Russia sells foreign reserves

This Month in the Economy Exercises: A General Explanation

These teaching packs are designed for 30-minute (online or offline) sessions that can be included within any lecture or tutorial class. They are designed to be suitable for university students, but could easily be adapted for higher or lower levels. Every month, we will publish at least one exercise that you can use to engage your students with current events. The main aims of these exercises are to give students practice in relating economic ideas to the real world and their own lived experiences.

Newspaper articles or videos are used as the entry point to an economic topic, which is then expanded upon by the instructor before the students are broken into small groups to engage in an activity. This will help students to develop the skills required to work as economists in the real world, and all the materials you need are provided for you. These teaching packs are published as creative commons (CC BY) and can be freely used and adopted.

The Economics and Geopolitics of Russia Selling Yuan and Gold Reserves

It is important for students to understand the workings of international and public finance and that the goal of governments and politicians is not always economic efficiency when making financial decisions. Normative goals other than efficiency can motivate economic decisions. A good economist is able to recognise, clearly name and take into account the values and goals behind economic behaviour, when making sense of the world.

The recent financial decisions of the Russian government provide a clear example of values and goals other than efficiency can affect economic activities, in this case how geopolitical goals (Putin’s imperial ambitions) are affecting the accumulation and stocks of Russia’s foreign exchange reserves. In January, Russia started selling some of its yuan as well as gold reserves. These decisions were a consequence of sanctions imposed by G7-countries on Russian oil and gas, which pushed Russia’s government budget into a significant deficit, due to a drop in tax revenues from oil and gas.

While this is an extreme example, many economic decisions are more complicated than efficiency considerations and it is crucial for students to understand the multiplicity of factors involved in real-world economic decisions, including political goals and other value judgements. Sometimes decisionmakers prioritise other outcomes over efficiency, such as standing up against the West and financing a war, as in the Russian case.

Instructor’s Guide

PowerPoint Slides