Oil prices versus oil export revenues as fundamental factors of the real Russian ruble exchange rate: a comparison of VEC models[Модели Зависимости Реального Курса Рубля От Цены И Стоимости Экспорта Нефти: Сравнительный Анализ]

The study compares the explanatory power of two alternative long-term determinants of the real effective exchange rate of the Russian ruble, oil prices and oil export revenues, in three variants of the error correction model. The linear model shows that during the period of managed nominal exchange rate from January 1999 to October 2014 explanatory properties of oil prices and oil export revenues are identical. In the model with structural break-in short-run parameters in November 2014 (when the Central Bank of Russia switched to a floating exchange rate and inflation-targeting policy) and in the Markov regime-switching model with two states, the oil price has higher explanatory power. This result could be explained, first, by the fact that since November 2014 oil revenue changes were mainly due to oil price movements rather than fluctuations in the volume of oil exports. In addition, information channel played an important role in the exchange rate dynamics. In this channel, with the non-instant adjustment of oil export price contracts, increase or decrease in the world price of oil forms expectations about the future rise (drop) of contract prices of exported oil, leading to an instant ap-preciation (depreciation) of the nominal and real exchange rates.