Oil price shocks and their Impact on Russian Economy and Stock Market

This paper examines the impact of crude oil price shocks on Russian economy through 2 macroeconomic variables Gross Domestic Product growth rate and Consumer Price Index inflation rate. Russia is chosen because it is one of the largest crude oil producers. The aim of the study is to determine whether Russian economy is responsive to oil price fluctuations in the global market for a past 20 years period. For this purpose, I apply the Structural VAR model approach. The empirical results show that mentioned dependence does exists, however weak evidence is observed to argue in favour of a reduction of the impact over time. The paper also includes a paragraph that summarises empirical evidence for stock markets relation to crude oil price movements from previous studies, suggesting an industry specific approach. The study could be of a particular interest for Russian crude oil export policy as it indicates potential problems in short-run adjustment to huge oil price shocks, indicated in the results for 2008-2014 period.