A case for monetary easing in Russia

The term paper for a course Advanced Monetary Economics. Genuinely enjoyed writing this project. Here I argue that Russian economy will benefit from expansion of monetary base.

“(C)hange in M2 is directly and positively related to change in GDP. Variation in those two can be on 80% explained by a liner equation. There was no quarter with positive change in GDP without a positive change in M2 of at least 15%, so that a guaranteed 5% annual growth in GDP should be accompanied by at least 35-40% annual increase in M2. Strictly speaking, a 0.25 quarter change of M2 gives 1 quarter change in GDP as a regression equation shows”.

Meanwhile, paper takes very close look at actions taken by the FED and the Bank of Russia during the financial crisis. The paper is closed by modeling the changes in the economy if a specific monetary policy was implemented.  The base model is Alternative Monetary Model by Smithin (2013).