And yet it is spinning – Newspaper Kommersant No. 237 (7438) of 12/21/2022

Economists of the Bank of Russia agreed with the Ministry of Finance in assessing the new actual construction of budget rules for Russia. According to the calculations of researchers from the Central Bank, the option of the budget policy currently being implemented by the government — saving a part of oil and gas revenues while balancing costs with domestic loans — on models demonstrates greater efficiency in terms of overall welfare compared to the alternatives available to the Russian Federation: after the introduction of mutual sanctions with the West there is not much.

The latest scientific papers published in 2022 by employees of the Bank of Russia quite convincingly demonstrate the increased ability of the Central Bank to develop applied analytical methods for practical application. In December, three papers were published at once, concerning the most important problems in this area. An article by Mikhail Andreev from the Central Bank’s DIP “The Impact of the Fiscal Rule and Model Assumptions on the Response of Inflation to Terms of Trade Shocks” somewhat after the fact answers the question of what economists of the Bank of Russia think about a new set of fiscal rules implemented partly in 2023-2025 at the initiative of the Ministry of Finance . Despite the fact that the question of the configuration of the new budget rule after the start of the Russian military operation in Ukraine, which led to the arrest of part of the international reserves of the Russian Federation and mutual restrictions with the largest economies of capital transactions, seems to be the subject of exclusively domestic political discussions, there is no ready-made “scientific” answer to it. There is neither a general nor an optimized for the Russian economy answer to the question of what a fiscal rule is in general, and there are quite a few works by economists comparing the effectiveness of rules that limit the impact of commodity export prices on key macro indicators in different jurisdictions. In other words, to one degree or another, all the budget rules in the world were developed “blindly”, including the Russian design, which should be fully operational from 2025 (the budget for 2023–2025 contains rules with a transitional period that deviates from permanent formulations), — the work of Mikhail Andreev compares theoretical alternatives for the Russian Federation on a mathematical model calibrated for this economy and shows that the choice made de facto looks optimal.

One of the features of Andreev’s work is the inclusion in the modeling of the so-called Ricardian households, that is, households that have and use alternatives to consumption and savings: two types of households are used in calculations for the Russian Federation.

It should be noted that in another important publication of the Central Bank – an article by economists of the Arkhangelsk branch of the Central Bank Elena Chetverikova, Yulia Gudkova, Anna Vorontsova and Yulia Manukhina – for the first time analyzes (based on materials up to 2020 inclusive) the heterogeneity of savings activity in the Russian Federation and methods for analyzing and predicting its application for regions countries. The nature of the Russian savings boom, a key topic for the Bank of Russia’s fall 2022 discussions in setting monetary policy, remains a subject of research, and the Arkhangelsk paper answers (in a highly technological way) at least part of the questions about how to study this problem. In particular, the fundamental differences in the boom for Moscow are shown and three different clusters of savings activity are typified with their own set of supposed reasons. In turn, Mikhail Andreev’s article takes into account the different reactions of saving and non-saving households to one or another version of the budget policy and is important for the forecast.

Mikhail Andreev identifies eight generalized variants of the budget rule. In options A1 and A2 (commodity) additional revenues are spent by the government or (option A2) directly by citizens, in option B the entire budget surplus is saved abroad, in option C external loans are also used to cover the market-driven budget deficit. Option D (foreign savings, domestic loans) was de facto implemented by the Russian government in 2010–2021. Option E assumes state savings of income surplus above the established level in rubles without internal loans. Finally, option F is the de facto declared budget rule of the Ministry of Finance from 2023: both savings and loans within the Russian Federation. Calculations show that the best option for most parameters (there are six of them – inflation, domestic output, exchange rate, interest rate, household consumption and change / decline in welfare) is option D, the implementation of which is currently impossible (as well as options B and C). Of the remaining options, rule A1 and F are theoretically better – A1 requires frequent sequestration of the budget, which does not provide advantages over the de facto chosen rule F.

The author makes a reservation: there is another unexplored and realistic option, in which the government sterilizes excess income from oil and gas exports in the accounts of the Ministry of Finance without using them in an economy with constant Central Bank liquidity management operations as part of inflation targeting. Perhaps this is one of the debatable sub-options in real politics given the limited capacity of the domestic loan market.

Finally, an article by Sergey Seleznev from the Central Bank and an independent researcher Ramis Khabibullin with the most abstract-looking title “Fast Evaluation of Bayesian State-Space Models Using Simulations” is a description of the algorithm for applying neural networks to analyze strong instabilities within modern SV-DSGE mathematical models of the economy. Sergey Seleznev and Ramis Khabibullin give practical application already in the text – these are “seasonal estimates with shifts”. The problem that arises with the reliability of estimates of any seasonality in 2020–2022 (the pandemic plus the sanctions campaign) was repeatedly described by Kommersant – the work shows that the accuracy of the Central Bank’s analysis of such “shifts” can be significantly higher in the future.

Dmitry Butrin