Money demand in post-crisis Russia : De-dollarisation and re-monetisation

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Title: Money demand in post-crisis Russia : De-dollarisation and re-monetisation
Author: Korhonen, Iikka ; Mehrotra, Aaron
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 14/2007
Year of publication: 2007
Publication date: 29.6.2007
Published in: Published in Emerging Markets Finance and Trade 46. (2), 2010, 5-19
Pages: 29 s.
Keywords: rahapolitiikka; valuuttakurssit; rahan kysyntä; valuuttasubstituutio; Venäjä; mallit; inflaatio; Bofit-kokoelma
JEL: E31; E41; E51; P22
Abstract: Estimating money demand functions for Russia following the 1998 crisis, we find a stable money demand relationship when augmented by a deterministic trend signifying falling velocity. As predicted by theory, higher income boosts demand for real rouble balances and the income elasticity of money is close to unity. Inflation affects the adjustment towards equilibrium, while broad money shocks lead to higher inflation. We also show that exchange rate fluctuations have a considerable influence on Russian money demand. The results indicate that Russian monetary authorities have been correct in using the money stock as an information variable and that the strong influence of exchange rate on money demand is likely to continue despite de-dollarisation of the Russian economy.
Note: Ilmestynyt myös Warsaw School of Economics; Working paper Series v. 2007 sekä Emerging Markets Finance and Trade 46 ; 2 ; 2010.

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