transparency and consequently contribute to a further decrease in inflation expectations.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129798149","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study builds a probabilistic model of Russian bank defaults. Microdata from the monthly financial and regulatory statements that Russian banks submit to the Bank of Russia are analysed, covering the period from July 2010 to December 2017. A model incorporating a standard set of reliable predictors of bank defaults is augmented by three novel predictors: the excess of deposit and loan rates over the respective cross-section averages, and the ratio of spending on advertising to the bank’s assets. These predictors are statistically significant in logit regressions that forecast bank defaults and improve the forecasting power of the model, although relatively moderately. The too-big-to-fail premise is not supported by the data.
{"title":"Do Higher Interest Rates on Loans and Deposits and Advertising Spending Cuts Forecast Bank Failures? Evidence from Russia","authors":"Lev Fomin","doi":"10.31477/RJMF.201902.94","DOIUrl":"https://doi.org/10.31477/RJMF.201902.94","url":null,"abstract":"This study builds a probabilistic model of Russian bank defaults. Microdata from the monthly financial and regulatory statements that Russian banks submit to the Bank of Russia are analysed, covering the period from July 2010 to December 2017. A model incorporating a standard set of reliable predictors of bank defaults is augmented by three novel predictors: the excess of deposit and loan rates over the respective cross-section averages, and the ratio of spending on advertising to the bank’s assets. These predictors are statistically significant in logit regressions that forecast bank defaults and improve the forecasting power of the model, although relatively moderately. The too-big-to-fail premise is not supported by the data.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121359338","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines an application of the VAR-LASSO model to Russia's key macroeconomic indicators: GDP, household consumption, fixed asset investment, exports, imports, and the rouble real exchange rate, along with oil prices (as an exogenous variable). The slowdown in the Russian economy following the 2008–2009 crisis is modelled as a structural break in the unconditional mean of growth rates of the time series under examination. The model is estimated with the assumption of a common growth rate for GDP, consumption, investment, exports and imports (any discrepancies in actual growth rates are due to changing oil prices and other shocks), which provides a solid foundation for balanced medium-term forecasts using an econometric specification that factors in this constraint. The model exhibits fairly good predictive power when pseudo real-time forecasts are benchmarked against the forecast by the Ministry of Economic Development and the forecast given by the BVAR model in Pestova and Mamonov (2016b), as well as against the best (based on the BIC criterion) VAR(1) model and the classical ARIMA model. The estimated model is used to study functions for impulse responses to oil price shocks and to build scenario-driven forecasts for 2019–2024.
{"title":"Forecasting Russia's Key Macroeconomic Indicators with the VAR-LASSO Model","authors":"N. Fokin, A. Polbin","doi":"10.31477/RJMF.201902.67","DOIUrl":"https://doi.org/10.31477/RJMF.201902.67","url":null,"abstract":"This paper examines an application of the VAR-LASSO model to Russia's key macroeconomic indicators: GDP, household consumption, fixed asset investment, exports, imports, and the rouble real exchange rate, along with oil prices (as an exogenous variable). The slowdown in the Russian economy following the 2008–2009 crisis is modelled as a structural break in the unconditional mean of growth rates of the time series under examination. The model is estimated with the assumption of a common growth rate for GDP, consumption, investment, exports and imports (any discrepancies in actual growth rates are due to changing oil prices and other shocks), which provides a solid foundation for balanced medium-term forecasts using an econometric specification that factors in this constraint. The model exhibits fairly good predictive power when pseudo real-time forecasts are benchmarked against the forecast by the Ministry of Economic Development and the forecast given by the BVAR model in Pestova and Mamonov (2016b), as well as against the best (based on the BIC criterion) VAR(1) model and the classical ARIMA model. The estimated model is used to study functions for impulse responses to oil price shocks and to build scenario-driven forecasts for 2019–2024.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131138881","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper evaluates the welfare implications of alternative monetary policy regimes for a small commodity-exporting economy. In line with the existing literature, welfare analysis shows that a flexible exchange rate regime tends to outperform a fixed nominal exchange rate. However, this paper shows that the welfare costs of a nominal peg vary considerably with the extent of international risk-sharing. In a model with complete and frictionless asset markets, real exchange rate volatility is small, and welfare losses from the nominal peg are negligible. By contrast, under financial autarky, a fixed nominal exchange rate generates significant volatility in inflation and results in large welfare costs. I also consider the welfare properties of flexible regimes, showing that core consumer inflation targeting and non-commodity domestic inflation targeting are not generally optimal, although their welfare costs are small compared to those of a fixed regime. Furthermore, the welfare ranking of these two regimes might depend on the currency in which the tradable goods are priced (producer-currency pricing vs. local-currency pricing).
{"title":"International Risk-Sharing and Optimal Monetary Policy in a Small Commodity-Exporting Economy","authors":"Valery Charnavoki","doi":"10.31477/RJMF.201902.03","DOIUrl":"https://doi.org/10.31477/RJMF.201902.03","url":null,"abstract":"This paper evaluates the welfare implications of alternative monetary policy regimes for a small commodity-exporting economy. In line with the existing literature, welfare analysis shows that a flexible exchange rate regime tends to outperform a fixed nominal exchange rate. However, this paper shows that the welfare costs of a nominal peg vary considerably with the extent of international risk-sharing. In a model with complete and frictionless asset markets, real exchange rate volatility is small, and welfare losses from the nominal peg are negligible. By contrast, under financial autarky, a fixed nominal exchange rate generates significant volatility in inflation and results in large welfare costs. I also consider the welfare properties of flexible regimes, showing that core consumer inflation targeting and non-commodity domestic inflation targeting are not generally optimal, although their welfare costs are small compared to those of a fixed regime. Furthermore, the welfare ranking of these two regimes might depend on the currency in which the tradable goods are priced (producer-currency pricing vs. local-currency pricing).","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117299340","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We test the ability of early warning indicators that appear in the literature to predict credit cycle peaks in a cross-section of emerging markets, verifying our findings by cross-sectional validation. Our results confirm that the standard credit gap indicator performs satisfactorily. In fact, we find that, in emerging market economies, it seems rather difficult to outperform this indicator by means of augmented multivariate models. Nevertheless, we have found that the robustness of real-time credit cycle determination may potentially be improved (although with a risk of overfitting the data) by simultaneously monitoring GDP growth, banks’ non-core liabilities, the financial sector’s value added and (to a lesser extent) the change in the debt service ratio.
{"title":"Determination of the Current Phase of the Credit Cycle in Emerging Markets","authors":"Elena Deryugina, A. Ponomarenko","doi":"10.31477/RJMF.201902.28","DOIUrl":"https://doi.org/10.31477/RJMF.201902.28","url":null,"abstract":"We test the ability of early warning indicators that appear in the literature to predict credit cycle peaks in a cross-section of emerging markets, verifying our findings by cross-sectional validation. Our results confirm that the standard credit gap indicator performs satisfactorily. In fact, we find that, in emerging market economies, it seems rather difficult to outperform this indicator by means of augmented multivariate models. Nevertheless, we have found that the robustness of real-time credit cycle determination may potentially be improved (although with a risk of overfitting the data) by simultaneously monitoring GDP growth, banks’ non-core liabilities, the financial sector’s value added and (to a lesser extent) the change in the debt service ratio.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122194410","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Following the 2007/08 global financial crisis, it became evident that there was a need for a strengthening of the global financial safety net (GFSN). However, the manner in which this should be achieved became a polarising issue of debate in international institutions such as the International Monetary Fund (IMF) and the G20. The empirical evidence concerning the impact of the GFSN remains scarce, therefore, this paper seeks to contribute to the debate by investigating the potential impacts that the various layers of the GFSN can have on sovereign borrowing costs in emerging markets. After initially replicating common methodologies in the literature concerned with identifying determinants of foreign currency sovereign spreads in emerging markets, the analysis is expanded to include elements of the GFSN. The results indicate that whilst the liquidity buffers provided by the overall GFSN appear to lower sovereign spreads, the impact of individual layers of the safety net are more ambiguous.
{"title":"The Impact of the Global Financial Safety Net on Emerging Market Bond Spreads","authors":"Jenny Kilp, V. Anvari, S. Springfield, C. Roberts","doi":"10.31477/RJMF.201902.43","DOIUrl":"https://doi.org/10.31477/RJMF.201902.43","url":null,"abstract":"Following the 2007/08 global financial crisis, it became evident that there was a need for a strengthening of the global financial safety net (GFSN). However, the manner in which this should be achieved became a polarising issue of debate in international institutions such as the International Monetary Fund (IMF) and the G20. The empirical evidence concerning the impact of the GFSN remains scarce, therefore, this paper seeks to contribute to the debate by investigating the potential impacts that the various layers of the GFSN can have on sovereign borrowing costs in emerging markets. After initially replicating common methodologies in the literature concerned with identifying determinants of foreign currency sovereign spreads in emerging markets, the analysis is expanded to include elements of the GFSN. The results indicate that whilst the liquidity buffers provided by the overall GFSN appear to lower sovereign spreads, the impact of individual layers of the safety net are more ambiguous.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126296581","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The principal interest of the paper is the quantification of terms of trade shock response of the Russian economy on a detailed computable general equilibrium (CGE) model calibrated with Russian input-output data. A number of recent theoretical studies ((Baqaee and Farhi 2019), (Atalay 2017)) stressed importance of explicit introduction of the intermediates in the models assessing effects of microeconomic and external shocks. CGE models permit introduction of rich details and complex production structures as well as optimizing behaviour of economic agents. The results suggest a decrease of welfare of the representative consumer and real GDP with the deterioration of the terms of trade. In the Central scenario (a 10% decrease in the world price of crude oil, a 3% decrease in the world price of natural gas and an 8% decrease in the world price of petroleum products) welfare of the representative consumer decreases by -3,55% of benchmark consumption level or 1,76% of the base year GDP in the comparative static model, where factors are fixed at benchmark levels. Welfare changes associated with the Central scenario of the steady-state model, where capital stock adjusts to it’s long-term level, indicate a significant decrease in the welfare of the representative agent up to -5,79% of benchmark consumption level or -2,92% of the base year GDP. These results exceed welfare changes in the Central scenario of the static model, and we can refer to these values as an upper bound of possible changes in welfare in the dynamic modelling exercise (Rutherford and Tarr 2003). The model was validated by historical simulation with observed levels of exogenous parameters, mimicking change in economic environment from 2011 to 2015. The results of the historical simulation stress the importance of fiscal parameters (i.e. export taxes) in analysis of production behaviour of Russian extraction industries.
{"title":"Effects of Terms of Trade Shocks on the Russian Economy","authors":"N. Turdyeva","doi":"10.31477/rjmf.202002.43","DOIUrl":"https://doi.org/10.31477/rjmf.202002.43","url":null,"abstract":"The principal interest of the paper is the quantification of terms of trade shock response of the Russian economy on a detailed computable general equilibrium (CGE) model calibrated with Russian input-output data. A number of recent theoretical studies ((Baqaee and Farhi 2019), (Atalay 2017)) stressed importance of explicit introduction of the intermediates in the models assessing effects of microeconomic and external shocks. \u0000CGE models permit introduction of rich details and complex production structures as well as optimizing behaviour of economic agents. The results suggest a decrease of welfare of the representative consumer and real GDP with the deterioration of the terms of trade. \u0000In the Central scenario (a 10% decrease in the world price of crude oil, a 3% decrease in the world price of natural gas and an 8% decrease in the world price of petroleum products) welfare of the representative consumer decreases by -3,55% of benchmark consumption level or 1,76% of the base year GDP in the comparative static model, where factors are fixed at benchmark levels. \u0000Welfare changes associated with the Central scenario of the steady-state model, where capital stock adjusts to it’s long-term level, indicate a significant decrease in the welfare of the representative agent up to -5,79% of benchmark consumption level or -2,92% of the base year GDP. \u0000These results exceed welfare changes in the Central scenario of the static model, and we can refer to these values as an upper bound of possible changes in welfare in the dynamic modelling exercise (Rutherford and Tarr 2003). \u0000The model was validated by historical simulation with observed levels of exogenous parameters, mimicking change in economic environment from 2011 to 2015. The results of the historical simulation stress the importance of fiscal parameters (i.e. export taxes) in analysis of production behaviour of Russian extraction industries.","PeriodicalId":358692,"journal":{"name":"Russian Journal of Money and Finance","volume":"127 11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124238663","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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