Economic Uncertainty Index for Russia and Alternatives in Cross-Border Settlements: New issue of Russian Journal of Money and Finance

The third issue of the scholarly quarterly Russian Journal of Money and Finance of 2023 has been published.

Many сentral banks raise key interest rates as the main instrument to curb inflation. However, it is common in academic literature to note the lack of efficiency of the key rate pass-through to commercial banks’ products: changes in credit and deposit rates are smaller than key rate increases. Henry Penikas (Bank of Russia) challenges the correctness of such findings. According to the author’s calculations, Russian banks completely pass through key rate changes to their own interest rates.

Higher economic uncertainty, regardless of whether it is caused by financial crises, natural disasters, or political instability, has negative implications for economic activity. The cost of financing grows, firms postpone their employment and investment decisions, and households reduce consumption. However, there should be appropriate tools to estimate the impact of uncertainty on economic indicators. For this, Diana Petrova (RANEPA) and Pavel Trunin (RANEPA; Gaidar Institute for Economic Policy) suggest using an economic policy uncertainty index they constructed based on news articles in Russian online media. Econometric analysis shows that an increase in economic policy uncertainty, measured using the new index, is associated with a notable decline in GDP and investment over a horizon from two to four quarters. 

Until recently, the system of cross-border settlements was characterised by the dominant role of traditional reserve currencies (the US dollar and the euro). However, this year, a number of countries, including Russia, have sped up the transition to settlements in national currencies. Alexey Ponomarenko (Bank of Russia) considers several schemes for cross-border settlements in national currencies and their effect on the exchange rate and monetary indicators.

The new issue of the Russian Journal of Money and Finance (No. 3, 2023) is available on the website.