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

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Author Info

  • Jouko Rautava

    (Bank of Finland)

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 apprecia-tion (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 pa-rameters 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://128.118.178.162/eps/mac/papers/0209/0209004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0209004.

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Length: 25 pages
Date of creation: 17 Sep 2002
Date of revision:
Handle: RePEc:wpa:wuwpma:0209004

Note: Type of Document - pdf; prepared on PC; pages: 25; figures: included
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Web page: http://128.118.178.162

Related research

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. Bruno Merlevede & Koen Schoors & Bas van Aarle, 2004. "Russia from Bust to Boom: Oil, Politics or the Ruble?," William Davidson Institute Working Papers Series 2004-722, William Davidson Institute at the University of Michigan.
  2. Bernd Hayo & Ali Kutan, 2004. "The Impact of News, Oil Prices, and Global Market Developments on Russian Financial Markets," Finance 0403002, EconWPA.
  3. Catherine Locatelli, 2006. "The russian oil industry between public and private governance : obstacles to international oil companies' investment strategies," Post-Print halshs-00002159, HAL.
  4. 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.
  5. 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.
  6. 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.
  7. Hasanov Fakhri, 2011. "Analyzing price level in a booming economy: the case of Azerbaijan," EERC Working Paper Series 11/02e, EERC Research Network, Russia and CIS.
  8. Kaitila, Ville, 2003. "An Assessment of RussiaŽs Growth Prospects in 2003 - 2010," Discussion Papers 869, The Research Institute of the Finnish Economy.
  9. Fakhri Hasanov, 2010. "The Impact of Real Oil Price on Real Effective Exchange Rate: The Case of Azerbaijan," Discussion Papers of DIW Berlin 1041, DIW Berlin, German Institute for Economic Research.
  10. repec:ebl:ecbull:v:17:y:2008:i:17:p:1-9 is not listed on IDEAS
  11. Katsuya Ito, 2008. "Oil price and macroeconomy in Russia," Economics Bulletin, AccessEcon, vol. 17(17), pages 1-9.
  12. 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.
  13. Suni, Paavo, 2007. "Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM," Discussion Papers 1088, The Research Institute of the Finnish Economy.
  14. Sadek Boussena & Catherine Locatelli, 2005. "Towards a more coherent oil policy in Russia ?," Post-Print halshs-00003970, HAL.
  15. Bernd Hayo & Ali Kutan, 2002. "The Impact of News, Oil Prices, and International Spillovers on Russian Financial Markets," Finance 0209001, EconWPA.
  16. Catherine Locatelli, 2002. "La faisabilité de la libéralisation de l'industrie gazière russe," Post-Print halshs-00177826, HAL.
  17. Sadek Boussena & Catherine Locatelli, 2004. "Vers une plus grande cohérence de la politique pétrolière de la Russie ?," Post-Print halshs-00003489, HAL.
  18. Markku Tykkyläinen, 2003. "Geographical Dimensions of Russian Energy Developments," ERSA conference papers ersa03p464, European Regional Science Association.
  19. 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.

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