A Minimalist Model for the Ruble during the Russian Invasion of Ukraine
Abstract
This note isolates an overlooked economic force for the ruble to appreciate in response to international sanctions limiting exports to Russia. The intuition is that when Russians are unable to buy the mix of foreign goods they wish, foreign goods become less attractive, increasing demand for domestic goods. To reestablish an equilibrium, a real appreciation is needed to raise the relative price of domestic goods and incentivize imports from nonsanctioning countries. We also review well-known forces for depreciation. Our analysis emphasizes that the exchange rate is an inadequate signal of the welfare impact and of the effectiveness of sanctions. (JEL D74, E31, F14, F31, F51, P24, P33)
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Movements in the exchange rate, by themselves, are a poor measure of the welfare effect of sanctions.
“Moreover, movements in the exchange rate, by themselves, are a poor measure of the welfare effect of sanctions (Lorenzoni and Werning, 2023).”
From Sanctions and Russian online prices (2024) · cites this paper as Lorenzoni and Werning, 2023
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Cited by 12
- Authors
- Lorenzoni, G., & Werning, I.
- Affiliations
- University of Chicago (US)
- Massachusetts Institute of Technology (US)
- ORCID
- Lorenzoni, Guido
- Venue
- American Economic Review: Insights
- Publisher
- American Economic Association
- Published
- 2023-09-01
- Volume
- 5
- Issue
- 3
- Pages
- 347-356
- ISSN
- 2640-205X (ISSN-L)
- 2640-2068
- OpenAlex
- W4386325698
- Cited by
- 12
- References
- 0
- Citations by year
- 2026: 2 · 2025: 6 · 2024: 3 · 2022: 1
- FWCI
- 2.24
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review Insights (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Sanctions and International Relations
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
- Keywords
- ruble appreciation, Russian invasion of Ukraine, international sanctions, export controls, real exchange rate, currency depreciation, Russian economy
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