Table of contents
1. Russian economy and currency
In his article ‘Russia’s rouble is now stronger than before the war—western sanctions are partly to blame’, academic Kirill Shakhnov provides an explanation for an apparent anomaly whereby Russia’s currency, the rouble, is stronger than it was before the invasion of Ukraine. This is despite sharp falls around the start of the war and the economic sanctions imposed since. He argues that this does not mean sanctions have been a failure.
Russia launched military action against Ukraine on 24 February 2022. Prior to mid-February 2022, the Russian currency had traded in the range 70 to 75 roubles to the dollar for most of the previous year. In the days before and following the invasion, it fell to a low of around 140 roubles to the dollar. However, from mid-March onwards it recovered, and at the date of Shakhnov’s article (June 2022) stood at around 57 roubles, which he said was Russia’s highest exchange rate in about four years. He stated that this recovery was “unexpected”.
(Wall Street Journal, ‘Russian rouble/US dollar’, accessed 8 July 2022)
Shakhnov said that the level of a currency is determined by flows of money in and out of the country; if more money is flowing into a country than is moving out, that currency would usually rise. Shakhnov argued that Russia’s largest international transactions are inflows, in payment for its oil exports. Hence, he said that historically the rouble has strengthened when the oil price has risen.
Shakhnov reported that initial attempts to support the Russian currency after the invasion by selling foreign exchange reserves were restricted when western sanctions froze the majority of these reserves. He said that, in response, the Russian central bank announced further restrictions and capital controls. For example, these required exporters to exchange 80% of their foreign exchange earnings into roubles within three days; increased the Russian central bank’s interest rate from 9.5% to 20%; and required “unfriendly” countries to pay for Russian oil in roubles. Furthermore, sanctions have also reduced the amount of roubles being sold to pay for imports.
Shakhnov stated that these developments successfully boosted the exchange rate and many of the restrictions have now been relaxed; for example, the interest rate has been reduced back to 9.5%. However, he argued that while the rouble may have strengthened, its “utility” is “greatly weakened”, because it is much more difficult to spend the currency on imports or on travel abroad. Therefore, Shakhnov concluded that sanctions have “worked” if their aim is to “punish” Russia.
2. Impact of ‘eat out to help out’ on Covid-19
In his Economic Journal article ‘Subsidising the spread of Covid-19: Evidence from the UK’s eat out to help out scheme’, Professor Thiemo Fetzer concludes that a scheme to encourage people to return to eating in restaurants following the first wave of the Covid-19 pandemic caused a significant increase in coronavirus cases.
In August 2020, as coronavirus was subsiding after the first wave, the government launched the ‘eat out to help out’ (EOHO) scheme to encourage people to return to pubs, cafes and restaurants. EOHO offered 50% off bills up to a maximum discount of £10 per person. It applied on Mondays, Tuesdays and Wednesdays throughout August 2020. The scheme cost the government £840mn. In total, 160mn meals were claimed under the scheme and there is evidence that it was successful in boosting demand in the sector.
However, Professor Fetzer found that increased socialising as a result of EOHO led to more coronavirus cases. For example, he detected a link between geographical areas that had a higher uptake of EOHO and (i) sharper increases in cases shortly after the start of the scheme; and (ii) larger falls in cases shortly after the end of the scheme. Professor Fetzer also reported that areas with “notable” rainfall during lunch and dinner when the discount was available had fewer Covid-19 infections than areas that saw little or no rain. He concluded that the data showed “a robust link between the EOHO program and infections” and that the scheme may have been responsible for “around 11% of newly detected Covid-19 clusters” during August and early September.
As a result, Professor Fetzer suggested that the public health costs of the scheme may have “vastly outstripped” EOHO’s positive economic effect. He recommended that fiscal responses intended to cushion the economic fallout from the pandemic should “pay particular attention to epidemiological risks as, otherwise, they may significantly worsen the pandemic progression and undermine any short-term economic benefits”.
3. Women in top jobs in the UK
In a review entitled ‘Sex and Power Index 2022’, the women’s equality campaign group the Fawcett Society found that the pace of change towards equal representation for women in top jobs is “glacial”.
The society identified 5,166 positions of power in the UK. These included jobs in a wide range of sectors including politics and public service, business, education, health, culture and sport. Of these, the society said that less than a third (32%) were held by women. It found that in some sectors representation was even worse; for example, only 8% of FTSE 100 chief executives (CEOs) and 15% of chairs of sports governing bodies were women. In politics and the pandemic response, the society said that only 34% of both MPs and members of the Scientific Advisory Group for Emergencies (SAGE) were women.
The society also found that minority ethnic women were under-represented in the same 5,166 positions. It found that there were no minority ethnic women at all in positions including Supreme Court justices, metro mayors, police and crime commissioners and FTSE 100 CEOs. The study claimed that only 2% of members of the House of Lords were minority ethnic women.
The society called for: targets to increase the number of women in positions of power; improved pay gap reporting, including by ethnicity; flexible working as a default for all job roles; and improved data on the disability status, sexual orientation and religion of those in positions of power.