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Money-based underlying inflation measure for Russia: a structural dynamic factor model approach

Author

Listed:
  • Elena Deryugina

    (Bank of Russia)

  • Alexey Ponomarenko

    (Bank of Russia)

Abstract

We estimate a dynamic factor model for the cross section of monetary and price indicators. We extract the common part of the dataset’s fluctuations and decompose it into structural shocks. We argue that one of the shocks identified has empirical properties (in terms of impulse response functions) that are fully in line with the theoretically expected relationship between money growth and inflation, confirming that the process identified has the capacity for economic interpretation. Based on this finding, we decompose recent inflationary developments in Russia into those that are associated with changes in monetary stance and other shorter-lived shocks.

Suggested Citation

  • Elena Deryugina & Alexey Ponomarenko, 2017. "Money-based underlying inflation measure for Russia: a structural dynamic factor model approach," Empirical Economics, Springer, vol. 53(2), pages 441-457, September.
    • Handle: RePEc:spr:empeco:v:53:y:2017:i:2:d:10.1007_s00181-016-1125-1
    DOI: 10.1007/s00181-016-1125-1
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    More about this item

    Keywords

    Monetary aggregates; Inflation; Dynamic factor model; Transition countries;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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