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on Confederation of Independent States |
| By: | Harrison , Barry (BOFIT); Vymyatnina, Yulia (BOFIT) |
| Abstract: | Currency substitution, the use of foreign money to finance transactions between domestic residents, is a common feature of emerging market economies. Currency substitution re-duces the stability of money demand functions in ways that can seriously undermine cen-tral bank credibility and its efforts to implement monetary policy. Most transition econo-mies, including Russia, experienced widespread currency substitution in the early phase of transition. Following Russia’s financial meltdown in 1998, its monetary authorities intro-duced a raft of changes that substantially improved the stability and performance of the macroeconomy and reduced currency substitution. This paper investigates currency substi-tution in the Russian economy in the post-crisis period of 1999–2005. Several measures of currency substitution and different modelling frameworks consistently suggest an on-going decline in currency substitution, a shift that has important implications for Russian mone-tary policy. |
| Keywords: | currency substitution; transition economies; de-dollarization |
| JEL: | E58 F31 F41 |
| Date: | 2007–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2007_003&r=cis |
| By: | Parkhomenko, Alexander; Redkina, Anastasia |
| Abstract: | Economist have noted for decades that Consumer Price Index (CPI) in the developed countries is overstating inflation by 0,5-2,0% per year. A significant part of such a bias is found to be caused by the presence of technology products and differentiated products in CPI. An increasing weight of these products in the Russian CPI may also lead to a substantial upward bias. Nowadays hedonic indices are believed to be the most efficient way to reduce the bias. Following Triplett we have developed the taxonomy of hedonic price indices within the “direct approach”. This first step is essential in constructing a detailed set of hedonic price indices. They can be used in two ways: to estimate the bias in CPI and to elaborate alternative official price indices for IT-products. We've estimated 11% fall of price for personal computers in 2005 with the usage of hedonic price indices, a 11-23% positive bias in price index for PC in Russia was also calculated. We also have found that Russian CPI could be upward biased by 0,12-0,23% per year due to new goods and quality change effects for PC. |
| Keywords: | Hedonic; Price index; bias; CPI; PC; inflation; new economy |
| JEL: | L0 E31 C43 |
| Date: | 2006–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:1506&r=cis |