Econometric estimation of the effect of transferring currency exchange rate onto consumer prices: is there a decrease?

Objective: to measure the short- and long-term effects of currency exchange rate transfer on consumer prices in modern Russian realities with the analysis of the effect asymmetry.

Methods: the study is based on the Federal State Statistics Agency and the Russian Central Bank data on the consumer price index, dollar exchange rate, and gross domestic product for 2000-2024. The study uses the autoregressive distributed lags (ARDL) model similar to error correction model (ECM).

Results: the article shows cointegration relationship between the consumer price index, the exchange rate, the GDP gap, and the global consumer price trend. The research found excess of the short-term effect of the transfer over the long-term one, the strengthening of the short-term effect of the exchange rate transfer and the weakening of the long-term effect after 2020. In comparison with the results of previous studies over the past time periods, there is a decrease in the incomplete effect of the currency exchange rate transfer on consumer prices and a reduction in its volatility. To explain the results obtained, the author concludes that the direct and indirect mechanisms of exchange rate transfer play a combined role in increasing the short-term effect regardless of the monetary policy regime. It is shown that the inflation targeting regime, the new configuration of foreign economic relations and weakened traditional channels of economic structural changes transfer influence the reduction of the transfer long-term effect after 2020. The asymmetry of the exchange rate in the long term is proved, when the effect of lower prices exceeds the effect of rising prices.

Scientific novelty: for the first time, the article assesses the effect of currency exchange rate transfer and its asymmetry in the Russian economy under the sanctions and economic structural changes after 2020.

Practical significance: the presented results can be useful in developing monetary policy regimes, managing the structure of foreign economic relations, and developing effective economic policy in modern conditions.

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