Template-Type: ReDIF-Paper 1.0

Author-Name: Ivan Khotulev
Author-Email: KhotulevIM@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation


Title: Shock-Dependent Exchange Rate Pass-Through in Russia

Abstract: In this note, we study shock-dependent exchange rate pass-through (ERPT) to
consumer prices in Russia. First, we estimate a traditional "shock-independent" ERPT on
aggregate quarterly time series of the exchange rate, CPI, and control variables. Estimated
coefficients confirm previous studies and official statements by the Bank of Russia. Rolling
regression in different periods shows that the ERPT becomes more stable and more
precisely estimated after 2014-2015 when the Bank of Russia switched to inflation targeting.
We compare results with the ERPT from an estimated structural model. We obtain a
forecast of macroeconomic time series from a DSGE model conditional on foreign variables
observed. We run the same regression on forecasted data and obtain estimates of the
"shock-independent" ERPT from the structural model. We compute shock-dependent ERPT
from model impulse responses. The magnitude of the ERPT varies for different shocks with
the highest value attributed to domestic monetary policy shocks. When estimating the 
pass-through of the exchange rate to prices, care must be taken of which shock caused 
changes in the exchange rate. Since monetary policy shocks appear to be associated with the 
highest ERPT, and the ERPT becomes more stable after 2014-2015, the Russian economy may be 
reaping an additional benefit of inflation targeting in the form of reduced monetary policy 
shocks and a more stable ERPT.

Length: 14 pages
Creation-Date: 2020-06
Revision-Date:
Publication-Status:
File-URL: http://cbr.ru/Content/Document/File/108266/analytic_note_20200609_dip.pdf
File-Format: Application/pdf
File-Function:
Number: note20
Classification-JEL: 
Keywords: exchange rate pass-through, monetary policy, Russia
Handle:RePEc:bkr:wpaper:note20