Panel VAR Models in Regional Financial Markets Researching: Case of Russian Federation

For the past ten years, the Russian financial markets system has been characterized by high volatility levels across most sectors’ performances. The spikes in volatility could be observed during 2014 and 2022 when unprecedented pressure came from the world community through sanctions. In 2020, the Russian markets also experienced a shock, which was reflected in the lack of supply and the general decrease in the total output of the real sector. Over the past decade, the financial market system of the Russian Federation has been characterized by a high degree of volatility inherent in the indicators of virtually all sectors. Particularly significant influences were the political crises of 2014 and 2022, associated with unprecedented sanction pressure from the global community, as well as the crisis of the 2020 pandemic caused by supply-side inflation and a general decline in aggregate output in the real sector. All these factors directly impacted the destabilization and transformation of the national financial system, leading to changes in macroeconomic policies by fiscal and monetary authorities. This study analyzes the impact of macroeconomic policy on key performance indicators of financial market sectors across the federal districts of the Russian Federation. The analysis employs methods for constructing panel vector autoregressive time series models based on dynamic data for indicators of regional financial market sectors and overall macroeconomic variables. The data for analysis is presented from 2012 to 2023, broken down by the eight federal districts of the Russian Federation, and sourced from the statistics of the Central Bank of Russia. The research aims to identify the most sensitive market indicators in response to fluctuations in macroeconomic indicators using the Panel VAR models with the simulation of shock scenarios.