MIL OSI Translation. Region: Russian Federation –
Source: State University Higher School of Economics – State University “Higher School of Economics” –
Vyacheslav Kramkov works in macrofinance, a field at the intersection of macroeconomics and financial markets. In an interview with the HSE Young Scientists project, he talked about how economists come up with their models, the social aspect of science, and the fact that the dollar-ruble exchange rate is no longer so firmly tied to oil prices.
Why I chose a scientific career
I never thought that I would be involved in science. But it turned out that this was what I did best. I understood this from the reviews of my teachers and supervisors. And in general, I noticed that it was easy for me to master methods and generate ideas, unlike many of my peers. In the last years of my bachelor’s degree, I realized that when I enroll in master’s and graduate school, I would do so with an eye toward my scientific activities: preparing projects, participating in research, choosing my topics.
What am I researching
The relationship between macroeconomics and financial markets. There are studies devoted only to macroeconomics: how the country’s economy functions as a whole, what basic processes affect our well-being. And there are separate studies devoted to financial markets: how to make money, how to optimize your activities. At the intersection of these two areas, a new direction was born – macrofinance. The example of our country shows that we have few financial crises of our own, and all the crises that occur have external causes. These connections are what I study.
Why was macrofinance invented?
The 2008 crisis was a significant point. It was a real crisis: people were losing their jobs, the quality of life was falling, loans were not issued. And the reasons for this were beyond what was then studied in macroeconomics. Gradually, economists, primarily American, in search of how to explain this, created a field that became macrofinance. I am working on it in relation to Russia.
What am I proud of
The biggest reason for pride is the last article that we managed to do; it will soon be published in the journal Applied Econometrics. In it I show which parts of our financial market are associated with foreign factors and which are not.
There is a belief among practitioners that individual stock prices, bond rates, and yield rates depend on foreign factors and react quickly to what happens abroad. And I have proven that internal Russian factors have recently played a much greater role. Over the past few years we have become more independent and it is now more important for us to look at what is happening in our country than what is happening abroad.
For the study, I used the econometric method of working with data, which I discovered in recent foreign publications. I adapted, mastered and applied this method – quite possibly the first in Russia.
And in my master’s degree, I wrote an article about how commercial banks set rates on deposits and loans. Articles that explain the logic of banks say that rates depend on the actions of the Central Bank: first, the Central Bank sets the key rate, then banks adjust theirs. However, I showed that commercial banks look not only at what the Central Bank has already done, but also at forecasts. That is, if he has not changed the rate yet, but only said that he is going to, then commercial banks immediately adjust their rates in a direction favorable to themselves. For example, they raise interest rates on loans very quickly and lower them very slowly, and vice versa on deposits. Before this, there were no studies that raised this topic.
What do I dream about
I have a general fascination with what I do, but I don’t set myself a single goal to achieve. I just try to consistently take it step by step. Now there are several ideas that I want to test. They are mainly related to what awaits us in the coming years. It seems that reality will be a little different, not the same as before 2022. We will have other trading partners, other access to the financial market. Perhaps this will have a strong impact on our market – and has already had an impact.
There will be changes in some points that interest me. Of these, the most interesting and obvious is what will affect the dollar-ruble exchange rate. It has always been believed that the exchange rate is very dependent on the price of oil. If the price of oil rises, it means that the ruble will strengthen, and vice versa. And this was indeed the case. But there are reasons to believe that this connection has weakened somewhat. And now the ruble exchange rate is on its own, and oil is on its own. I have preliminary calculations that show this to be the case.
How ideas are born
Coming up with a model is the main task of all economists. A hundred years ago there were no models at all. People simply reasoned, and all works were written in text, without formulas. They are no less important, and also thoughtful. But now, when someone wants to communicate an idea, they try to present it in the form of a model, and these are either graphs or equations.
Creating a model is quite difficult. We need to think about what factors are important, what can be ignored, how we represent the relationship between quantities and processes. See how colleagues have already done this in other articles. And gradually, from different pieces, a presentation is put together for my specific task. Then I try to polish it, remove the excess. This is a complex process, it is not regulated and not particularly structured. In many ways, intuition works here.
Once the model is built, I check it using mathematical methods.
Science to me is common sense. I don’t think it’s only available to a limited circle. In my opinion, any thinking person who devotes a lot of time to studying a problem will come to the same conclusions that science comes to.
In addition, I associate science not with a lone intellectual, but with a group of people. Science is not done for oneself. Social interaction is a must. Writing poetry on a table can still be an art. But in science, if a person reaches some idea, some results, he is obliged to share them, make them the subject of discussion, and pass them on. The most important things happen at conferences where people talk about their results. And everything that happened before the conference, publication, publication was preparation.
Of course, some results from the field of basic science will only be understood by a few people in the world. And then we need to hope that after some time there will be specialists from the applied field, a wider circle of people who will understand these ideas, and they will apply them in their activities.
In applied mathematics there are modern ideas that go back to fundamental theories created decades before the current moment. This also happens in economics. I recently read with great pleasure the book “The History of Macroeconomics,” which describes the development of science from 1930 to the 2000s. And I noticed that some ideas that were popular in the 1950s were then forgotten and became popular again in the 2010s or now.
If I had not become a scientist
I would be engaged in a more mainstream economic profession – auditing or financial consulting. If I hadn’t studied economics at all, I would probably have been a chef. I think economic modeling has something in common with cooking. We take different ingredients, combine them, see what fits together. Working on an economics study is part art and part craft. Somewhere you need to have inspiration, somewhere you need good technique.
Which scientist would I like to meet?
In my field, these are people who developed methods that we now actively use, including mathematical ones. This is, for example, James Hamilton, he has a textbook on time series analysis. Or Mark Watson. Their ideas, which seemed old-fashioned for a while, have proven to be very resilient, and we are returning to them again. It would be interesting to discuss why more advanced models are fragile, while simpler ones are suitable and flexible.
And among the economists who have already passed away, I am interested in Robert Solow. He studied economic growth – explained why people live well in some countries and not in others. Why are some countries growing fast while others are still in crisis? His basic model, which everyone is now studying, describes what economic reasons do not explain growth. And what explains it is unknown. This is outside the scope of his model.
What does my typical day look like?
My working day starts at 9 am, and before that I still try to get to the gym in time. After 6-7 pm I usually have free time and go somewhere before returning home. There is such a thing as a “third place”, intermediate between home and work. It’s different for everyone: some go to restaurants, others to shopping centers.
For several years I had something similar to burnout. Study was not over yet, but I already had to think about my career. Then I made a habit of having this third place. I also go to listen to jazz; I fell in love with it at school. We have a cafe where they play live jazz and host jams. Concerts are often held at the Philharmonic. My favorite jazz musician is Herbie Hancock. His music is energetic and lyrical at the same time.
What else am I interested in?
Volleyball and skiing – cross-country and alpine. I recently went to Sochi to ski. There had just been a big snowfall, a meter of snow fell in one day. As a result, many areas were closed due to avalanche danger. We had to ride below, where it was allowed. But it was enough for a week.
What’s the last thing I watched
In January, I watched the modern production “The Third Truth, or the Story of a Crime” at the Nizhny Novgorod Drama Theater. She made a great impression on me. It takes place in the 19th century. There, on the one hand, there is a discussion about how to conduct economic policy, how best to organize society, whether private property is needed or not. And in parallel, the everyday plot develops. They don’t intersect in any way, and that’s the drama.
This is very similar to scientific activity, because sometimes scientists are reproached for living in an ivory tower, not interacting with the world of ordinary people and their results are not needed there. But it seems to me that at least since the beginning of the 20th century, we as economists have stepped towards real problems and closer to the pressing problems of ordinary people.
My beliefs
If we take the whole range of possible beliefs, I would probably be considered a liberal: I am both for market regulation and for minimal government intervention. But if we take only economists, compared to them I have much more non-mainstream beliefs. They relate, among other things, to globalization, international cooperation, and the collective idea that at all costs it is necessary to participate in the global economy with an orientation toward the Western course. In my opinion, we must interact with all regions. If at the end of the 20th century 60% of wealth was in the Western world, now it is less than half. And interaction with developing countries is no less important than interaction with the West.
Maybe this is the cost of the profession – that when you start thinking about some problem, it seems to you that it is purely economic. That economic factors are much more important than cultural, social, political.
The standard for a scientist is that his views should not influence the science he does. It is wrong to adjust the results to your worldview. There may be an influence on the choice of ideas, but I don’t feel it. When a fish swims, it does not notice the water. If something seems right to me, then I may not notice that it only seems to me.
Advice for those who choose a scientific path
I found it helpful to try different things in my time. You have to choose your path at school, at the age of 16, when you have very little life experience. This is precisely why a university exists, where you can take different courses, try different things, and then choose during internships, your first job, and see what happens. And when you accumulate experience, use it to choose a job consciously.
My favorite place in Nizhny Novgorod
Strelka, where the Volga and Oka merge. I liked the entry in someone’s diary that not a single Nizhny Novgorod resident will find a single square wide enough, because from the embankment that faces Strelka, such space opens up that cannot be compared with anything else.
Note; This information is raw content directly from the source of the information. This is exactly what the source states and does not reflect the position of MIL-OSI or its clients.
Please note; This information is raw content directly from the information source. It is accurate to what the source is stating and does not reflect the position of MIL-OSI or its clients.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and or sentence structure not be perfect.
