Front Matter Page
Monetary and Exchange Affairs Department
Table of Contents
Summary
I. Introduction
II. Monetary Policy in the Soviet Union
A. The Conduct of Monetary Policy Until 1987
B. The Conduct of Monetary Policy 1987–December 1991
Reforms of 1987-88
Credit policies
Monetary instruments
Foreign exchange policies
III. Monetary Policy During the Ruble Area Period: January 1992–July 1993
A. Introduction
B. Credit Policy
Government financing
Intersate credits
Directed credits
C. Monetary Policy Instruments
D. Foreign Exchange Policies
IV. Monetary Policy After the Ruble Area Period
A. Introduction
B. Financing of the Deficit
C. CBR Refinancing
D. Introduction of New Monetary Instruments
E. Coordination of Monetary Instruments
F. Financial Policies and the Exchange Rate
V. Conclusions
Text Tables
1. U.S.S.R.: Total Domestic Credit 1986–1991
2. Effective Reserve Requirements 1991–1995
3. Monetary Policy Implementation
4. Russian Inflation (Monthly) 1992–1995
5. Exchange Rates and Foreign Exchange Market Operations
6. CBR Refinance Rate (Annual) 1992–1995
7. CBR Credit Auctions, February 1994–June 1995
Appendix
I. The Russian Financial Sector
Appendix Table
Russian Banking Intermediation 1992–1995
References
Summary
This paper analyzes the evolution of monetary policy in Russia, focusing on the period 1992–1995. Previously, in the Soviet Union, monetary policy was conducted largely through direct instruments—chiefly administrative controls and direct credits from a monobank (the Gosbank) to specific sectors of the economy or to the government.
The institutional heritage of the Soviet Union, in particular a poorly implemented ruble area, pressures to finance a large fiscal deficit, and a lack of monetary instruments drastically, compromised the CBR’s ability to implement an effective monetary policy in the period immediately following the establishment of the Russian Federation as an independent country.
This paper describes the evolution of the CBR from a passive institution with insufficient instruments to develop and implement an independent monetary policy, to a full-fledged central bank. It traces the steps that the CBR took to shift from the use of direct monetary instruments to a system of indirect instruments where the CBR influences overall market conditions by influencing the supply of reserves in the banking system. This shift required changes in both instruments and procedures. Direct monetary instruments are relatively simple to implement and have the advantage of an apparently straightforward link to the policy objectives. The shift to indirect instruments required new techniques of analyzing market developments and new ways of intervening in the market. It also required clearer definition of the objectives of central bank intervention. In describing this transformation, the paper highlights the importance of matching the instruments used to conduct policy with the structure of the financial market within which they operate. It also discusses the measures that must be introduced in parallel in order to facilitate an effective monetary policy implementation.