The price of oil has doubled from its value a year ago and could increase much more if there are significant reductions in the quantity of Russian oil that reaches world refineries. This is the first in a series of two posts on what these events could mean for the U.S. economy. Today I focus on the implications for inflation, and in a follow-up post I will discuss implications for real GDP.
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Category Archives: international
The Ruble: Convertible No Longer
From Anders Aslund at Project Syndicate:
And on March 8, the central bank decided to stop exchanging rubles for foreign currencies, which means that the ruble is no longer convertible.
A Forecast on Russian Policy Rate, Inflation
From Wells Fargo today:
Russia Deploys the Interest Rate Defense (and probably everything else)
Russia raises the policy rate to 20%, from 9.5%, which was itself raised on 2/11.
Ruble Futures
Front month, CME as of about 5pm Central:
Sanctions on Russia, International vs. Foreign Exchange Reserves, and Capital Controls
Interesting quote from 2020 IMF Article IV, Annex III: External Sector Assessment (distributed February 2021):
Cutting SWIFT, Sanctioning Central Bank of Russia
In the old literature on sanctions, costs imposed on the economy had to be pretty large in order to effect change (Hufbauer notes sanctions had an average impact around 2% of GDP, which wasn’t much; sanctions on Iraq were on the order of 5%). Those announced on Russia so far would not have that magnitude of impact in the short run (maybe different in the longer run). However, cutting off Russia from SWIFT — in addition to other restrictions on financial transactions — might come closer. Sanctioning the Central Bank of Russia, apparently under consideration, might come yet closer.
Russian Asset Prices Today
Ruble down about 7%, sovereign bond yields up 4.7 percentage points in 6 days, stock market down 1/3 in one day.
Russia EMP Watch
One way to assess external financial stress is to look at exchange market pressure (EMP) – the change in the exchange rate, change in reserves, and change in interest rates, possibly weighted by inverse of standard deviations. or otherwise (see e.g., Patnaik, et al. (2017) for several different versions).
Would Pumping More Natural Gas in America Have Countered Russian Pressure?
A reader suggests this is the case. Well, if there was an integrated natural gas market, maybe. (To anticipate the answer to the question: Duh, NO).