Why regional inflation responds differently to key rate changes and why are alternative data useful for price statistics: new issue of Russian Journal of Money and Finance
The first issue of the scholarly quarterly Russian Journal of Money and Finance of 2021 has been published.
Russia belongs to a group of countries with pronounced regional heterogeneity, which causes variations in the response of different regions’ economy to countrywide factors, e.g. changes in global oil prices or exchange rate fluctuations. The extent of the response to a change in the Bank of Russia key rate may also vary. The exact reasons behind such variations are explained through the regional inflation model suggested by Vadim Napalkov, Anna Novak, and Andrey Shulgin from the Volga-Vyatka Main Branch of the Bank of Russia. According to the authors, the scale of variations estimated by them is comparable to similar figures in other countries with pronounced regional heterogeneity, such as Australia, Indonesia, Canada, China, USA, and Turkey.
Central banks should take into account the asymmetric effects of a policy rate change on inflation and output, which is essential in pursuing monetary policy. Analysing Armenia’s economy, Haykaz Igityan (Central Bank of Armenia) shows that contractionary monetary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way: a rise in the policy rate causes a stronger response than its reduction.
New big data technologies bring about more opportunities for economic studies, e.g. real-time monitoring of economic activity or online price tracking. Alex Isakov and his co-authors from VTB Capital and RANEPA describe their experience of developing a database on consumer goods and service prices in Moscow and the Moscow Region that relies on web scraping technology, that is, automated data collection from online stores’ and other companies’ websites. The scope of their observations covers and goes beyond the range of goods and services analysed by Rossat to calculate its consumer price index. The data collected by the authors are open to other researchers. They may use this information to both monitor retail prices in certain goods categories in real time and develop their own price indices.
Vladimir Bessonov (National Research University Higher School of Economics), who prepared a publicly available response to the study by Alex Isakov and his co-authors, believes that as online trade develops such data sources may be used to obtain alternative inflation estimates, which will provide grounds for discussing the extent of the reliability of official statistics, increase confidence in them, and thus help anchor inflation expectations. He also emphasises that alternative studies of price statistics may contribute to the improvement of the methodologies for calculating consumer price indices.
The new issue of the Russian Journal of Money and Finance (No. 1, 2021) is available on its website.