Central Bank of the Russian Federation

09/30/2019 | Press release | Distributed by Public on 09/30/2019 04:18

Russian Journal of Money and Finance: Lean-against-the-wind Policy and Other Measures of Financial Stability

To ensure financial stability, central banks use various monetary and macroprudential policy tools. In their article, Mikhail Andreev (Bank of Russia), M. Udara Peiris and Aleksandr Shirobokov (National Research University Higher School of Economics), and Dimitrios P. Tsomocos (University of Oxford) show, how effective could be for Russia the lean-against-the-wind monetary policy, a policy which responds to the growth in unsecured lending.

Under this type of monetary policy, the key rate depends not only on the inflation rate but also on the growth of unsecured lending. The lean-against-the-wind policy, together with certain macroprudential tools, influences both the real economy and the banking system in response to oil price shocks. The authors point out, however, that other monetary policies addressed in this paper can also have a stabilizing effect on the economy.

In resource-based economies, high commodity price periods lead to a boom in lending and external debt growth followed by complications in foreign currency lending when commodity markets change. Marina Tiunova (Bank of Russia), analyzing the influence of commodity price dynamics on financial markets in six countries using data from the last two decades, concludes that trends in lending are less dependent on changes in the global market in countries that make extensive use of macroprudential policy. For example, the Columbian authorities apply seven different macroprudential tools, while in Chile they use six.

The full current issue of the Russian Journal of Money and Finance, №3/2019, is available online.

30 September 2019