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Sergey Glazyev and Politics of the Central Bank of the Russian Federation

The newspaper of the TRV-hunger turned to Oleg Shibanova , Professor of Finance Rash, academic director of programs for the economy of the Corporate University of Sberbank, with a request to comment on the scientific views of the Academician of the Russian Academy of Sciences Sergey Glazyev .

I already managed to speak out about the general views on the economy of the respected academician Glazyv in Forbes [1]. But then there was an opportunity to look at the scientific views of Sergei Yuryevich, based on his article in the journal "Questions of Economics" [2]. The analysis of this study is extremely important, since the report of Glazyev is also based on these opinions, presented on September 15, 2015 at a closed meeting of the interdepartmental commission of the Security Council of the Russian Federation.

The author’s article in “Economics matters” is devoted to the analysis of the monetary policy of the Central Bank of the Russian Federation. As other materials show on the official website of the respected academician Glazyev [3], the issue of interaction between the Central Bank of the Russian Federation with financial markets and the economy is key for understanding other proposals, including by industrial policy. Therefore, let's go through the text and analyze what the conclusions of the article are based on.

"Economic miracle" or "trap of medium income"?

To begin with, let's look at an interview with Sergey Glazyev [3], or rather, at the very first statement: “ In Russia, it is possible to increase GDP growth to 7% per year.” This indicator does not look fantastic: in Russia from 2000 to 2007, the economy grew about these pace [4]. As we know, China has shown higher pace since 1991 (the average geometric is about 10% per year).

What can be counterarguments for this, very attractive proposal? After all, Russia in 2008–2014 showed only 1.56% of average height, and in 2010–2014 (with the exception of the failure of 2009) - 2.82%. This is too low, while slowing growth for Russia. Growing 7% per year will be more comfortable in many respects. Why are other economists less optimistic? For example, the Central Bank now predicts a slight decrease in GDP in 2016 at the current oil prices [5].

Here, history is associated with the so -called trap of average income. High growth rates of GDP are the usual characteristic of “catching up” for countries with low GDP per capita. At the moment, Russia with its $ 12,736 is significantly ahead of China with its $ 7594 [6]. In an even more accurate comparison of the parity of the purchasing ability to per capita, Russia is far ahead of China: $ 25,636 versus $ 13 217.

The question arises: is it true that countries with higher GDP per capita grow slower than poor countries? We can observe a similar fact on the example of modern Europe or Japan compared to violently growing China and India. Such a view of growth is usually called a “trap of medium income” [7]. The idea standing behind the issue of fundamental changes is as follows: relatively poor countries can borrow (“simulate”) technology and accumulate capital (in accordance, for example, with the Solou model [8]).

Upon reaching a certain level of national wealth of capital, there are already enough new investment ideas with a sufficient norm of profit - which means that the economy does not need new financing, only to maintain the level of capital and technology. There is a need for inventions ("innovations"). This requires high -quality education and focus on human capital as a whole (see the most interesting discussion of Kudrin and Mamut [9]). Also important factors in improving the possibilities of further growth are the length of the road network (the more, the better) and the size of the state -owners to GDP (the smaller the better).

This is one look at the complication of opportunities for the growth of the economy. The second, and even more sad is a story about possible “statistical changes” [10]. It may turn out that our ideas about the trap of average income are too optimistic and inaccurate: many countries experienced a sharp decrease in growth due to the so-called regression to the average value [11].

Imagine that you ask students to go through an IQ test. After that, you select 20% of the best and 20% of the worst and give them the opportunity to write the same test. Then in a new experiment, the results of the best will deteriorate in the direction of the average, and the results of the worst will improve. Part of their initial result was associated with random effects, simpler questions or confusion, which may disappear in the second attempt.

Larry Henry Summers and Lant Pritchett [12] argue that countries that had high GDP growth in the past are growing much slower because of this effect of accident. In the future, they do not return to previous trends - and this is the expected result, not even associated with the growth of wealth, but simply with the nature of statistical dependencies.

In general, it is very likely that high growth rates are the history of the past of Russia, and in the future it would be very good for us to reach stable 3-4% per year, which may become a “new norm”.

Inflation targeting and currency in developing economies

Now let's move on to the analysis of the work of the respected Academician Glazyev in “Economics issues” (hereinafter - the article). I will follow the logic of the article and comment on it in order. The discussion begins with the question of what is inflation targeting and how it formally differs from the fight against inflation in the previous version of monetary policy (hereinafter-the DCP). Since the Central Bank of the Russian Federation has a mandate for inflation, and not in terms of growth or growth in lending to the real sector of the economy, it is really important to understand this difference.

The new type of DCP meets the standards of inflationary targeting, which are used in many countries of the world, including our BRICS colleagues, namely Brazil, India and South Africa. China in this regard is a slightly more difficult case, since the People’s Bank of China also secretly responsible for the growth rate of the economy.

The first question that Sergei Yuryevich asks is the ratio between the inflation management using a interest rate (in Russia - a “key rate”) and a free ruble rate. According to the respected academician (see p. 2–3 of articles), one cannot resolve a flexible course in a situation where a significant part of the market is determined by imports [13]. In addition, the author claims that the Central Bank of the Russian Federation is subject to “myth of one tool” - “only the key rate is used to manage inflation”.

I would like to note that it is quite difficult to agree with both statements. A free exchange rate for a not very large open economy (and Russia sells a lot with the rest of the world - approximately like France, Italy or Great Britain in relation to GDP [14]) - the least unpleasant way to adjust in conditions of reducing prices for export goods. When prices for almost all of our export goods (oil, gas, metals) fall, we will not receive dollar revenues from the sale. If at the same time the ruble rate is fixed, the import changes weakly, and this is greatly reflected at the rate of reduction in GDP. We saw a very similar story in 2008-2009, when the Central Bank of the Russian Federation refused to let go of the ruble, which led to a loss of almost $ 200 billion in five months and a sharp decrease in GDP (about -8% in 2009). Therefore, it seems to me not very correct to assume that you can keep a fixed course with a decrease in export income.

As for the tools that the Central Bank of the Russian Federation currently uses to control the stability of the market, it would be worth mentioning the provision of ruble liquidity to banks for pledges [15] and repo [16]. More importantly, as our study showed, this is the provision of foreign exchange liquidity within the framework of repo operations [17].

Dictionary

REPO transaction (from the English. Repurchase Agreement, Repo) - a transaction of purchase of security with an obligation to sell after a certain period at a predetermined price.

This practice, especially activated in January 2015, greatly influenced both the foreign exchange market and the possibility of banks to help companies in paying external debt.

What would happen if the Central Bank of the Russian Federation began to “control the ruble course”, as the respected colleague offers? It is difficult to say, without peering into a parallel universe in which this is implemented, but it is possible to compare the results in other countries trying to maintain a course when exporting external factors (reducing export prices, outflow of capital, reducing direct investments in a real economy, etc.). Almost all of them experienced the same thing: at first a gradual decrease in reserves, closer to the end - a speculative attack and in the final - a floating exchange rate with almost zero reserves of the country's central bank. Mexico in 1995 became a characteristic example.

Yes, of course, you can listen to the words of another respected expert-Andrei Cherepanov, a member of the Monetary Committee of the Central Bank of Russia [18], and to say that the Central Bank of the Russian Federation can still redeem the entire monetary base using reserves. The only problem in this story is that with a decrease in the monetary base, the money supply will also decrease, which means the liquidity of the banking system. Which will almost automatically lead to a deep recession - and then it is not only possible, but it will also be necessary to scold the Central Bank of the Russian Federation for inadequate perception of reality. But not earlier.

Central Bank of the Russian Federation and inflation targeting

We will discuss the second part of the statements of the respected academician Glazyev: that the appearance of the dollar as the main reserve currency has significantly changed the structure of the “trillema” in recent years. Let me remind you that the “trilemma” claims: a small open (in the sense of trade with the rest of the world), the country cannot simultaneously maintain a fixed course of its currency, have an independent DCP and free movement of financial flows of capital. According to the author, now there is a new “quadrilem”: if the country does not issue a reserve currency, it cannot control either the DCT or the exchange rate.

Sergei Yuryevich claims that the “new reality” is significantly different from the past and other parts: the monetary base “grows exponentially”, pours into the markets of all countries of the world and increases the canopy of “almost free loans” (see page 4 of articles).

I would like to start with two comments. The first is that the "trillem" can be tested empirically [19]. It turns out that even after the disappearance of the Golden Standard, the Trillema is quite the case and the countries really choose between these three variables. Therefore, the "quadrilem" does not seem to be responsible for the data. I would have read the study of the respected academician on this issue with great pleasure.

The second is that the expansion of the monetary base leads to huge liquidity flows. Here you need to carefully watch how this monetary base goes into money supply or simply into loans to the population and business. The European Central Bank is practically forced to pursue its policy of buying up government bonds of the eurozone countries precisely because banks do not want to issue loans, which means they stop expanding the money supply and the possible growth of the economy. All parties are rational here: banks understand that borrowers are not so rainbow prospects as before the financial crisis of 2007-2009, and borrowers do not go for loans.

In addition, Sergey Yuryevich’s statement is surprising that world financial markets are not regulated. In recent years, especially after wild scandals with Libor manipulation and exchange rates, regulation is becoming much more rigid, and banks have already paid about $ 200 billion to close cases against them. Therefore, to argue that there are speculators who receive financing from the central banks of developed countries and playing in the markets of developing are very risky tactics: we can suddenly understand that these speculators are the country's population, buying dollars to preserve their small savings ...

Finally, is it true that the Central Bank of the Russian Federation transferred the Office of its monetary policy to Western central banks, and its employees do nothing and only receive huge income for investing in the papers of these developed countries? This could be said if the conservative policy of the former Minister of Finance Kudrin had not led to significant accumulations of assets in the reserve fund and the National Welfare Fund. These funds were compiled from assets nominated in dollars - and oh, how grateful to them the Government of the Russian Federation, which can maintain budget expenditures when the prices for export goods fell!

It is a pity that a respected academician does not show specific data about the participation of speculators in the Russian market and about who “drives the course”. But the fact that the ruble exchange rate is significantly dependent on the price of oil and that this effect is naturally connected with how much our export in dollars costs, how many of these dollars come to the foreign exchange market, how much we buy imports and spend the same dollars on the same, - about this is a briefly on page 8 of his article.

Our study shows that a huge part of the change in the ruble exchange rate over the past year explains the change in the price of oil Brent - but then why are the claims of the Central Bank of the Russian Federation, and not companies for the production of shale oil in the United States? And if Sergey Yuryevich proposes to “stabilize the course at a new level” (p. 8 of article), then he could not clarify why it was necessary to devalue by 1.5 times, and not by 2.1 or 3.75?

Of course, you can drop the ruble very low, to the level of 100 rubles. For the dollar, and then keep such a rate confidently - buying up dollars in the market, while the price of oil is kept above $ 40 per barrel. But I can imagine what panic would have developed in this situation, and also what would happen to the banking system, and without such a devaluation quite strongly affected by the crisis.

Central Bank of the Russian Federation and control over the movement of capital

Further, Sergei Yuryevich talks about the impossibility of inflation targeting without monitoring the movement of capital (see page 6 of the article).

This statement also does not look accurate. At the moment, many countries of the world use inflation targeting without capital control (for example, India, Brazil or South Africa). Moreover, when the author talks about “the collapse of the course under the influence of the outflow of capital”, he again forgets to say that there could be no change in the course - if it weren’t for such a huge and long drop in oil prices.

Sorry, dear colleague, but if in 2008-2009 prices fell about the same (three times) for a very short period of time (less than six months), then in 2014-2015 they decreased about the same-and so far, from January 2015, they are in no hurry to grow. It would be interesting to see how exactly one could keep the course under such difficult external conditions.

Central Bank of the Russian Federation, investment and flexible course

The next statement is about the transition to a flexible course in November and an increase in interest rate in December 2014. The author claims that investment in the real sector has ceased to be attractive first due to increasing the key rate, and then due to improving the conditions for the operations of the currency repo.

Dear academician, probably, I do not agree that investments have been gradually inhibited since 2012 [20].

From the beginning of 2012 to the first half of 2014, investments stopped growing at first, and then reduced from the third quarter of 2013. This is a certificate of some much more serious, probably structural problems, and not tactical changes due to the key rate. Moreover, the statement about processing production and their inability to compete is also inaccurate [21]. Russian companies significantly increased their profits (40%!) - and still do not invest. Why, I would like to know from the author ...

It would be very curious to see where Sergey Yuryevich takes his calculations of the benefits of investments in the foreign exchange market on page 6–7 of the article. Suppose someone is a major player in the market and is able to move the course, he can earn on the proposed operation-and even then I would like to see all the calculations and riskiness of such actions. But who is this major player if we sell the currency mainly exporters, and buy - importers and households?

Central Bank and its mandate

The last thing you want to talk about is the discussion of the "mandate" of the Central Bank (p. 8 of article). I deliberately use the word “mandate” in the same sense as a respected academician Glazyev uses the word “targeting,” as an Erzatz of the usual tasks of the Central Bank.

According to Sergei Glazyev, the Central Bank of the Russian Federation should provide:

preservation of the purchasing power of Russians;
Conditions for economic growth and investment.

Alas, the mandate of central banks almost never implies such tasks. The regulator does not set the goal of investment and economic growth - this is the task and key indicators of government efficiency. The Central Bank of the Russian Federation is obliged to achieve low inflation (the goal is 4% in 2017) and financial stability.

If you look at inflation, then in 2014 it increased greatly compared to 2013 (11.4% versus 6.5%). Is this the failure of the Central Bank of the Russian Federation? Yes. Is he to blame for this? No.

In 2014-2015, several external shocks hit Russia. Two main ones - a decrease in export prices and sanctions for borrowing in the West. Such shocks in any developing economy that greatly depends on the export of raw materials lead to an increase in inflation and a decrease in growth rate, especially if it was ensured by the expansion of loan and consumption, as ours. Similar examples are Brazil in the same period or Belarus closer to us. In the first, inflation grows from 6.41% in 2014 to two -digit numbers in 2015 [22], and the purpose of the Central Bank of Brazil is 4.5%. В Белоруссии же курс местной валюты очень сильно падал в 2011– 2012 годах. Результат — инфляция в 2012 году в 60% [23].

Этот результат называется pass-through : местная валюта дешевеет из-за уменьшения притока долларов из экспортного или кредитного источника; падение курса валюты увеличивает себестоимость производства, если в нем используется импорт, как у нас; это дает рост цен и на импорт, и на товары внутреннего производителя. Естественный путь изменения ситуации — улучшение конкуренции, открытие рынков для мелкого и среднего бизнеса, снижение налогов на них, облегчение регулирования. Все эти действия неподконтрольны ЦБ.

Немного про финансовую стабильность. Почти очевидно, что в декабре 2014 года ЦБ РФ не до конца реализовал свои возможности, что в какой-то момент довело курс доллара до (неравновесных) 80 руб. Повышение ставки до 17% не сразу дало необходимый эффект. Но валютная ликвидность по РЕПО [24] значительно улучшила ситуацию с волатильностью рынков.

В целом можно утверждать, что ЦБ РФ понимает, как обеспечить стабильность рынков. Рост инфляции, скорее всего, останется в 2014–2015 годах, когда резкое снижение курса рубля в силу снижения цен на нефть стало единовременным фактором ухудшения ситуации.

Ставки процента и инфляция

Еще одно интересное замечание уважаемого академика: «Повышение процентных ставок для снижения инфляции и повышения курса национальной валюты — стандартная рекомендация МВФ. Она основана на математических моделях рыночного равновесия, которые не соответствуют экономической реальности, но иллюстрируют очень простые и внешне убедительные суждения» .

Я вынужден не согласиться с коллегой. В целом инфляционное таргетирование является очень разумным подходом для увеличения роста экономики и уменьшения инфляции на среднесрочных горизонтах (см. более подробно [25]; также крайне интересны результаты по ЮАР, показавшие значительное улучшение после введения таргетирования в 2000 году [26]). Не знаю, откуда автор получает такие результаты, к сожалению, список литературы в его статье ограничен тремя ссылками, две из которых не являются академическими.

Хочется также отметить, что центральные банки Европы, Японии, США и многих других стран в данный момент используют инфляционное таргетирование в качестве ДКП в ситуации, когда:

наблюдается низкая или очень низкая инфляция (например, почти дефляция в Еврозоне);
рост экономики невысокий.

В рамках этих реалий расширение кредита не разгоняет инфляцию (и, к сожалению, не разгоняет и экономики Еврозоны — России было бы выгодно, если бы основной торговый партнер начал бурно расти и покупать больше наших товаров). В США снижение ставки почти до нуля, кажется, привело к росту экономики — но вот уже на прошедшей неделе они не решились повысить ставку, потому что внешние факторы работают против экономики.

Зато в Бразилии ставки достигли 14,25% [27]. Это является методом борьбы с инфляцией. ЦБ Бразилии согласен, что нужно снизить инфляцию для облегчения условий ведения бизнеса и планирования инвестиций. Конечно, это временное повышение ухудшает возможности роста экономики в этом году, зато может принести много выгод в будущем.

Незагруженные мощности и производство

Наконец, про загрузку мощностей (стр. 9 Статьи). Уважаемый академик показывает, что она сейчас около 60% — что ниже исторического максимума для российской экономики в 68%. Более того, если бы увеличить загрузку до 100%!

Проблема с этим желанием в том, что наш уровень загрузки не был выше этих 68% даже в бурные годы роста экономики в 2006–2007 годах. Коллеги из Центра макроэкономических исследований Сбербанка написали короткую справку по этому вопросу [28]. Сейчас есть небольшие возможности, которые всё же не увеличат рост до 7% с прогнозируемых в 2015 году –4%. А как достичь загрузки в 80% при качестве этих мощностей и снижающемся внутреннем спросе, было бы очень интересно узнать.

Conclusions

Анализ статьи уважаемого академика Глазьева показывает, что автор не всегда в курсе современных исследований. К сожалению, трудно проследить источники его утверждений, но очень многие из них выглядят как неточные или прямо неверные.

Инфляционное таргетирование, на которое сделал основной упор Сергей Юрьевич, действительно предполагает управление при помощи денежно-кредитной политики, но всё, что было поставлено в вину ЦБ РФ, является результатом внешних вызовов России, таких как падение цен на экспортные товары, снижение доступности внешнего кредитования и слабый рост в экономиках основных торговых партнеров.

Наконец, переход на плавающий курс рубля в ноябре 2014 года был полностью оправданным методом балансирования внешней торговли. Что бывает, когда страна принимает другие решения, можно узнать из случая Латвии в 2008–2009 годах.

1. www.forbes.ru/mneniya-column/gosplan/299409-nebezopasnye-sovety-v-chem-oshibaetsya-sergei-glazev

2. www.glazev.ru/upload/iblock/129/1299749d3f0be1fe108d80969d6e718f.pdf

3. www.glazev.ru/econom_polit/448/

4. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?page=1

5. http://cbr.ru/publ/ddcp/2015_03_ddcp.pdf

6. http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

7. www.imf.org/external/pubs/ft/wp/2013/wp1371.pdf

8. ru.wikipedia.org/wiki/Модель_Солоу

9. http://strelka.com/ru/summer/event/2015/09/08/from-oil-dependancy-towards-human-capital-open-discussion-with-alexander-mamut-and-aleksei-kudrin

10. www.voxeu.org/article/growth-slowdowns-middle-income-trap-vs-regression-mean

11. en.wikipedia.org/wiki/Regression_toward_the_mean

12. www.nber.org/papers/w20573.pdf