IDEAS home Printed from https://ideas.repec.org/p/rif/dpaper/1088.html
   My bibliography  Save this paper

Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM

Author

Listed:
  • Suni, Paavo

Abstract

Russia has greatly benefited both from exporting more energy commodities in volume terms and from the improvement of its terms of trade due to the rise in oil and other commodity prices in the 2000s. To study the impacts, the counterfactual simulation for the years 2001-2006 and the usual oil price rise simulations for the future were made. According to the counterfactual simulations, the role of oil has been a key driver in the recent Russian economic development in the 2000s. The average GDP growth in 2001-6 would have been around 4 per cent, around 2.5 percentage points lower than in the actual case. The effect was strongest in the last years of the period bringing the growth even below one per cent in 2006 instead of more than 6 per cent. The strong effect is due to large and rising price difference between the actual and counterfactual oil prices especially in the years 2003-6, which would have meant pronouncedly smaller oil income into the economy than actually took place. In the other simulations, the effects of the permanent 20 USD price rise to the baseline was compared. The economy reacted initially strongly to the shocks with e.g. raising GDP growth and current account strongly. The effect was, however, quickly vanishing after the rise. The temporary end of the current commodity boom would cause serious difficulties in the Russian eco-nomic development as the fuel for the engine would dry. The more robust growth would necessitate drastic changes in the economic structure from resource based economy towards more normal economic structure. Given the short and rather undeveloped Russia time series and from this reason also rather undeveloped models, the results contain large uncertainty. However, simulations provide one useful benchmark on the size of the effects of the energy price rise on the Russian economy.

Suggested Citation

  • Suni, Paavo, 2007. "Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM," Discussion Papers 1088, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1088
    as

    Download full text from publisher

    File URL: http://www.etla.fi/wp-content/uploads/2012/09/dp1088.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kaitila, Ville, 2007. "Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia," Discussion Papers 1087, The Research Institute of the Finnish Economy.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, June.
    3. Rautava, Jouko, 2002. "The role of oil prices and the real exchange rate in Russia's economy," BOFIT Discussion Papers 3/2002, Bank of Finland, Institute for Economies in Transition.
    4. World Bank, 2005. "Russian Federation : From Transition to Development, A Country Economic Memorandum for the Russian Federation," World Bank Other Operational Studies 8628, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:rujoec:v:1:y:2015:i:3:p:257-272 is not listed on IDEAS
    2. Andreas Benedictow & Daniel Fjærtoft & Ole Løfsnæs, 2010. "Oil dependency of the Russian economy: an econometric analysis," Discussion Papers 617, Statistics Norway, Research Department.
    3. Paavo Suni, 2008. "Effects of Energy Price Changes on Russian Economy," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(2), pages 9-15, July.
    4. Alho, Kari E.O., 2008. "Regulation of Energy Prices in Russia," Discussion Papers 1128, The Research Institute of the Finnish Economy.
    5. Daniel Treisman, 2010. "Oil and Democracy in Russia," NBER Working Papers 15667, National Bureau of Economic Research, Inc.
    6. repec:eee:rujoec:v:1:y:2015:i:1:p:30-54 is not listed on IDEAS

    More about this item

    Keywords

    Russian economy; simulation; oil price;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rif:dpaper:1088. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kaija Hyvönen-Rajecki). General contact details of provider: http://edirc.repec.org/data/etlaafi.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.