Popov, Vladimir (2005): Exchange rate in a resource based economy in the short term: the case of Russia.
This is the latest version of this item.
Download (204kB) | Preview
What should be the appropriate macroeconomic policy to minimize the volatility of output in a resource-based economy, i.e. in an economy that is highly dependent on export of resources with very volatile world prices? This paper examines the sources of volatility of output in Russia as compared to other countries and concludes that in 1994-2004 volatility of Russian growth rates was mostly associated with internal monetary shocks, rather than with external terms of trade shocks. In all countries that export resources with highly volatile prices, like Russia, volatility of economic growth is associated with volatility of RER, which in turn is mostly caused by the inability to accumulate enough foreign exchange reserves (FOREX) in central bank accounts and in stabilization funds (SF). However, in Russia, volatility of RER and GDP growth rates in recent 10 years was associated not so much with objective circumstances (terms of trade – TT – shocks), but with poor macroeconomic policies – despite intuition, volatility of real exchange rate (RER) was caused mostly by internal monetary shocks rather than by external terms of trade shocks. It is argued that the good (minimizing volatility) macroeconomic policy for Russia would be (1) not to generate monetary shocks (2) to cope with inevitable external shocks via changes in FOREX and SF, while keeping the RER stable.
|Item Type:||MPRA Paper|
|Original Title:||Exchange rate in a resource based economy in the short term: the case of Russia|
|Keywords:||exchange rate, resource based economy, volatility|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Vladimir Popov|
|Date Deposited:||29. Jan 2011 13:25|
|Last Modified:||25. Feb 2015 22:46|
Aghion, Ph., G-M. Angeletos, A. Banerjee, K. Manova (2004). Volatility and Growth: Financial Development and the Cyclical Composition of Investment. Mimeo, Harvard University, 2004.
Auty, R. (1994). Large Resource Abundant Countries Squander Their Size Advantage: Mexico and Argentina. – In: Auty, R.M. (ed) Resource Abundance and Economic Development, Oxford University Press, Oxford, 2001, 208-222.
Balassa, D. (1984). Adjustment Policies in Developing countries: A Reassessment. – World Development, No. 12, pp. 955-72.
Blanchard, Olivier Jean & Quah, Danny (1989). "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73.
Bolton, Patrick and Xavier Freixas (2000). Equity, Bonds and Bank Debt: Capital Structure and Financial Market Equilibrium Under Asymmetric Information. The Journal of Political Economy, Vol. 108, No. 2, 2000, pp. 324-351.
Edwards, Sebastian and Igal Magendzo (2003). A CURRENCY OF ONE’S OWN? AN EMPIRICAL INVESTIGATION ON DOLLARIZATION AND INDEPENDENT CURRENCY UNIONS. NBER WORKING PAPER SERIES Working Paper 9514 (http://www.nber.org/papers/w9514).
Fanelli, J. (2005). International Financial Architecture, Macro Volatility, and Institutions. Background paper for the project. 2004
Feldstein, M. & Horioka, C. (1980) Domestic Saving and International Capital Flow". The Economic Journal, v. 90, n. 358, June, pp. 314-329.
Griffith-Jones, Stephany, Manuel F. Montes, and Anwar Nasution (2001). Short-Term Capital Flows and Economic Crises. OUP, 2001.
Montes, M., V. Popov (1999). “The Asian Crisis Turns Global”. Institute of Southeast Asian Studies, Singapore.
Polterovich, V., V. Popov (2004). Accumulation of Foreign Exchange Reserves and Long Term Economic Growth – In: Slavic Eurasia’s Integration into the World Economy. Ed. By S. Tabata and A. Iwashita. Slavic Research Center, Hokkaido University, Sapporo, 2004. See full version at: http://fir.nes.ru/~vpopov/documents/Exchange rate-Growth-2006.pdf
Popov, V. (2000a). Shock Therapy versus Gradualism: The End of the Debate (Explaining the Magnitude of the Transformational Recession). – Comparative Economic Studies, Vol. 42, Spring, 2000, No. 1, pp. 1-57.
Popov, V. (2000b). Exchange Rate Policy After the Currency Crisis: Walking the Tightrope. – PONARS Policy Memo No. 174, Nov. 2000 (http://www.fas.harvard.edu/~ponars/POLICY%20MEMOS/Popov174.html).
Popov, V. (2003a). Currency crises in Russia and other transition economies. - In: International Financial Governance under Stress. Global Structures versus National Imperatives. Edited by Geoffrey R. D. Underhill, Xiaoke Zhang, Cambridge University Press, 2003.
Popov, V. (2003b). Does Russia Need to Strengthen the Ruble? Accumulation of Foreign Exchange Reserves and Economic Growth. PONARS Policy Memo No. 306, Nov. 2003 (http://www.csis.org/ruseura/ponars/policymemos/pm_0306.pdf)
Popov, V., A. Peresetsky (2005). International Financial Architecture, Macro Volatility, and Institutions. Country Study – Russia. Working paper draft, available from email@example.com
Prasad, Eswar, Kenneth Rogoff, Shang-Jin Wei and M. Ayhan Kose (2003). Effects of Financial Globalization on Developing Countries: Some Empirical Evidence, IMF, March 17, 2003.
Sosunov, K., O. Zamulin (2005). Monetary Policy in a Resource-Based Economy: The Case of Russia. Manuscript, 2005.
Stiglitz, Joseph E. (2000). Capital Market Liberalization, Economic Growth, and Instability. World Development, Volume 28 (6) 2000, pp. 1075 – 1086.
Vdovichenko A., V. Voronina (2004). Monetary Policy Rules and Their Applications in Russia. Working paper 04/09, EERC, 2004.
Available Versions of this Item
Exchange rate in a resource based economy in the short term: the case of Russia. (deposited 18. Jan 2011 15:26)
- Exchange rate in a resource based economy in the short term: the case of Russia. (deposited 29. Jan 2011 13:25) [Currently Displayed]