Portfolio Choice in the Russian Economy and Monetary Authorities Policy in 2007-2009

Abstract

The paper examines the composition and structure of private sector demand for alternative assets: real capital, high power money, government obligations. The private sector assets demand is limited by its resources: savings, foreign and domestic borrowing, and reshuffling of previously accumulated assets. The government assets demand in the Russian economy is a passive reflection of the private sector assets demand. This fact distorts the monetary policy, causes ineffective using of development resources. The government assets demand and its supply of financial assets to the private sector must play an active role, enlarging and correcting the private sector assets demand. The control over trans-border capital movement is the necessary condition for that end.