Modeling the Balance Sheet Channel of Monetary Transmission in Russia

Mariya A. Shchepeleva ()
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Mariya A. Shchepeleva: National Research University Higher School of Economics, Moscow 101000, Russian Federation

Finansovyj žhurnal — Financial Journal, 2020, issue 2, 39-56

Abstract: Topicality. After the global financial crisis of 2008–2009, research on the impact of financial variables on the real sector has intensified. According to the theory of monetary transmission, a change in the short-term interest rate affects the volume of investment in both direct and indirect ways, through a change in the balance sheet indicators of creditors (bank lending channel) and borrowers (balance sheet channel of monetary transmission). Analysis of various transmission channels provides relevant information for the regulator, allowing for a more accurate estimation of monetary policy’s consequences. This paper aims to assess the extent to which the balance sheet channel was at work in Russia throughout 2010–2017. By applying both micro- (panel dataset) and macroapproaches (time series), we establish that there are certain signs of the balance sheet channel in the Russian economy, though it is not fully compatible with the traditional transmission chain. Our analysis provides evidence that there is a statistically significant link between short-term interest rate and investment. Still, we do not find robust empirical support for the remaining linkages in the transmission chain. Further research is needed to provide more precise quantitative estimates of the linkages within the balance sheet channel and compare its significance with other channels of monetary policy transmission.

Keywords: balance sheet channel; financial stress; monetary transmission; panel VAR; Bayesian VAR (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:200203:p:39-56

DOI: 10.31107/2075-1990-2020-2-39-56

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