Familiar Traits in a New Reality: The Central Bank of Russia's Response to Economic Sanctions

The economic sanctions introduced by the United States and European Union against Russia since 2014 have specifically targeted Russia’s financial system, while having significant negative consequences for Russia’s macroeconomic position. Yet, today the Russian financial system continues to function in a stable manner while inflation is low for modern Russian standards. The Central Bank of Russia (CBR) is the main actor responsible for guaranteeing the stability of the Russian financial system and has used a range of monetary and institutional policies to do so. Therefore, this research aims to explain the monetary and institutional policies pursued by the CBR in response to economic sanctions in the context of Russia’s political economy. The research uses process tracing in order to analyse the policy decisions by the CBR used since 2014 and explain them in the context of developments in Russia’s political economy in recent decades. The research finds that the CBR’s monetary policy...Show moreThe economic sanctions introduced by the United States and European Union against Russia since 2014 have specifically targeted Russia’s financial system, while having significant negative consequences for Russia’s macroeconomic position. Yet, today the Russian financial system continues to function in a stable manner while inflation is low for modern Russian standards. The Central Bank of Russia (CBR) is the main actor responsible for guaranteeing the stability of the Russian financial system and has used a range of monetary and institutional policies to do so. Therefore, this research aims to explain the monetary and institutional policies pursued by the CBR in response to economic sanctions in the context of Russia’s political economy. The research uses process tracing in order to analyse the policy decisions by the CBR used since 2014 and explain them in the context of developments in Russia’s political economy in recent decades. The research finds that the CBR’s monetary policy is different compared to earlier crises, but not novel as many policy decisions can be traced back to developments in the CBR’s policies over the last decade. Meanwhile, the CBR’s institutional policies can be linked to developments in Russia’s political economy, as they are increasingly aimed at sterilising the Russian economy from external shocks. Therefore, even though the CBR’s crisis response can be seen as successful from the perspective of Russian policymakers, the content of the policies is not surprising considering broader developments in Russia’s political economy.Show less

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Familiar Traits in a New Reality: The Central Bank of Russia's Response to Economic Sanctions