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Price and financial stability: Is there a contradiction between these goals of the Bank of Russia?

Author

Listed:
  • Gadiy, L.

    (JSC "Alfa-Bank", Moscow, Russia)

  • Dzhaokhadze, E.

    (Russian Presidential Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA), Moscow, Russia)

  • Kiyutsevskaya, A.

    (JSC "Alfa-Bank", Moscow, Russia)

  • Chembulatova, M.

    (Gaidar institute for economic policy, Moscow, Russia)

Abstract

After the global crisis, the monetary authorities of many countries were given the additional goal of ensuring financial stability. The complexity of the implementation of this task is associated with the lack of generally accepted definition of quantitative indicators of financial stability. Moreover, there is no consensus on the relation of the main goal for most central banks to ensure price stability and the goal of maintaining the stability of the financial system. Estimates of the correlation of the goals of the Bank of Russia to ensure price and financial stability obtained in this work using dynamic correlations calculated using multidimensional DCC-GARCH models allow us to conclude that the Bank of Russia contributed to the achievement of financial stability providing price stability in 2006-2019, and that contradictions between these goals arise only in adverse conditions. The validity of this conclusion is also confirmed by the results of a regression analysis, which also show that neither the business activity nor the interest rate policy of the Bank of Russia has statistically significant effect on the relation of its goals.

Suggested Citation

  • Gadiy, L. & Dzhaokhadze, E. & Kiyutsevskaya, A. & Chembulatova, M., 2020. "Price and financial stability: Is there a contradiction between these goals of the Bank of Russia?," Journal of the New Economic Association, New Economic Association, vol. 47(3), pages 67-83.
    • Handle: RePEc:nea:journl:y:2020:i:47:p:67-83
    DOI: 10.31737/2221-2264-2020-47-3-3
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    More about this item

    Keywords

    monetary authorities; price stability; financial stability; goal conflict; index of financial stability; inflation targeting;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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