A Preliminary Evaluation of Monetary Policy Rules for Russia (draft)

The paper reviews the recent conduct of monetary policy and the central bank’s rulebased behaviour in Russia. Using several policy rules, we test whether central banks in Russia react to changes in inflation, output gap and the exchange rate in a consistent and predictable manner. Our results indicate that during the period of 1993-2002 the Bank of Russia has used monetary aggregates as a main policy instrument in conducting monetary policy.

 

Financial Sector Development in the Future EU Member States and Russia (draft)

Financial sector development is an important feature of the long-term real and nominal convergence of the Future EU Member States, and of the successful completion of transition to the market economy in Russia and other “transition” economies. The importance of the development of a strong financial sector, both in the Future EU Member States and in Russia, is strengthened by two factors. First, there is an increased body of empirical and theoretical literature that shows a positive correlation between financial sector liberalization and development for economic growth and stability (see Beck and Levine, 2000). This literature also shows that policies matter: both general macroeconomic conditions and system-specific measures influence the speed and stability of financial deepening and development (see Vinhas de Souza, 2004). Second, the current levels of financial development in the Future EU Member States, and even more in Russia, are far from the levels achieved by advanced countries, which shows the potential for convergence and catch up in this area.

The study is organized as follows: The first chapter provides brief description of the major feature of the financial sectors in the Future EU Member States. The second chapter gives a comparative assessment of the main policy issues affecting financial sector development in these countries. The next part of the study describes the development of the Russia financial sector, the main weaknesses following the currency and banking crisis of August 1998. The fourth chapter summarizes briefly those main lessons that can be learned by Russia and other transition economies form the experiences of the Future EU Member States.