How much control does Bank of Russia have over money supply?

The paper provides an indirect inquiry on the transmission mechanism of monetary policy in Russia for the period of 1995-2004 by looking at the nature of money supply in the country. The findings support endogenous nature of money supply with two sources of endogeneity characterising transition economy. This implies that interest rate management might be a better policy instrument for the Bank of Russia. Inflation is found to be the cause of money supply growth, which supports the endogenous money supply view.