Elvira Nabiullina, Central Bank of Russia governor is credited with saving Russia's economy from falling apart. Russia's economy has been held back by sanctions, corruption, and low prices of oil and gas, however the Central Bank of Russia has exhibited promising policymaking.
As a result of the crisis of 2008-9, Russia enacted two sets of reforms: First, it diversified its sources of funding. Second, its international reserves grew significantly. This has helped prop up the economy while oil prices are falling. Some critics say the Central Bank's strict monetary policy is the reason behind Russia's struggling economy because it cripples investment with the high interest rates, however corporate profits rose 50% last year. Ms Nabiullina cites the cause as "Our economic downturn is mostly the result of structural factors.” Her biggest worry is how "how quickly and dynamically" the country can improve its business environment. Elvira Nabuillina seems confident in her ability as well as the Central Bank's ability to bring Russia toward economic prosperity; it will be interesting to watch what path they choose to take.
http://www.economist.com/news/finance-and-economics/21696946-russian-economy-bad-way-elvira-nabiullina-has-saved-it?cid1=cust/ednew/n/bl/n/20160414n/owned/n/n/nwl/n/n/n/n
Both steps taken by Russia's central bank are solid efforts at attempting to reinvigorate the Russian economy. When it comes to Russia's strict monetary policy there are benefits and costs, one being that it makes there economy more resistant to economic fluctuations due to a recession abroad but limits what the Russian economy can due to combat inflation. The criticism about Russia's strict monetary policy crippling investment may be ill-formed on the critic's part as higher interest rates would actually increase investment because saving would become less attractive as money being saved would progressively lose value over time so people would want to spend their money sooner.
ReplyDeleteI agree with Richard. That's awesome that the Russian economy has improved, but I'm curious to see what will happen with these stricter monetary policies.
ReplyDeleteI agree with Phoebe and Richard. It is great that Russia is striving to improve their economy. Diversification is almost always a healthy choice. On the other hand, higher interest rates due to a strict monetary policy will likely decrease investment. This may not impact the country in the best way. It will be interesting to see what comes about from these policies.
ReplyDeleteI think this really goes to show that there is never one correct answer for economic policy and while a policy usually leads to a certain outcome, it is never definite. I thought that strict monetary policy would have to lead to impeded profits for Russian corporations, but there are so many factors at play that this is not always true.
ReplyDeleteAnother way that Russia could improve their economic growth is to stop angering all of the other powerful economies in the world. Russia has been rocked by economic sanctions over the past few years. While these sanctions may not have a huge immediate impact, they are projected to begin causing problems in the future. Other than that, it seems like Russia's monetary policy has done a great job of promoting economic growth.
ReplyDeleteSanctions have had some drastic effects in the decision making of Putin. It is good to see that Russia has made some changes to make growth. this will not only benefit Russia but everyone involved with them in trade.
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