The EDB: flexible exchange rate policies and fiscal rules help to improve the region’s nations’ resilience to external shocks
Moscow, 11 November 2019. The EDB member states’ exposure to external shocks is associated with foreign trade and financial flows. This finding is presented in the new theme report by the EDB’s Directorate for Research titled The Channels and Scale of External Shocks’ Impacts on the EDB Economies.
The report explores external shock’s impacts on the EDB member countries’ key macroeconomic indicators and proves that the external economic environment remains important to the dynamics of economic cycles in the region’s economies.
The authors state that external demand shocks have a significant influence on the EDB member countries’ economic development, which is explained by the openness of their economies and the fact that the largest countries in the region are integrated into the global financial market. That said, Andrey Falileyev, Director for Research at the EDB, believes that the channels for transmitting these shocks onto economic activity in the Bank’s member states are different because of structural peculiarities of their economies, as well as monetary and foreign exchange policies.
The EDB analysts point out to the region’s economies’ vulnerability to fluctuations in global commodity markets, which is explained by the structure of their export and import transactions where primary commodities (energy resources, in the first place) continue to play a key role. They calculate that a temporary reduction in oil prices by 10% over the year may cost around 0.14 percentage points of the EDB member countries’ aggregate GDP.
The report notes that flexible foreign exchange policies and fiscal rules in effect in some countries of the region help to reduce the impact of external shocks on their economies.
Additional Information:
The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.
The EDB Media Centre:
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