Why Inflation in Russian Regions Differs and How to Improve Forecasting: New Issue of Russian Journal of Money and Finance
The third issue of the scholarly quarterly Russian Journal of Money and Finance of 2024 has been published.
Price growth rates in Russian regions differ, which may undermine efficient monetary policy. However, the analysis of food inflation in Russian regions evidences the convergence of the growth rates of food prices, i.e. a decline in the number of differences. The convergence is less pronounced in the regions of the Far Eastern and North Caucasian Federal Districts, which may be due to the geographical remoteness (in the case of the Far East), a large share of the informal sector (for the North Caucasian regions), and low retail chain penetration. This means that increasing the level of transport and logistics connectivity is a much-needed measure of state policy.
The consumer basket that is used for calculating the consumer price Index (CPI) includes multiple categories of goods and services. The prices in each category are determined by an individual set of factors. To take into account the entire variety of factors, inflation should be forecast separately for each category, and subsequently, the resulting indicators should be used to make up the aggregated forecast. Experiments using Russian data have shown that such an approach may provide a much more accurate result than the classical approach (which simply predicts the headline CPI).
During the global crises (the Great Recession in 2008, the European debt crisis in 2011–2012, and the COVID-19 shock in 2020), the stock market regulators in many countries banned short sales to stabilise the market. However, this step may entail negative consequences. The analysis of data of European stock markets in 2020 shows that short-selling bans lead to increases in metrics of the market risk used to determine the amount of required capital. As a result, the banking system becomes more vulnerable.
The level of competition in the banking sector impacts all financial consumers (their costs, incomes, and lending opportunities). The analysis of competition in different segments of the financial market and the studies of its impact on social welfare and the efficiency of monetary policy were presented at the 12th international seminar of the Bank of Russia, the New Economic School, and the Department of the Bank of Russia at the HSE University. The review of the seminar is published in the September issue of the journal.
The new issue of the Russian Journal of Money and Finance (No. 3, 2024) is available on the website.