Monetary Policy in an Oil-dependent Economy in the Presence of Multiple Shocks
Andrej Drygalla
Review of World Economics,
forthcoming
Abstract
Russian monetary policy has been challenged by large and continuous private capital outflows and a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble and led the central bank to give up its exchange rate management strategy. Against this background, this work estimates a small open economy model for Russia, featuring an oil price sector and extended by a specification of the foreign exchange market to correctly account for systematic central bank interventions. We find that shocks to the oil price and private capital flows substantially affect domestic variables such as inflation and output. Simulations for the estimated actual strategy and alternative regimes suggest that the vulnerability of the Russian economy to external shocks can substantially be lowered by adopting some form of inflation targeting. Strategies to target the nominal exchange rate or the ruble price of oil prove to be inferior.
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26.01.2022 • 2/2022
Investment, output gap, and public finances in the medium term: Implications of the Second Supplementary Budget 2021
With the Second Supplementary Budget 2021, the German government plans to allocate a reserve of 60 billion euros to the Energy and Climate Fund. This additional spending is also meant to reduce the macroeconomic follow-up costs of the pandemic. According to the IWH’s medium-term projection, the expenditure is expected to increase output by about 0.5% at the peak of its impact in 2024. “While this macroeconomic effect is welcome, the additional investment will by no means compensate for the lack of investment activity since the beginning of the pandemic,” says Oliver Holtemöller, head of the Department Macroeconomics and vice president at Halle Institute for Economic Research (IWH). Moreover, the supplementary budget is likely to reduce confidence in the reliability of the debt brake.
Oliver Holtemöller
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07.09.2021 • 22/2021
IWH Bankruptcy Update: Ongoing Decline in Bankruptcy Statistics
After hitting an all-time low in July, the number of firms declaring bankruptcy in Germany fell yet again in August. A new low was also registered in the number of impacted jobs. These are the headline findings of the IWH Bankruptcy Report, published by the Halle Institute for Economic Research (IWH), which provides a monthly update on German bankruptcy statistics.
Steffen Müller
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06.05.2021 • 13/2021
IWH Bankruptcy Update: Upward Trend in Bankruptcies Stopped; Reintroduction of Filing Requirement Unlikely to Generate Bankruptcy Wave
Following a rising trend in recent months, the number of corporate bankruptcies fell significantly in April. The number of impacted jobs also remained at modest levels. After a recent sharp rise in the bankruptcy statistics for microbusinesses (which has drawn little press attention), the upward trend for this subcategory loses steam. These are the key findings of the IWH Bankruptcy Update, which provides monthly statistics on corporate bankruptcies in Germany.
Steffen Müller
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15.04.2021 • 11/2021
Pandemic delays upswing – Demography slows growth
In their spring report, the leading economic research institutes forecast an increase in gross domestic product of 3.7% in the current year and 3.9% in 2022. The renewed shutdown is delaying the economic recovery, but as soon as the risks of infection, particularly from vaccination, have been averted, a strong recovery will begin. The economy is likely to return to normal output levels around the start of the coming year.
Oliver Holtemöller
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