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Nikolay Pilnik 1, Stanislav Radionov 1, Artem Yazykov 1
  • 1 National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation

The Optimal Behavior Model of the Modern Russian Banking System

2018. Vol. 22. No. 3. P. 418–447 [issue contents]

The paper describes the new version of the model of the Russian banking system, which successfully reproduces a wide set of parameters characterizing its performance: loans and deposits of firms and households, liquidity nominated both in rubles and in foreign currency, mandatory reserves. We describe the technique of derivation of model relations, which includes the statement of the problem of macroeconomic agent “bank”. This problem is based on the maxi­mization of discounted flow of profit subject to budget constraint, balance of loans and deposits, liquidity constraints and reserve sufficiency requirements. The paper contains the system of equations which describes the solution of the problem. We provide a detailed description of transition of continuous to discrete time and the new approach to the relaxation of complementary slackness conditions based on the assumption that the model exhibits a turnpike property.

Apart from the standard approach to the parameter estimation for this class of models, we apply a method of multi-step forecasting. We show that the standard method of estimations allows to closely reproduce the historic series but leads to the poor quality of forecasts. The method of multi-step forecasting, on the other hand, successfully reproduces historic series and also leads to rather accurate forecasts. We compared it with standard econometric techniques and show that the model with parameters obtained via multi-step forecast method provides somewhat better forecasts than ARIXAM and much better ones than AR, ARIMA, VAR and VARX. We also show that then we use multi-step forecasting method, optimal values of parameters are about the same for different intervals of estimation and different lengths of forecasts (from one to six months). Such a stability of parameters makes us think that the model reproduces long-term relations of variables and can be used for forecasting and scenario analysis.

The model can be used for the evaluation of reaction of the banking system on the monetary policy, external constraints of different kind and the general condition of the economy. The model can be used as a block of a bigger general equilibrium model of the Russian economy.
Citation: Pilnik N., Radionov S., Yazykov A. (2018) Model' optimal'nogo povedeniya sovremennoy rossiyskoy bankovskoy sistemy [The Optimal Behavior Model of the Modern Russian Banking System]. HSE Economic Journal , vol. 22, no 3, pp. 418-447 (in Russian)
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