How Inequality Impacts Monetary Policy and What is Taken into Account in Housing Rental Prices: New Issue of Russian Journal of Money and Finance

Inequality may distort the effect of monetary policy on the economy. Thus, contractionary monetary policy causes a more significant decline in demand in economies where inequality is high. A study based on evidence from Russian regions confirms this well-known observation. The study shows that the economy’s response to contractionary monetary policy is stronger in those regions where inequality is relatively higher.

Housing rental prices might change due to multiple economic factors. However, price indices generally ignore the extent to which these movements can be affected by non-economic factors, such as housing characteristics. The analysis of changes in short-term rental prices in Moscow over 2015–2023 demonstrates that the contribution of such factors may range from 2% to 66%. Specifically, all else being equal, the availability of an air conditioner increases the rental price by 17%, whereas every kilometre away from the metro reduces it by 2%. Hedonic indices take into account the utility of particular characteristics of a product for consumers. When the quality of a product is ignored, this may lead to a distorted picture of the price dynamics, as noted by the authors. They also conclude that applying the hedonic approach is appropriate not only for the calculation of price indices for real estate, but also for categories of goods such as household appliances, electronics, and cars.

The share of the digital rouble in the total amount of transactions might range from 3–7% to 32–41% one year after its introduction, according to the findings of the modelling of the Russian market of payment instruments. For the digital rouble to successfully compete with non-cash money, it should have such key features as a high level of interoperability with other forms of settlements and network effects, that is, the more people are ready to switch to the digital rouble, the more investors are encouraged to invest in infrastructure supporting the digital currency.

The new issue of the Russian Journal of Money and Finance (No. 1, 2024) is available on its website.