Optimal Monetary Policy Framework in an Emerging Market Economy under Sanctions Pressure and Restrictions on Capital Flows

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Values of key model parameters

Parameter	Value	Parameter	Value
Output gap		Core inflation
a1	0.55	b1	0.35
a2	0.05	b2	0.09
a3	0.20	b3	0.20
a4	0.35	Real marginal costs
a5	0.10	k1	0.45
a6	0.15	k2	0.25
Wages		Non-core inflation
aa1	0.55	bb1	0.60
aa2	0.40	bb2	0.05
aa3	0.25	bb3	0.10
Exports		Imports
c1	0.45	d1	0.40
c2	0.45	d2	1.00
c3	0.25	d3	0.10
Exchange rate		Monetary policy reaction function
h1	0.30	mm1	0.60
h2	0.90	mm2	0.55
Monetary conditions		mm3	0.30
m1	0.50
m2	0.15
m3	0.35

Simulation results of a scenario of worsening external economic conditions: Baseline model specification

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
σ(ŷ)	0.4	0.4	0.5	0.4	0.4
σ(π4)	2.1	2.3	2.5	1.9	1.1
σ(p)	4.4	4.8	5.1	3.5	1.5
σ(∆i)	0.7	0.6	0.6	0.7	1.7
L(γ=0.25)	12.3	14.2	16.2	8.0	2.6
L(γ=0.50)	12.5	14.3	16.3	8.1	3.3
L(γ=0.75)	12.6	14.4	16.4	8.3	4.1

Simulation results of a scenario of worsening domestic economic conditions: Baseline model specification

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
σ(ŷ)	2.8	2.9	2.8	3.2	3.5
σ(π4)	5.0	5.1	5.2	5.3	4.4
σ(p)	8.5	7.7	8.1	6.5	5.3
σ(∆i)	1.2	0.8	0.7	1.1	12.1
L(γ=0.25)	52.8	47.5	50.8	40.7	66.3
L(γ=0.50)	53.2	47.7	50.9	41.0	103.0
L(γ=0.75)	53.6	47.8	51.1	41.3	139.7

Simulation results of a scenario of worsening external economic conditions: Strict restrictions on capital flows

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
σ(ŷ)	0.3	0.3	0.3	0.3	0.4
σ(π4)	1.2	1.3	1.3	1.1	1.2
σ(p)	2.4	2.6	2.8	1.9	1.1
σ(∆i)	0.4	0.3	0.3	0.4	2.1
L(γ=0.25)	3.7	4.3	4.8	2.4	2.6
L(γ=0.50)	3.7	4.3	4.9	2.5	3.7
L(γ=0.75)	3.8	4.3	4.9	2.5	4.8

Simulation results of a scenario of worsening domestic economic conditions: Strict restrictions on capital flows

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
σ(ŷ)	2.9	3.1	3.1	3.2	3.3
σ(π4)	5.2	6.0	5.9	6.3	5.7
σ(p)	6.0	5.7	5.8	5.6	4.7
σ(∆i)	1.3	1.1	1.0	1.4	13.9
L(γ=0.25)	35.9	39.3	39.5	41.3	80.6
L(γ=0.50)	36.3	39.6	39.7	41.8	128.8
L(γ=0.75)	36.8	40.0	40.0	42.3	177.0

Efficiency of monetary policy regimes in an unconditional simulation experiment: Baseline model specification

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
(γ=0.25)	2.3	3.6	4.7	1.6	2.8
L(γ=0.50)	2.1	3.4	4.5	1.5	3.5
L(γ=0.75)	2.1	3.4	4.2	1.5	3.8

Efficiency of monetary policy regimes in an unconditional simulation experiment: Strict restrictions on capital flows

Indicator	Monetary policy regime
	FIT	AIT (2Y)	AIT (3Y)	PLT	MT
(γ=0.25)	2.7	3.9	4.9	1.7	1.8
L(γ=0.50)	2.4	3.7	4.7	1.6	2.6
L(γ=0.75)	2.3	3.6	4.5	1.5	3.1