Assessing Fiscal Distortions of the Monetary Policy Transmission Mechanism in Russia: An Empirical Analysis for 2010–2024

Andrey V. Koshkin

Peter the Great St. Petersburg Polytechnic University, Saint-Petersburg, Russia

Abstract

The relevance of this study is driven by the profound structural transformations experienced by the Russian economy after 2022 and the persistent need to understand the systemic impact of fiscal measures on the effectiveness of monetary regulation in the context of successive crises over the past decade, including sanctions pressure, the COVID-19 pandemic, and the conduct of a special military operation. The purpose of the work is to conduct a comprehensive empirical assessment of the impact of fiscal factors on the effectiveness of the transmission of monetary impulses in the Russian economy for the period 2010–2024. The main hypothesis posits that an active budget policy not only quantitatively weakens traditional channels of monetary transmission but also qualitatively transforms their functioning, creating persistent structural distortions that are most pronounced during periods of economic shocks. The essence of the research procedure is based on the application of a complex of modern econometric methods, including structural vector autoregressions with shock identification through recursive schemes and sign restrictions, time-varying parameter models to account for structural shifts, and vector error correction models for analyzing long-term relationships. The obtained results indicate a significant weakening of the interest rate transmission channel under the influence of fiscal expansion, reaching 64% during crisis periods, reveal a persistent fragmentation of the financial market into segments with fundamentally different sensitivities to monetary policy measures, and demonstrate a pronounced asymmetry in the effectiveness of the fiscal rule, which depends on the conditions in commodity markets. The theoretical significance of the results lies in the empirical substantiation of the need to modify standard transmission models for commodity-based economies, taking into account the effect of quasi-fiscal institutions, while the practical significance lies in the development of specific recommendations for transitioning to an asymmetric system of coordination between fiscal and monetary policy, including modifying the fiscal rule and introducing sectoral mandates for the central bank.

Keywords

fiscal distortions; transmission mechanism; monetary policy; budget rule; structural shifts; econometric analysis; Russian economy.

JEL classification

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About Authors

Andrey Vyacheslavovich Koshkin

Assistant Professor, Department of Economic Theory, Peter the Great St. Petersburg Polytechnic University, Saint-Petersburg, Russia (195251, Saint-Petersburg, Polytechnicheskaya street, 29); ORCID https://orcid.org/0000-0001-9942-7722 е-mail: koshkin_9300@mail.ru

For citation

Koshkin, A.V. (2026). Assessing Fiscal Distortions of the Monetary Policy Transmission Mechanism in Russia: An Empirical Analysis for 2010–2024. Journal of Applied Economic Research, Vol. 25, No. 2, 545-569. https://doi.org/10.15826/vestnik.2026.25.2.018

Article info

Received October 17, 2025; Revised December 4, 2026; Accepted February 18, 2026.

DOI: http://dx.doi.org/10.15826/vestnik.2026.25.2.018