A Minimalist Model for the Ruble During the Russian Invasion of Ukraine / Guido Lorenzoni, Iván Werning.

Format:

Book

Author/Creator:

Lorenzoni, Guido.

Contributor:

National Bureau of Economic Research.

Werning, Iván.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29929.

NBER working paper series no. w29929

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

This note isolates an overlooked economic force for the Ruble to appreciate in response to international sanctions limiting exports to Russia. The economic intuition is that when Russians are unable to buy the mix of foreign goods they wish, then foreign goods becomes less attractive, increasing the demand for domestic goods; to reestablish an equilibrium a real appreciation is needed to raise the relative price of domestic goods and incentivizing the accumulation of foreign assets and the import from non-sanctioning countries. We also review well-known forces for a depreciation (e.g. Russian export reduction). Our analysis emphasizes that the exchange rate is an inadequate signal of welfare impacts and the effectiveness of sanctions.

Notes:

Print version record

April 2022.