Asset prices, credit and the Russian economy

We examine the importance of macroeconomic effects of changes in asset prices and credit aggregates for the Russian economy.  We show that the amplitude of the fluctuations of asset prices and lending was exceptionally large in 2006-2009.  This implies that the asset price and the lending channel may be significant for Russia.  We estimate a Bayesian VAR model with steady state priors and sign restrictions on impulse response functions.  Our results suggest that an asset price bust and a credit squeeze have accentuated the impact of financial crisis on the real economy.