Research Object: Macroeconomic policy and macroeconomic relationships
Research Purpose: To conduct a complex analysis of the problems involved in constructing macroeconomic policy and modeling business cycles.
Empirical Base of the Research: Databases of the Federal State Statistics Service (http://www.gks.ru), the Central Bank of the Russian Federation (http://www.сbr.ru), the World Bank (http://databank.worldbank.org), OECD (http://www.oecd.org), the International Monetary Fund (http://www.imf.org/external/data.htm), and Bloomberg Professional (http://www.bloomberg.com/professional).
Research Results: We elaborate the DSGE model, make its Bayesian estimation for Russia for the period of 2001-2012, and compare different monetary policy rules. It is shown that the exchange rate targeting rule, with a floating exchange rate (in an economy with the Taylor rule) as a target, fits Russian data better than the Taylor Rule itself. Moreover, we indicate that the Central Bank can substantially neutralize small cost-push shocks under dynamic, inconsistent policy. We also propose a model that helps indicate new ways of using macroprudential tools for regulating such financial innovations as securitization and shadow banking, which can increase the effectiveness of macroprudential policy. In addition, we show that with an increase in the degree of capital outflow, it is optimal for the Central Bank to concern itself with a loss of international reserves and to set a high interest rate on its unsecured loans. Then we indicate that the monetary policy controlling a risky interest rate can mitigate default risks only when the upper limit on inflation is sufficiently high. In our project, we show that if the inequality in skills and incomes is high, then the majority supports a high barrier to entry. This result can explain the persistence of entry barriers in democracies. Moreover, we estimate the fiscal multiplier of production and utility-enhancing government expenditures in zero lower bound and positive interest rate cases.
Implementation of the Research Results: The estimated DSGE model can be used to conduct an optimal monetary policy in Russia, evaluate the efficiency of various monetary regimes, and analyse the Bank of Russia’s stabilization policy. The results can also be used to estimate the credibility level of a particular central bank. Moreover, the research's implications can explain deviations from the announced plan. Our results can be used to analyse the regulation on financial innovations that increases the efficiency of macroprudential policy. Our work suggests the design of a monetary policy with liquidity support for the banking system in case of capital outflow. Our findings also indicate the capabilities and boundaries of monetary policy aimed at mitigating default risks. Moreover, we estimate the impact of fiscal policy on macroeconomic equilibrium. Our results can serve as practical guidelines for designing the optimal macroeconomic policy for Russia, for both the short- and long-term.
- Roel Beetsma, Ph.D., Professor, University of Amsterdam http://www1.fee.uva.nl/toe/beetsma.shtm
- Hubert Kempf, Ph.D., Professor, École normale supérieure de Cachan http://ces.univ-paris1.fr/membre/Kempf/images/TMPmts7254bat.htm
- Antoine D'Autume, Ph.D., Professor, University Paris-1 (Pantheon-Sorbonne) http://ces.univ-paris1.fr/membre/dautume/dautume.htm
- Jean-Pierre Drugeon, Ph.D., Professor, University Paris-1 (Pantheon-Sorbonne) http://www.parisschoolofeconomics.eu/en/drugeon-jean-pierre/
- Eleni Iliopulos, Ph.D., Professor, University Paris-1 (Pantheon-Sorbonne) http://eleni.iliopulos.free.fr/
- Bertrand Wighiolle, Ph.D., Professor, University Paris-1 (Pantheon-Sorbonne) http://www.parisschoolofeconomics.eu/en/wigniolle-bertrand/