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The role of oil prices and the real exchange rate in Russia's economy

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Author Info

  • Rautava, Jouko

    ()
    (BOFIT)

Abstract

Most people seem to think that Russia's economy and fiscal situation are still crucially tied up with international oil prices and the exchange rate of the rouble, although this view has recently been challenged by some analysts. Empirical research on this topic is, however, scanty. In this paper, the impact of international oil prices and the real exchange rate on Russia's economy and fiscal policy is analysed using VAR methodology and cointegration techniques. The research period covered is 1995:Q1 - 2001:Q3. The results indicate that in the long run a 10% permanent increase (decrease) in international oil prices is associated with a 2.2% growth (fall) in the level of Russian GDP. Respectively, a 10% real appreciation (depreciation) of the rouble is associated with a 2.4% decline (increase) in the level of output. These long-run equilibrium relationships also have a significant impact on short-run dynamics through an error-correction mechanism. The estimation results confirm also a strong dependence of fiscal revenues on output and oil price fluctuations. Estimated parameters and diagnostic statistics do not indicate that Russia's dependence on oil and the real exchange rate would somehow have weakened in recent years.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp0302.pdf
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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 3/2002.

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Length: 25 pages
Date of creation: 11 Mar 2002
Date of revision:
Handle: RePEc:hhs:bofitp:2002_003

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: Russian economy; fiscal policy; oil; real exchange rate; VAR; cointegration;

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References

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  1. Basdevant, Olivier, 2000. "An econometric model of the Russian Federation," Economic Modelling, Elsevier, vol. 17(2), pages 305-336, April.
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Citations

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Cited by:
  1. Catherine Locatelli, 2006. "The russian oil industry between public and private governance : obstacles to international oil companies' investment strategies," Post-Print halshs-00002159, HAL.
  2. Markku Tykkyläinen, 2003. "Geographical Dimensions of Russian Energy Developments," ERSA conference papers ersa03p464, European Regional Science Association.
  3. B. Merlevede & K. Schoors & B. Van Aarle, 2007. "Russia from Bust to Boom: Oil, Politics or the Ruble?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/461, Ghent University, Faculty of Economics and Business Administration.
  4. Melnikov, Roman, 2010. "The impact of oil price dynamics on the macroeconomic indicators of the Russian economy," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 20-29.
  5. Sadek Boussena & Catherine Locatelli, 2005. "Towards a more coherent oil policy in Russia ?," Post-Print halshs-00003970, HAL.
  6. Catherine Locatelli, 2002. "La faisabilité de la libéralisation de l'industrie gazière russe," Post-Print halshs-00177826, HAL.
  7. Tuuli Koivu & Pekka Sutela, 2005. "Financial Systems in Transition: Could Small Actually Be Beautiful?," Eastern Economic Journal, Eastern Economic Association, vol. 31(2), pages 265-283, Spring.
  8. repec:ebl:ecbull:v:17:y:2008:i:17:p:1-9 is not listed on IDEAS
  9. Sadek Boussena & Catherine Locatelli, 2004. "Vers une plus grande cohérence de la politique pétrolière de la Russie ?," Post-Print halshs-00003489, HAL.
  10. Hasanov, Fakhri, 2010. "The impact of real oil price on real effective exchange rate: The case of Azerbaijan," MPRA Paper 33493, University Library of Munich, Germany.
  11. Bernd Hayo & Ali M. Kutan, 2004. "The Impact of News, Oil Prices, and Global Market Developments on Russian Financial Markets," William Davidson Institute Working Papers Series 2004-656, William Davidson Institute at the University of Michigan.
  12. Kaitila, Ville, 2003. "An Assessment of RussiaŽs Growth Prospects in 2003 - 2010," Discussion Papers 869, The Research Institute of the Finnish Economy.
  13. Hayo, Bernd & Kutan, Ali M., 2002. "The impact of news, oil prices, and international spillovers on Russian financial markets," ZEI Working Papers B 20-2002, ZEI - Center for European Integration Studies, University of Bonn.
  14. Shahbaz, Muhammad & Tiwari, Aviral Kumar & Tahir, Mohammad Iqbal, 2013. "Analyzing Time-Frequency Relationship between Oil Price and Exchange Rate in Pakistan through Wavelets," MPRA Paper 48086, University Library of Munich, Germany, revised 05 Jul 2013.
  15. Hasanov, Fakhri, 2009. "Analyzing price level in a booming economy: the case of Azerbaijan," MPRA Paper 29555, University Library of Munich, Germany.
  16. Katsuya Ito, 2008. "Oil price and macroeconomy in Russia," Economics Bulletin, AccessEcon, vol. 17(17), pages 1-9.
  17. Locatelli, Catherine, 2006. "The Russian oil industry between public and private governance: obstacles to international oil companies' investment strategies," Energy Policy, Elsevier, vol. 34(9), pages 1075-1085, June.
  18. Katsuya Ito, 2009. "The Russian Economy and the Oil Price: A Co-integrated VAR Approach," Transition Studies Review, Springer, vol. 16(1), pages 220-227, May.
  19. Suni, Paavo, 2007. "Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM," Discussion Papers 1088, The Research Institute of the Finnish Economy.

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