| 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. |