Oil Shocks' Effect On Key Macroeconomic Variables: SVAR Identification With Heteroscedasticity

Oil is one of the most significant sources of energy in modern world, and plays a crucial role in various economic activities and production. Changes in oil market structure can dramatically affect a country’s economy. There has been a considerable amount of studies devoted to this influence and it’s causes and consequence since 1970’s. Many of these studies have explored the relationship between oil price and such macroeconomic variables as output, inflation, exchange rate etc. with structural vector autoregressive (SVAR) analysis. One of the main problems of such analysis is identifying the shocks of interest. There is a number of solutions of this problem, but all of them has some disadvantages, which may be severe in some cases. This study presents an SVAR model for determining the impact of oil shocks on economy using identification through heteroscedasticity for one of the largest oil exporters, Russia.