A Minimalist Model for the Ruble during the Russian Invasion of Ukraine
American Economic Review: Insights
no. 3, September 2023
This note isolates an overlooked economic force for the ruble to appreciate in response to international sanctions limiting exports to Russia. The intuition is that when Russians are unable to buy the mix of foreign goods they wish, foreign goods become less attractive, increasing demand for domestic goods. To reestablish an equilibrium, a real appreciation is needed to raise the relative price of domestic goods and incentivize imports from nonsanctioning countries. We also review well-known forces for depreciation. Our analysis emphasizes that the exchange rate is an inadequate signal of the welfare impact and of the effectiveness of sanctions.
Lorenzoni, Guido, and Iván Werning.
"A Minimalist Model for the Ruble during the Russian Invasion of Ukraine."
American Economic Review: Insights,
Conflict; Conflict Resolution; Alliances; Revolutions
Price Level; Inflation; Deflation
Empirical Studies of Trade
International Conflicts; Negotiations; Sanctions
Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation
Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid