Regional Differences in the Effects of Monetary Policy

Abstract The article examines the regional differentiation of the effects of the monetary policy implemented by the Bank of Russia. The study is based on an analysis of changes in the scale and territorial-sectoral structure of production lending. The differences in the regions‘ reactions to changes in the Central Bank’s key rate are shown. These differences are related to the industrial structure of production, the ratio of large, small and medium-sized businesses, and other characteristics of the regional economy. The Russian credit system is characterized by a high level of spatial concentration, which makes national indicators dependent on the situation in the largest regions, primarily Moscow. The key rate has had a “nonstandard” impact on lending during the economic adaptation process to the conditions that emerged after 2022, when the high cost of credit did not stop production growth, which was determined by rising demand. Lending to small and medium-sized businesses is most sensitive to monetary policy tightening; government support mitigates the negative consequences of rising key rates but does not eliminate dependence on them.