Modelling The Effects Of Bank Of Russia’S Monetary Policy On Eaeu Countries[Моделирование Последствий Денежно-Кредитной Политики Банка России Для Стран Еаэс]

In this paper we estimate the effects of the Bank of Russia’s monetary policy on the Eurasian Economic Union members. The relevance of the study arises from two points: first, economic integration implies coordination in macroeconomic policy; second, fluctuations of Russian economy as the biggest economy in the region cause fluctuations in the whole EAEU, changing the flows of goods and resources. The purpose of this paper is to identify key effects and channels of cross-border transmission of Bank of Russia’s monetary policy under changing monetary regimes of the EAEU countries. For the empirical model we use quarterly data on EAEU key macroeconomic indicators from 2000 to 2021, the basic method is block-exogenous structural vector autoregression. Our results show that interest rate channel plays the key role in cross-border transmission of monetary policy effects in the region. The exception is the case when the recipient’s country central bank employs fixed exchange rate regime, rendering international interest rate channel ineffective. Another important channel is international trade: monetary policy tightening leads to the contraction of demand for the imported goods, so the exports of the recipient countries decrease. We conclude that despite heterogenous response among the EAEU countries to monetary shocks occurring in Russia, monetary policy tightening decreases economic activity in the whole economic union. The study can be extended in several ways like the analysis of the synchronization in systematic monetary policy decisions in EAEU or detailed estimations of financial channels of international transmission using banking statistics.