Article

Relationship between Exchange Rate and Inflation in Russia

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Abstract

The article estimates the short- and medium-run exchange rate pass-through effect on consumer prices on the aggregate level and for individual groups of goods and services for the period from 2000 to 2008. Special attention is paid to the asymmetric exchange rate pass-through. It is shown that the improvement of certain macroeconomic indicators in recent years in Russia has not led to a reduction in pass-through effect on inflation as in other countries. The pass-through effect has a pronounced asymmetrical character, that is, consumer prices are more likely to respond to the depreciation of the domestic currency, than to its appreciation. The largest effect is observed for the food CPI while its costs constitute a significant part of household budget in Russia.

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... There are several papers focusing on exchange rate pass-through in specific CIS countries, mainly Russia. The studies for Russia, for example, provide quite a wide variety of estimates for ERPT (Dobrynskaya and Levando, 2005;Beck and Barnard 2009;Kataranova, 2010;Ponomarev et al., 2014). The estimates of ERPT to CPI for USD range between 5-40 % after one quarter, and between 20-90 % after four quarters. ...
... For emerging economies, the evidence is mixed, but it seems that depreciation may lead to stronger ERPT than appreciation and that large devaluations are associated with stronger than proportionate ERPT (Mihaljek and Klau, 2008;Razafimahefa, 2012;IMF, 2015). Among CIS countries, asymmetric effects have been found at least for Russia (Kataranova, 2010;Ponomarev et al., 2014). ...
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