Asymmetric Effects of Monetary Policy in Russian Regions

One of the most important features of monetary policy is that it is the same for the entire national economy. While formulating decisions on monetary policy, authorities pay attention to such indicators as inflation, GDP and other national indicators. National economic indicators on average can meet central bank goals. At the same time, the local economy in one region may be more sensitive to changes in monetary policy than in another one due to the heterogeneity of regions. There are some researches that discuss asymmetric effects of monetary policy on the economic activity of regions; however, according to the information we have, there is no such study for the Russian economy. In this study we analyze the impact of changes in key rate on the economic activity of 79 regions of Russia for the period 2015-2019 taking into account the action of transmission mechanisms and the presence of spatial effects. The analysis was carried out using panel data and a spatial autocorrelation model. In addition, individual direct effects of changes in the key rate for each studied region were calculated. In accordance with the results obtained, the key rate is negatively associated with real income: with an increase in the key rate, real income decreases, while with a decrease in the key rate, real income increases. In the short term, the effect of monetary policy shocks continues for 2 quarters after the change in the key rate with a gradual decrease in influence. The key rate affects the economic activity of Russian regions differently. Significant characteristics affecting the asymmetry of influence are the industrial composition of the region and the concentration of small enterprises in the region. At the same time, the export orientation of the region does not have a significant impact on the sensitivity to changes in key rate. Also spatial relationships are significant. The results of this study, indicating the asymmetric effect of the key rate on real income in the Russian regions, are consistent with the conclusions drawn in the works, which analyzed the effects of monetary policy in different countries of the world. The current work carried out for the Russian economy contributes to the study of the asymmetric effects of monetary policy in regions.