An Influence of Exchange Rate Fluctuation on Trade Balance. An Experience of the Russian Federation

This paper investigates an impact of exchange rate rubble fluctuation on trade balance of Russia. A basic model of trade balance synthesizes the theory of elasticity and the absorption approach. The analysis was carried out on the basis of quarterly data from 2002 (I) to 2017 (IV). China, Germany, the United States, the Netherlands, the United Kingdom, Turkey, Finland and Italy were chosen as main trade partners of Russia. During the research, an ARDL model was constructed, the best specification of which was chosen by comparing the values of the Akaike information criterion (AIC). The results of the investigation provide evidence of short-term negative impact of ruble depreciation on Russia's trade balance, which is becoming positive already in the next quarters. The results correspond with all aspects of the theories underlying the analysis. Keywords: trade balance, real effective exchange rate, Russia, autoregressive distributed lag model.