Experts of the Central Bank told about the risks of undervaluation of the ruble

Attempts to undervaluation of the real exchange rate through operations in the foreign exchange market, usually based on historical experience, terms of macroeconomics fail. This was reported in a research note, Department of research and forecasting of the Bank of Russia, which is published on the regulator’s website.

“The real exchange rate is still stronger, but under the influence of a higher growth rate of prices (wages because of competition for labour from the non-tradable sector). In Russia is observed in 2000-ies, when the background of high oil prices, the Bank of Russia intervened in the currency market by buying foreign currency”, — stated in the document.

As a result of growth of liquidity, real rates were signaticollis. This resulted in the outpacing growth of wages in the economy compared to labour productivity growth.

“Ultimately, in the medium term, price competitiveness is still not decreased and depended on the policy of the Bank of Russia. It is important to emphasize that we are talking about attempts at artificial control of nominal and real strengthening of the ruble. In the event of a change in oil prices occurs, the equilibrium exchange rate adjustment that causes structural shifts in the economy”, — said in a note.

However, as noted, from the point of view of the structure of the economy the effects of undervaluation are not uniform and are manifested differently in sectors of the economy.

The document emphasizes that the policy of a weak currency, slowing growth in labor productivity, in addition, the low exchange rate limits the productive capacity of the economy.