Measuring fiscal impulse and its heterogeneous effect on inflationary processes in Russian regions

Myasnikov A.
Tarasov V.

Averyanova A.
Tkachenko M.

Fiscal policy analysis is an important part of a national or regional macroeconomic analysis. The use of a broader range of tools to analyse fiscal policy helps conduct a comprehensive assessment of its impact on national macroeconomic indicators and facilitates more effective fiscal and monetary policy coordination.

In this paper we use the fiscal impulse as an indicator of fiscal policy easing or tightening. It shows the initial impact of fiscal policy on growth or reduction in aggregate demand in a regional economy. This information proves useful in assessing the effect of public finance on inflationary processes in order to make future monetary policy decisions.

The key findings of this study are the measurement of the fiscal impulse indicator, which comprehensively reflects fiscal flows in each particular Russian region, and the development of a retrospective database containing fiscal impulse components for all Russian regions. The effect of fiscal impulse on inflation in Russian regions is heterogeneous and negatively correlated with the level of economic development of the regions. Over the period under study from 2011 to 2021, the average fiscal impulse was higher in the regions with a lower gross regional product (GRP) per capita (below the Russian average). An expansionary fiscal policy has a more pronounced effect on inflationary processes in this group of regions than in regions with a higher GRP per capita (above the Russian average).

Measuring fiscal impulse and its heterogeneous effect on inflationary processes in Russian regions