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Analysis of Inflation Risk Factors in Russia

Author

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  • Alexandra Chudaeva

    (Institute of Applied Economic Research, RANEPA)

Abstract

This paper uses quantile regression combined with the local projections approach to study the impact of macroeconomic and financial factors on the conditional distribution of inflation and inflation risk in Russia, i.e. the probability of high values of price growth. It is shown that the main predictors of growth in inflation risk are increases in nominal wages and retail turnover, the weakening of the Russian rouble, and declines in production. In addition, geopolitical tension and the narrowing of the bond spread could indicate the intensification of this risk. It is revealed that the effect of the pass-through of the dynamics of the exchange rate to consumer prices is manifested even more with growth in the inflation rate. At the same time, in a high inflation environment, the strengthening and weakening of the Russian rouble are passed through to prices with varying intensity, greater in the second case. A notable reduction of the risk of critically high inflation may require the central bank to take comprehensive measures to fight inflation, since the effect of a rising interest rate on inflation risk is less significant compared to the effect on the average value of price growth.

Suggested Citation

  • Alexandra Chudaeva, 2025. "Analysis of Inflation Risk Factors in Russia," Russian Journal of Money and Finance, Bank of Russia, vol. 84(1), pages 60-92, March.
    • Handle: RePEc:bkr:journl:v:84:y:2025:i:1:p:60-92
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    More about this item

    Keywords

    inflation; inflation risk; risk assessment; quantile regression; conditional distribution; exchange rate pass-through effect; monetary policy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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