Template-type: ReDIF-Article 1.0
Author-Name: Alexander Tishin
Author-Email: tishinav@cbr.ru 
Author-Workplace-Name: Bank of Rusia
Title: Monetary Policy Surprises in Russia
Abstract: This paper studies the monetary policy transmission in the Russian economy. The key question of this research is to determine how monetary policy affects the economy through currency exchange rates. I construct a series of monetary policy surprises for the Russian economy using the high-frequency identification approach. Many papers use futures on interest rates as monetary policy instruments; however, we do not have these futures on the Russian financial market. Therefore, I use different currency futures as monetary surprises because these futures are liquid, and they may reveal market sentiments. I take the dates when the Board of Directors of the Bank of Russia made a decision on the key rate and look at the changes in the currency exchange market in a tiny 30-minute window. Next, I construct a structural vector autoregression model to show the effect of these surprises on macroeconomic variables. In the identification process, I use the external instruments approach a la Gertler and Karadi (2015). Finally, I compare the results with other methods (Cholesky decomposition). I find that a tightening monetary policy significantly increases the bond rate; moreover, the effect on inflation is not immediate, but appears after a couple of months.
Classification-JEL: E31, E32, E43, E44, E52, E58
Keywords: monetary policy transmission, external instruments, high-frequency identification, SVAR, currency futures
Journal: Russian Journal of Money and Finance
Pages: 48-70
Volume: 78
Issue: 4
Year: 2019
Month: December
DOI: 10.31477/rjmf.201904.48
File-URL: https://rjmf.econs.online/upload/iblock/8db/Monetary_Policy_Surprises.pdf
Handle: RePEc:bkr:journl:v:78:y:2019:i:4:p:48-70