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Russia from Bust to Boom: Oil, Politics or the Ruble?

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  • B. MERLEVEDE

    ()

  • K. SCHOORS

    ()

  • B. VAN AARLE

Abstract

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, private sector confidence and fiscal policy on economic performance. The model does very well in explaining Russia’s recent economic history in the period 1995-2004. Simulations suggest that the Russian economy is vulnerable to downward oil price shocks. We substantiate two mechanisms that mitigate the economic effects of oil price shocks, namely the stabilisation brought by the Oil Stabilisation Fund and the Dutch disease effect. The negative effect of a shock in private sector confidence on real GDP is comparable to the effect of an oil price shock, although the transmission of both shocks runs along different channels. The fiscal policies of the Putin administration temper economic fluctuations caused by oil price shocks, but it remains to be seen whether these policies will be continued.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 07/461.

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Length: 32 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:rug:rugwps:07/461

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Keywords: Russia; Macroeconomic Modeling; Macroeconomic stabilization;

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References

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  1. Jouko Rautava, 2002. "The role of oil prices and the real exchange rate in Russia‘s economy," Macroeconomics 0209004, EconWPA.
  2. Esanov, Akram & Merkl, Christian & Vinhas de Souza, Lúcio, 2004. "Monetary Policy Rules for Russia," BOFIT Discussion Papers 11/2004, Bank of Finland, Institute for Economies in Transition.
  3. John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
  4. Hall, Stephen & Mizon, Grayham E. & Welfe, Aleksander, 2000. "Modelling economies in transition: an introduction," Economic Modelling, Elsevier, vol. 17(3), pages 339-357, August.
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Cited by:
  1. Haaparanta, Pertti & Pirttilä, Jukka, 2005. "Reforms and Confidence," BOFIT Discussion Papers 1/2005, Bank of Finland, Institute for Economies in Transition.
  2. Oomes , Nienke & Kalcheva, Katerina, 2007. "Diagnosing Dutch disease: Does Russia have the symptoms?," BOFIT Discussion Papers 7/2007, Bank of Finland, Institute for Economies in Transition.
  3. Katerina Kalcheva & Nienke Oomes, 2007. "Diagnosing Dutch Disease," IMF Working Papers 07/102, International Monetary Fund.

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