• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site

Working paper

Non-Keynesian savings of Russians

Russian recession of 2014/2015 began with ruble run and rise of inflation. It is just the opposite of the western-type deflationary slump combined with money hoarding. Does it mean that Russians need different micro-model to describe saving and consumption behavior? This study show that work-horse log-linearized rational SDF with CRRA utility still provides good explanation for Russian consumers. It explains dollarization, domestic equity market avoidance, preference for real estate, and chiefly - wary attitude towards rubles. Expectations derived from the past and interactive preferences lock macro economy in the state of steadfast distrust in ruble, prone to inflation. For a while one should not expect Keynesian-type deflationary cycle in Russia. The next recession is likely to be inflationary, requiring monetary tightening. This reasoning is generalized for other emerging countries. Free-floating currency and inflation targeting do not mean easy way ahead for the country with recent negative inflation experience.