SVAR Modeling of Inflation Response to Monetary Policy in Russia

Abstract

The objective of this work was to assess the impact of the monetary policy of the central bank of the Russian Federation on the level of inflation using the structural autoregression model (SVAR). The results show significant inflation responses in the first months to different approximations of monetary policy. Thus, with an increase in the money supply (M2) by 1%, inflation in the first month increases by 0.23%, and with an increase in the interbank lending rate by the same amount, inflation increases by 0.125%. Inflation attenuation at the 90% level of significance occurs at 5 and 6 months, respectively. At the 95% level of significance, when the money supply changes, the inflation response dies out in the second month. When changing the interbank loan rate, the attenuation occurs in the fifth month.