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Russia from Bust to Boom: Oil, Politics or the Ruble?

Author

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  • B. MERLEVEDE
  • K. SCHOORS
  • B. VAN AARLE

Abstract

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.

Suggested Citation

  • B. Merlevede & K. Schoors & B. Van Aarle, 2007. "Russia from Bust to Boom: Oil, Politics or the Ruble?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/461, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:07/461
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    File URL: http://wps-feb.ugent.be/Papers/wp_07_461.pdf
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    References listed on IDEAS

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    1. repec:zbw:bofitp:2004_011 is not listed on IDEAS
    2. Esanov, Akram & Merkl, Christian & Vinhas de Souza, Lucio, 2005. "Monetary policy rules for Russia," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 484-499, September.
    3. Rautava, Jouko, 2004. "The role of oil prices and the real exchange rate in Russia's economy--a cointegration approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 315-327, June.
    4. 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.
    5. Taylor, John B. (ed.), 2001. "Monetary Policy Rules," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226791258, July.
    6. World Bank, 2002. "Transition, The First Ten Years : Analysis and Lessons for Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 14042.
    7. Jouko Rautava, 2002. "The role of oil prices and the real exchange rate in Russia‘s economy," Macroeconomics 0209004, University Library of Munich, Germany.
    8. William Tompson, 2002. "Putin's Challenge: The Politics of Structural Reform in Russia," Europe-Asia Studies, Taylor & Francis Journals, vol. 54(6), pages 933-957.
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    Cited by:

    1. repec:zbw:bofitp:2007_007 is not listed on IDEAS
    2. Ms. Katerina Kalcheva & Nienke Oomes, 2007. "Diagnosing Dutch Disease: Does Russia Have the Symptoms?," IMF Working Papers 2007/102, International Monetary Fund.
    3. repec:zbw:bofitp:2007_011 is not listed on IDEAS
    4. Aaron Mehrotra & Jouko Rautava, 2008. "Do sentiment indicators help to assess and predict actual developments of the Chinese economy?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(3), pages 225-239.
    5. Haaparanta, Pertti & Pirttila, Jukka, 2007. "Reforms and confidence," Journal of Development Economics, Elsevier, vol. 84(1), pages 534-550, September.
    6. Oomes, Nienke & Kalcheva, Katerina, 2007. "Diagnosing Dutch disease: Does Russia have the symptoms?," BOFIT Discussion Papers 7/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. Yulia Vymyatnina, 2014. "Spillover Effects in the Customs Union of Russia, Kazakhstan and Belarus," EcoMod2014 7160, EcoMod.
    8. Oomes, Nienke & Kalcheva, Katerina, 2007. "Diagnosing Dutch disease : Does Russia have the symptoms?," BOFIT Discussion Papers 7/2007, Bank of Finland, Institute for Economies in Transition.

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    More about this item

    Keywords

    Russia; Macroeconomic Modeling; Macroeconomic stabilization;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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