Russia from Bust to Boom: Oil, Politics or the Ruble?
AbstractThis 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, and political stability on economic performance. The model does very well in explaining Russia’s economic history in the period 1995-2002. We then use the model to simulate two sets of scenarios, one with various oil price scenarios and one with various adverse shocks. The simulations suggest that the Russian economy is still very vulnerable to oil price swings, and that these swings have asymmetric effects. Indeed the cost of a downward swing of oil prices seems to be larger than the benefit of an upward swing. We also find that the aggregate effects of an oil price collapse are comparable to these of renewed political instability. Although their propagation mechanism is quite different, both adverse shocks do have a similar effect on real GDP. A real exchange rate appreciation on the other hand has relatively mild effects on real GDP. All in all, it is suggested that Russia should reduce its vulnerability to adverse oil price shocks and maintain political stability.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-722.
Length: 29 pages
Date of creation: 01 Oct 2004
Date of revision:
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Russia; Macroeconomic Modeling; Macroeconomic stabilization;
Other versions of this item:
- 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.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-03-20 (All new papers)
- NEP-CMP-2005-03-20 (Computational Economics)
- NEP-ENE-2005-03-20 (Energy Economics)
- NEP-MAC-2005-03-20 (Macroeconomics)
- NEP-TRA-2005-03-20 (Transition Economics)
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