Economic growth and monetary policy in Russia

Modern growth models often overlook such growth determinants as the presence of structural constraints and the influence of monetary policy instruments, which requires appropriate research with the employment of empirical methods of analysis that allow clarifying the emerging and disrupted relationships between the relevant parameters of economic growth. The purpose of the study is to determine the impact of basic monetary policy instruments on Russian economic growth and inflation over a long time interval, on the components of GDP and the sectoral structure represented by processing, raw materials and transaction sectors. The methodology rests on the neo-Schumpeterian growth theory. The methods of empirical, regression and structural analysis are used. The evidence is the 2000–2023 data coming from the Federal State Statistics Service of the Russian Federation and the Bank of Russia. The paper finds that monetary policy instruments had different effects on the dynamics of GDP, its components, and basic sectors of the economy. In particular, an increase in monetisation contributed to economic growth, while an increase in the key interest rate had the opposite effect and did not provide a noticeable suppression of inflation. Simultaneously with the effect of demand restraint, the effect of supply “degradation” occurred, provoking a large amount of costs and inflationary pressure. The established difference in the impact of monetary and budgetary policy instruments on the sectoral structure and components of GDP confirms the need to change the content of these types of policies.