The effects of foreign exchange and monetary policies in Russia

•We examine the effects of Russian monetary policy under conditions of abundant natural resources.•We apply SVAR models and identify money supply disturbances as monetary policy shocks.•Monetary policy shocks have a persistent effect on real output.•Interest rate and stock price disturbances contribute to a lesser extent to changes in real output.•Stock prices are a more significant transmission channel of monetary policy than bank loans.

This paper examines the effects of Russian foreign exchange and monetary policies under conditions of abundant natural resources during the period 1999-2011 using structural VAR models. The results suggest that monetary policy shocks, which are identified as money supply disturbances, have a persistent effect on real output, and more than half of the volatility in real output can be explained by changes in the money supply. Furthermore, the analysis reveals that stock prices are a more significant transmission channel of monetary policy than bank loans.