Monetary policy in an oil-dependent economy in the presence of multiple shocks

Abstract Russian monetary policy has been challenged by large and continuous private capital outflows a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble led central bank give up its exchange rate management strategy. Against this background, work estimates small open economy model for Russia, featuring an price sector extended specification of foreign market correctly account systematic interventions. We find that shocks flows substantially affect domestic variables such as inflation output. Simulations estimated actual strategy alternative regimes suggest vulnerability external can be lowered adopting some form targeting. Strategies target nominal or prove inferior.