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Central banking and monetary policy implementation in Russia
In this chapter, we study the evolution of monetary policy regimes and operational framework in Russia during the last 30 years. After the collapse of the Soviet Union, the development of monetary policy instruments in Russia started virtually from scratch. Over the course of time, the central bank has switched from direct lending to the Treasury and companies to exchange rate targeting and then to inflation targeting. In terms of operational framework development, the regulator was gradually replacing administrative tools with market ones. Initially, the US model with primary dealers and government bond market as a core of financial system was a benchmark but later it was abandoned as severe crises in the 1990s hit. Currently, the operational framework is functioning generally in line with the European tradition of interest rate corridor and provision / absorption of liquidity to commercial banks on a regular basis. Paradoxically, the sanctions have rather contributed to the financial stability of the Russian economy – cut off from global capital markets, the country is protected from financial shocks, while painful crises triggered the implementation of measures that made the financial system much more robust. The clear achievements of the last 30 years are stabilization of inflation and a significantly more sustainable financial system.