Heterogeneity of the Fiscal Impulse Impact on Inflation in the Russian Regions
Maksim Gabov
Given the growing role of fiscal policy in the Russian economy, understanding how fiscal stimuli translate into inflation at the regional level takes on particular practical significance for the coordination of fiscal and monetary policy. This paper proposes an adapted method for estimating the fiscal impulse at the regional level, based on a comparison of a region’s actual consolidated budget deficit from its own resources with its “neutral” level, calculated as the median value for the period of macroeconomic stability from 2017 to 2019. Using dynamic panel models (Arelano-Bond System GMM) on data for 85 regions of Russia for the period from Q1 2020 to Q3 2025, it was found that the fiscal impulse has a positive and statistically significant effect on the deviation of regional inflation from the federal level. However, the effect is heterogeneous: it is observed in regions with chronically high structural deficits (clusters 1 and 3), whereas no significant effect was found for regions with a neutral fiscal position (cluster 2). Additionally, the partial role of the structure of budget expenditures is demonstrated: in the specification with individual effects, regions with a higher share of social expenditures exhibit a more pronounced inflationary response. The study’s results can be used to assess inflation risks at the regional level, as well as to forecast regional inflation more accurately, taking into account the structural characteristics of the constituent entities of the Russian Federation.