1. ¹HUBrussel, Brussels, Belgium
2. ²CERISE, Ghent University, Tweekerkenstraat 2, Gent 9000, Belgium. E-mail: koen.schoors@ugent.be
3. ³Research Foundation-Flanders
4. ⁴Department of Law, Governance and Economics, European Business School, Söhnleinstrasse 8a, 65201 Wiesbaden, Germany
5. ⁵WDI, University of Michigan, USA

Abstract

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.