Russian Exchange Rate Pass Through into Consumer Prices

For Russia, it’s maybe 10%-17% for 1 quarter, 50%-70% for 4 quarters.

Figure 1: Year-on-year nominal trade weighted Ruble depreciation (brown), year-on-year CPI inflation rate (blue), both calculated in log-difference terms. Red dashed line at annexation of Crimea. Source: BIS, OECD via FRED, and author’s calculations.

Over the past week, the Ruble has depreciated about 36% in log terms. What does that imply for the CPI?

From Iu. Ponomarev, P. Trunin & A. Ulyukaev (2016) Exchange Rate Pass-Through in Russia, Problems of Economic Transition, 58:1, 54-72; a 100% change in exchange rate induces a 10% change in CPI after 1 quarter, 48% after 4 quarters.


This study uses data 2000-2012. That means it excludes the 2014 depreciation.

From Comunale, M. and Simola, H., 2018. The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors. Research in International Business and Finance44, pp.186-217; a 100% change in trade weighted exchange rate causes a 13%-17% change in CPI after 1 quarter, 51%-68% after 4 quarters in 7 Commonwealth of Independent States countries, 1999-2014. Note that removing Russia results in slightly higher pass-through, so this suggests that Russian pass through using this methodology and sample is a little bit lower.

This study only catches the earliest part of the 2014 depreciation.

What will happen to inflation? if 4 quarter pass through is about 0.5, then if the current level of the Ruble is sustained, the 36% depreciation will induce an 18% increase in the price level above what it otherwise would be. That would be added to a January inflation rate of 1% m/m (not annualized).