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The paper looks into emergence of external imbalances and economy’s adjustment to them. We find that Russian economy adjusts mainly via increase or decrease of domestic demand (resulting in substantial risks and losses of production), while capacity of adjustment via exchange rate channel is very limited. Another conclusion is that long-term growth rate compatible with external sustainability amounts to just 2,2%. Any attempts to boost growth above this level, not supported with profound structural reforms, would entail regular painful crises, reverting economy to the two-percentage growth trajectory.
Gurvich et al. (Fri,) studied this question.