Russia from Bust to Boom: Oil, Politics or the Ruble?
This 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, private sector confidence and fiscal policy on economic performance. The model does very well in explaining Russia’s recent economic history in the period 1995-2004. Simulations suggest that the Russian economy is vulnerable to downward oil price shocks. We substantiate two mechanisms that mitigate the economic effects of oil price shocks, namely the stabilisation brought by the Oil Stabilisation Fund and the Dutch disease effect. The negative effect of a shock in private sector confidence on real GDP is comparable to the effect of an oil price shock, although the transmission of both shocks runs along different channels. The fiscal policies of the Putin administration temper economic fluctuations caused by oil price shocks, but it remains to be seen whether these policies will be continued.
|Date of creation:||Apr 2007|
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- Esanov, Akram & Merkl, Christian & Vinhas de Souza, Lúcio, 2004.
"Monetary Policy Rules for Russia,"
BOFIT Discussion Papers
11/2004, Bank of Finland, Institute for Economies in Transition.
- Hall, Stephen & Mizon, Grayham E. & Welfe, Aleksander, 2000.
"Modelling economies in transition: an introduction,"
Elsevier, vol. 17(3), pages 339-357, August.
- Hall, S. & Mizon, G.E. & Welfe, A., 1999. "Modelling economies in transition: an introduction," Discussion Paper Series In Economics And Econometrics 9919, Economics Division, School of Social Sciences, University of Southampton.
- Jouko Rautava, 2002.
"The role of oil prices and the real exchange rate in Russia‘s economy,"
- 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.
- John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
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