Russia from bust to boom and back: oil price, Dutch disease and stabilisation fund

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyse the impact of the oil price, the exchange rate, private sector confidence and fiscal policy on economic performance. 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 fiscal policies of the Putin administration temper economic fluctuations caused by oil price shocks. doi:10.1057/ces.2009.2 Keywords: Russia, oil price, macroeconomic modelling, Oil Stabilisation Fund JEL Classifications: C70, E17, E58, E16, E63
INTRODUCTION Russia is the largest neighbour of the enlarged European Union (EU). The economies of the EU and Russia are increasingly integrated through rising flows of goods, services, capita! and [...]