Monetary Policy and Liberalisation in Poland, Russia and the United Kingdom

Money Growth–Inflation Relationship in Postcommunist Russia

“…In earlier studies (Easterly and Viera da Cunha, 1993;Fisher, 1994;Koen and Marrese, 1995;Hoggarth, 1996;Allen et al, 1996;Korhonen, 1996Korhonen, , 1998Korhonen and Pesonen, 1998), researchers claimed that inflation in Russia, since price liberalization at the beginning of 1992, clearly has monetary roots. 7 In all of these studies, the past growth of ruble broad money (M2) is claimed to have had the strongest influence on the inflation rate among various monetary aggregates.…”

“…(2) yields an autoregressive dynamic model suggested in the previous literature (Hoggarth, 1996;Allen et al, 1996;Korhonen and Pesonen, 1998). This model is specified by Eq.…”

“…Similarly, Buch (1998) claimed that the speed of transmission of monetary impulses into prices is inversely related to the sophistication of a country's financial system, and this process is comparatively fast in Russia because its financial system is not very sophisticated. Hoggarth (1996) and Allen et al (1996) suggested that a temporary fall in the inflation rate may not only reduce the extent to which money growth affects future inflation, but also, by establishing a lower inflationary environment, 6 In 1998, the official exchange rate went from R5.96/$ to R20.65/$, a depreciation of 246%. From August 1998 to the end of March 1999, the ruble depreciated 287%, from R6.24/$ to R24.16/$.…”

“…The dummy variable takes a value of 1 for October 1994 and 0 otherwise. 14 Following earlier studies (Easterly and Viera da Cunha, 1993;Koen and Marrese, 1995;Hoggarth, 1996;Allen et al, 1996;Korhonen and Pesonen, 1998), changes in prices () are modeled as a function of each of the aggregates of money supply (m). All variables are in growth form and the following model is estimated,…”