Fiscal and Monetary Policy

Abstract

For 25 years since the start of market reforms, Russian progress in fiscal (budgetary) and monetary policy in the direction of developed countries has been significant. Russia has created a modern tax system, institutional mechanisms for administering revenues from the export of oil, an expenditure management system and a system of fiscal federalism. It has provided a high degree of independence to the central bank (the Bank of Russia), transitioning to an inflation-targeting regime and a floating exchange rate. In this chapter, we aim to explain how fiscal and monetary policy has evolved over the course of the post-Soviet history of Russia, which problems have been addressed by the Russian government by means of fiscal and monetary instruments and which ones remain and how they should be addressed. Among the remaining challenges, perhaps the most important one is the continued lack of “coordination” or, more precisely, the lack of mutual regard between fiscal and monetary policies in Russia. This has militated against macroeconomic stability and led to recurring economic crises (or otherwise complicated the economy’s exit from these crises).