Impact of Oil Price Shocks on Russian Macroeconomic Performance

Abstract

This study examines the significant influence of oil price fluctuations on the economies of oil-exporting countries. While elevated oil prices can result in foreign currency inflows and advantages for oil-exporting countries, they can also trigger adverse effects, including a reduction in manufacturing sectors and a loss of price competitiveness due to currency appreciation. This research focuses on the period from 2004Q1 to 2021Q4, examining the influence of oil price fluctuations on key macroeconomic indicators in Russia, including industrial production, exchange rates, inflation and interest rates. The structural VAR model findings confirm that the monetary channel demonstrates a higher degree of responsiveness to oil price shocks compared to the fiscal channel. Specifically, the study observes that industrial production exhibits a pronounced procyclical response to oil price shocks through the fiscal channel. Conversely, the monetary channel reveals that increased oil price volatility exerts pressure on the Russian rouble, resulting in a counter-cyclical behaviour in inflation and interest rates.