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Factor Analysis of the Russian Budget System Revenues


  • Balaev, Alexey I.

    (Economic Expert Group)


In this paper we analyze factors which influence the dynamics of the Russian budget system revenues using econometric models. In our models we incorporate the following factors: Urals crude oil price, ruble exchange rate, inflation rate and real GDP. For the purpose of distinguishing the impact of these factors on the revenues more clearly we conduct their preliminary orthogonalization that requires defining a prespecified order in which they influence each other. It is determined by exogeneity (or endogeneity) of the factors using a vector autoregression and its impulse-response function. The constructed models are later used for measuring the contribution of each factor to the variation of revenues on all the levels of the budget system. Our analysis shows that dependence of the Russian budget on oil price fluctuations is much stronger than it could be inferred from simply calculating the share of oil and gas revenues. In recent years, the oil and gas sector was providing from 22 to 28% of the expanded government budget revenues, and from 40 to 50% of the federal government budget revenues. However, according to our estimates, the variation of oil and gas revenues explains from 60 to 70% of the total variations of these revenues. These calculations are used in order to evaluate Russia’s potential to reduce its budget expenditure variation through introducing a strict budget rule. We demonstrate how Russia’s place among the G20 economies can change in terms of stability of the government expenditure dynamics. We also discuss a possible amplification of our analysis.

Suggested Citation

  • Balaev, Alexey I., 2017. "Factor Analysis of the Russian Budget System Revenues," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 8-37, June.
  • Handle: RePEc:rnp:ecopol:ep1731

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    References listed on IDEAS

    1. Gary C. Cornia & Ray D. Nelson, 2010. "State tax revenue growth and volatility," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 23-58.
    2. Rodrigo O. Valdes & Eduardo M Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
    3. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2016. "The impact of oil shocks on exchange rates: A Markov-switching approach," Energy Economics, Elsevier, vol. 54(C), pages 11-23.
    4. Kamilya Tazhibayeva & Aasim M. Husain & Anna Ter-Martirosyan, 2008. "Fiscal Policy and Economic Cycles in Oil-Exporting Countries," IMF Working Papers 08/253, International Monetary Fund.
    5. E. Gurvich., 2010. "Natural Rent in the Russian Oil and Gas Sector," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 11.
    6. Gylfason, Thorvaldur, 2008. "Development and Growth in Mineral-Rich Countries," CEPR Discussion Papers 7031, C.E.P.R. Discussion Papers.
    7. 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.
    8. Elsiddig Rahma & Noel Perera & Kian Tan, 2016. "Impact of Oil Price Shocks on Sudan’s Government Budget," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 243-248.
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    More about this item


    budget system; revenues fluctuations; dependence on oil prices; econometric modeling; variance decomposition;

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General


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