Oil prices shocks and the Russian economy

We investigate the relationship between the price of oil for domestic companies and main economic activity in Russia, measured as the price-adjusted output of agricultural production, mining, manufacturing, production and distribution of electricity, gas and water, construction, transport, retail and wholesale trade. In addition, we use indices of industrial production, mining, production, and the production and distribution of electricity, gas and water separately to examine the effects of oil price changes on various activities. We find that oil prices are procyclical and lead the business cycles. Considering the response to oil price shocks, we find that positive shocks in oil prices have had a positive and statistically significant impact on almost all types of Russian economic activity. Taking into account possible structural changes led by the economic crisis in Russia in 2008–2009, we find a negative response to a positive shock in oil prices in eight months both for main economic activity and mining. Examining causual relationships, we find the domestic oil prices do Granger cause main economic activity, industrial production and manufacturing which is consistent with the cyclical properties. © 2019 Elsevier B.V.