Effects of Changes in Oil Prices on Russian Economy: Analysis of Cointegration with Multiple Structural Breaks and Symmetric Causality

In this paper, effects of changes in oil prices on Russian economy is analyzed with the help of cointegration with multiple structural breaks and symmetric causality tests, for the period of 1992Q1-2014Q3. In this context, stationarity of the series is investigated by Kapetanios (2005) unit root test with multiple structural breaks and it is found that the series are not stationary at level values, but stationary when their first differences are taken. Causality relations between series are investigated by Hacker and Hatemi-J (2012) symmetric causality test and it is seen that causality relation exists from oil prices to export, foreign trade balance and national income. Existence of cointegration relation between series is tested by Maki (2012) method of cointegration with multiple structural break and it is found that the series are cointegrated. Long run analysis is done and it is estimated that 1 percent increase in oil prices increase the export, foreign trade balance and national income of Russia by 1.01 percent, 0.27 percent and 0.13 percent respectively.