Economics

Macroeconomic forecasts often assume shock-induced unemployment is temporary and that employment and output recover. However, the reality may be far more complicated. The loss of skills and the mismatch that arises when workers switch industries may stall a recovery for years.

The science of economics is not mere knowledge of the world but a way of knowing it. This is why fictional worlds may be legitimate areas of research which are sometimes more convenient than the real world.

In Russia, around a third of the employed face a significant risk of being potentially affected by AI in their daily work. However, full automation, owing to the shift of all functions from humans to AI, threatens less than 1% of jobs.

The price differential between new builds and resale properties in Russia is driven by factors beyond macroeconomic conditions. What also matters is the housing market structure including the level of competition among developers and banks, and subsidised mortgage programmes.

The digital economy is transforming the classic factors of production Adam Smith described in The Wealth of Nations – the treatise that laid the foundation of economics. Two and a half centuries later, Smith’s ideas remain relevant, but new realities demand that we rethink them.

Participants in the Bank of Russia’s Financial Congress discussed the impact of the rapid development of artificial intelligence on the economy, the risks it carries, and how regulators should respond.

Participants in the Bank of Russia’s Financial Congress discussed whether the housing market in Russia is overheated, the risks of payment by instalments, and the risks faced by developers and buyers.

Over the past year and a half, the ruble exchange rate has strengthened despite the turbulence and volatility of the foreign exchange market. Participants in the Bank of Russia’s Financial Congress discussed the factors influencing the dynamics of the ruble exchange rate.

The world has entered a geopolitical recession – a prolonged erosion of international cooperation. In addition, the global economy is being reshaped by climate, demographics, and artificial intelligence, which brings both economic opportunities and new geopolitical risks.

Russia has seen a twofold rise in the average standard of living over the past 20 years. However, the share of food in household spending has shown paradoxical trends: in defiance of economic theory and global practice, it has changed little, if at all.

Central banks have faced a new reality: supply shocks have become the norm, and confidence in low inflation has been shaken. Participants in the New Economic School discussed why a resilient economy is at risk of structural damage and why monetary policy needs a ‘house of brick’.

The world economy is increasingly facing oil, semiconductors, labour force and rare-earth shortages. But is it really a problem of scarcity, and is the market capable to regulate these imbalances? Participants in discussion at the New Economic School addressed these issues.

People often make unnecessary purchases or end up paying more than they can afford to, contrary to their economic benefit. Such consumption is called non-standard, and is observed, at least occasionally, in almost half of Russian adults.

Crowdfunding needs more than just money and internet access to grow. Interpersonal trust, institutional predictability, and cultural behaviour patterns are essential for collective investment: crowdfunding can serve as a mirror reflecting the level of trust in the economy.

Russians tend to judge inflation by average expenditure rather than ‘visible items’ and describe a ’good economy’ as a self-reliant manufacturing powerhouse. This influences the perception that the key rate is an instrument to support production rather than manage demand.

People often intuitively perceive economics as a zero-sum game, where one person’s gain automatically means another person’s loss. These naïve economic beliefs distort decision-making processes and become a handy tool for political manipulation.

The price of gold is shaped by a combination of fundamental and political factors. We examine the key forces that form it and explain, why the Fed’s decisions has taken the back seat, how central banks and the AI boom influence the market, and why low-grade gold ore prevails?

Countries that do not target inflation responded to the post-COVID inflation surge in a similar way to those with inflation targeting (IT), that is by raising policy rates. This crisis-driven convergence is the ultimate test of the IT regime’s efficiency under various conditions.

Migrants make a substantial contribution to the economy of the Russian capital, accounting for over 20% of its GRP. Up to two-thirds comes from residents of other Russian regions. The significant role of internal migration is what sets Moscow apart from many other global cities.

The degree of monetary tightening for a sustainable disinflation depends not only on the inflation rate, but also on the conditions that have led to its rise. There are three reasons why considerable monetary tightness might need to be maintained even when inflation decelerates.

Industrial policy is recovering all over the world. Our analysis of more than 6,500 regulatory acts across nations evidenced that advanced economies support high-tech mastered sectors, while emerging markets – the introduction of simpler technologies, which are new to them.

Human capital and its key component – education – are strongly linked to economic growth. However, high levels of education do not guarantee economic growth if a weak institutional environment hinders efficient application of knowledge and skills.

While advanced economies were promoting the climate agenda as ideology, the Global South was investing in renewable energies and new technology markets. Energy transition is still underway in both ‘worlds’. What this means to Russia was discussed at the Financial Congress.

The Russian labour market is gradually cooling, but high unemployment does not threaten it. The main challenge for the economy is not so much labour shortages as a lack of highly qualified specialists, analyzed the participants of the Financial Congress.

The slowdown in the Russian economy has provoked concerns about an immediate threat of a succession of defaults and a coming banking crisis. Participants in the Financial Congress discussed whether these gloomy expectations were justified.

Is it possible to ‘buy’ economic growth with high inflation, how demand ‘accumulated’ over years, what investments increase productivity, and where forecasters make a mistake: abstracts from the Financial Congress session dedicated to economic growth.

Suboptimal and erroneous financial decisions people make often stem from cognitive biases. Their effect can be mitigated by impacting two key aspects – people’s behaviour and the decision-making environment.

The impact of population ageing on inflation remains contentious, as researchers’ opinions differ as to whether ageing has a deflationary or proinflationary effect. Our work uses data from the Russian regions to show that an elderly population has a proinflationary effect.

Why does a central bank need a Telegram channel, what makes the Russian economic information space special, how are inflation expectations managed, does AI help the Bank of Russia write press releases – these are key points from the discussion hosted by New Economic School.

An import reduction has a more than proportionate impact on Russia’s industrial output and exports. Over one year, a 1% decrease in imports as a share of production costs across industries leads to a more than 2% output reduction and an even more significant decline in exports.

The macroeconomic situation is the overall performance of the country’s regional economies. Experts at the Bank of Russia’s Financial Congress assessed which regions are benefiting and which are losing out as a result of the ongoing transformation and structural changes.

Modern technology and big data on retail sales enable more accurate and faster measurement of inflation. We are developing a methodology for calculating a price index based on data from online receipts: in the future, it will make it possible to track inflation in near real time.

Human capital is one of the key factors of economic growth, but there are few quantitative estimates of its contribution to the Russian economy. New estimates show that its contribution peaked in the second half of the 2000s and had almost disappeared by the end of the 2010s.

In a geographically large economy, different regions can respond differently to the same events. Nowcasting used for data across Russia revealed these differences as well as their dependence on the level of development and the sectoral specialisation of the regions.

Europe’s dependence on Russian supplied gas has drastically reduced. Nevertheless, several EU member states retain an interest in continued Russian exports given the steep costs of switching to alternative supplies. 

The number of educated and employed women in Russia is high by world standards. Russia is among the world leaders for the share of families with a woman as the main breadwinner. The weak role in governance and large pay gap are paradoxical, but have an institutional explanation.

The past two years saw an almost complete transformation of the logistics and geography of Russia’s export and import. Analysis of this process has identified a number of patterns and risks in the new structure of foreign trade.

In terms of concentration of wealth in the hands of a small group, 1% of the population, Russia is among the world’s leaders. This group is almost inaccessible for sociological analysis, but a few assessments can be made from open sources.

The dynamics and geography of international capital flows are changing. Geopolitical risks have become the major driver of these flows.

After a period of record growth in 2022, gas spot prices in the European market have returned to the levels seen two years ago. Europe has managed to adapt to the reduction in supplies from Russia, but price volatility and consumption risks persist.

The inflationary episode that has been experienced by all developed countries since 2021 is not over. The risk of losing the inflation anchor and falling into the stagflation trap exists even though the effects of pro-inflation factors have almost completely worn off.

Entrepreneurship in Russia has shown great resilience to changes in the political and economic landscape: the influence of institutions and culture on business activity may persist even after extreme changes in political and economic conditions.

Global lenders are focused on financing development projects in good times. In times of crisis, they switch to stabilisation loans and become ‘firefighters’. This is the role being increasingly played by development banks, data from 11 countries of the Eurasian region show.

No one will argue that the financial sector affects the real one, but the number of answers to the question of how exactly it does so is almost the same as the number of economists. A problem arises in finding indicators that characterise this influence quite fully.

The reliance of Russian economic sectors on imports is relatively low and does not exceed the median for other countries, a study has found. However, 60% of Russia’s imports come from the countries that have announced sanctions against Russia.

Gravity exists not only in physics, but also in economics, and just like in physics, its laws are objective. It is far more important for small and medium-sized economies to maintain and develop economic ties with the largest economies than vice versa.

As one of the three winners of the 2022 Nobel Prize in economics, Ben Bernanke was awarded it for his research into the causes of the Great Depression. He learned and applied its lessons as chair of the US Federal Reserve when it had to combat the global financial crisis.

Demography is one of the factors influencing potential economic growth. Potential growth increases in tandem with the birth rate, which is closely linked to the increase in household income.

One in five of Russian professionals with higher education and permanent employment are impoverished or low-income. According to the HSE, poverty among professionals, which seemed to be a thing of the past, is now returning, and the crisis may exacerbate it.

Transition to a low-carbon economy remains a priority for major countries including China despite the rises in commodity prices and the highest global inflation. For Russia, as its economy refocuses on Asian markets, the importance of the green transition still holds.

International sanctions have sparked a fundamental transformation in the Russian labour market, which may result in large-scale underutilisation of accrued human capital, notes Rostislav Kapeliushnikov, Corresponding Member of the Russian Academy of Sciences.

The Fed waited too long to tighten the policy in its anti-inflation stand, believing the acceleration of prices to have been temporary. The biggest concern for markets now is whether the Fed could avoid another policy mistake with regards to over hiking interest rates.

Russian businesses have faced foreign counterparts’ refusal to continue cooperation, suspension of imported components and the rising cost of logistics. Companies are looking for alternative production and logistics chains, the Bank of  Russia survey finds.

In March, the Russian economy entered a downturn phase triggered by the impact of all-out foreign trade and financial sanctions and restrictions. If they continue, the economy will lose some of its potential, and the recovery will be protracted.

There has never been such expensive gas in Europe as recently: over the 12 months up to the end of November, prices increased more than 5-fold. The situation raises the question of whether this crisis is temporary or it signifies structural problems in the energy markets.

Uber and Lyft once promised to replace personal cars and do away with traffic congestion. However, some municipal authorities believe that these services have only exacerbated traffic jams. Research shows that their impact on road traffic depends on the ‘design’ of cities.

Russians have passed through several stages in their emotional feelings during the corona crisis: fear and respite gave way to a return of tension, which is ongoing. For all the stress that an uncertain future has caused people, a certain adaptation to the pandemic can be seen.

Many researchers believe that the costs of hosting the Olympics are not recouped, and this is one of the reasons behind growing scepticism towards the Games. However, the Olympics often provided a stimulus to economies: it is all about how to take advantage of the Olympic legacy.

Russia will lag behind Europe, the United States and China in reducing greenhouse gas emissions from its power industry. Ensuring a reliable and affordable energy supply is of a higher priority in Russia than ecology, and natural gas matches both criteria.

The gender pay gap can be explained by many reasons. A data study on Russian graduates showed that the dominant reasons are segregation and self-selection of women in low-paid specialisations.

The changes in the Russian labour market caused by the corona crisis have been largely temporary, but some of them may take hold and become the ‘new normal’. Sustained changes in the labour market will also affect inflation in the Russian economy.

Inequality remains a sore point in socio-economic development, but society's key demands for justice have more to do with inequalities of opportunity such as equality before the law and equal access to healthcare and education, than with the elimination of income inequality.

Experiments show that cats, monkeys, and deer can often ‘compose’ more profitable investment portfolios than those of professional investors. However, one should not rely on luck when investing.

Digitalisation is changing the payment market and consumer behaviour in many countries. This raises the question of whether it would be expedient to introduce an additional form of money that would meet the requirements of the digital age: a central bank digital currency.

During a crisis, real-time data is particularly important: the economic situation requires prompt governmental and regulatory decisions. Industry-specific financial flow monitoring developed by the Bank of Russia allows analysis of business activity on a daily basis.

The EU carbon tax on imports that is to be imposed in 2022 may affect almost 42% of Russian exports. The private sector and the state should take active measures to maintain economic competitiveness in the world of growing climate risks.

Crises are a chance for countries to reassess their economic policies, proving that what used to be unquestionable is often a myth, says Esther Duflo, an MIT Professor and Nobel Prize winner.

Changing attitudes, aptitudes to reassess conventional ideas, and greater intellectual tolerance predetermined the Industrial Revolution and later, Europe turning into the world’s major economic centre, argues economist Joel Mokyr.

Modern surveys help economists get into people’s minds: it turns out that people’s perceptions of the economy are not in line with reality, which in the end, can undermine economic policy, argues Stefanie Stantcheva, professor at Harvard.

Capitalism is not driven by the selfishness and greed of the homo economicus but by decentralized decision-making that allows for experimenting and learning from one another, and the future lies with unity of purpose and mutual support, argues Paul Collier, professor at Oxford.

Various indicators of the Russian labour market and their correlation with output show that there has been no record rise in overall unemployment due to the coronavirus shock, and given how things are going, there will be none.