The Effect of US Monetary Policy on the Activities of Russian Banks in the Low Interest Rate Environment

Nadezhda Ivanova, Ekaterina Petreneva, Konstantin Styrin, Yulia Ushakova

This paper studies the cross-border transmission of US monetary policy to Russia in 2000-2019 via its effect on activities of Russian banks in the low interest rate environment in comparison with normal times. Specifically, we investigate dynamic responses of lending, funding, and risk taking. The main finding is that, in normal times, the dynamic responses of dependent variables of interest are consistent with the prevalence of the international lending channel whereas in the low rate environment the patterns are different for different indicators: in some instances the dynamic effect of interest is attenuated compared with normal times, in others, it is reinforced. The estimates of the robustness analysis may indicate that the effects of U.S. monetary policy on the lending activity in Russia substantially decrease in 2014-2019 compared to the previous sub-periods and become even statistically insignificant.