Template-Type: ReDIF-Paper 1.0
Author-Name: Yulia Ushakova
Author-Email: ushakovayuv@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Dmitry Chernyadyev
Author-Email: ChernyadevDN@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation




Title: The effects of Financial Shock on Russian short-term equilibrium interest rates

Abstract: We estimate the impact of the Russia-specific shocks of 2014 on the short-term
real equilibrium interest rate. We have used two approaches. The first approach is
based on theoretical model calculations. The second rests on empirical estimates
based on the results of IMF cross-country research on the sensitivity of the
equilibrium interest rate to shifts in investment demand and supply (savings) curves.
Our estimates suggest that the 2014 financial shock that restricted external
borrowing for Russian issuers triggered 0.6-1.4 pp growth of the short-term
equilibrium interest rate. However, the economy adjusted to the financial shock in
2016-2017 thanks to the macroeconomic policy pursued: the CDS risk premium
declined, investment resumed growth and the net investment position gradually
decreased. As a result, the effect of the financial shock on the short-term equilibrium
interest rate has almost entirely vanished

 Length: 13 pages
Creation-Date: 2017-11
Revision-Date:
Publication-Status:
File-URL: http://www.cbr.ru/Content/Document/File/87614/analytic_note_171107_dip(171115).pdf
File-Format: Application/pdf
File-Function:
Number: note11
Classification-JEL: 
Keywords: 
Handle:RePEc:bkr:wpaper:note11