Russia's Transition Toward the World Economy: Is the Market Mechanism Working?
By the end of 1993, the unified and freely convertible ruble on current account represented a major step in Russia's foreign exchange management. The monetarist model adopted here (which gives a robust estimate of the real exchange rate) suggests that the impact of the gap between cash supply and cash demand (in the next month) on the real ruble-dollar exchange rate (for the period beginning July 1992) was small. Perhaps this parametric value reflects the restrictions on foreign exchange transactions, and the intervention of the Central Bank of Russia (CBR) in the Moscow Interbank Currency Exchange (MICEX) which determines the exchange rate. In contrast to the unification and current account convertibility of the ruble, progress during 1992-1994 in the foreign trading arrangements was halting. Export trading was hobbled by export quotas, licensing and passport surveillance. There were no quantitative restrictions on import activity which nevertheless was subjected to steadily rising import tariffs (evidently calculated to counter the impact of the appreciating real ruble). The estimates of the trade equations suggest that the real exchange rate had no impact, ceteris paribus, on export performance but it influenced impost flows. The changing pattern of Russia's trade, both in terms of (export-import) commodity composition and orientation, has to be judged in the context of the asymmetrical impact of the exchange rate on that pattern.
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