An Estimation of Fundamentally Substantiated Real Exchange Rate of the Ruble
Russian Economic Developments, No. 2, pp. 65-67, 2015
3 Pages Posted: 26 Feb 2015
Date Written: February 24, 2015
The key factor in the strengthening of the real exchange rate of the ruble in the 2000s was the transformation based growth of Russia’s economy (the Balassa-Samuelson effect) coupled with the improving foreign trade conditions. As can be concluded on the basis of data for Q4 2014, for the ruble’s real exchange rate to return to its fundamentally substantiated level, it was to be increased by 6.2%. In view of expectations of inflation in the RF and her trade partners at the rates of 12-14% and 3-4% respectively, the real effective exchange rate of the ruble in 8-11 months will return to its equilibrium level, if the nominal rate remains stable and the fundamental factors do not deteriorate.
Keywords: Russian economy, inflation, monetary policy
JEL Classification: P24, E52
Suggested Citation: Suggested Citation