The Effects Of International Oil Price Fluctuations On Russian Economic Situation

Oil is often perceived as a necessary and highly addictive energy commodity for the global economy.Both oil-consuming and oil-supplying countries are economically dependent on oil.Therefore,any change in the oil price is prone to affect both sides of the market.The oil market's dynamics have the tendency to change dramatically due to technological c hanges and political events,resulting in price fluctuations affecting the entire world economy.Countries suffering from a shortage of oil reserves or importing oil are trying to reduce the oil consumption.But this can be only possible if alternatives of oil reserves are available.The factors affecting exchange rate are inflation,interest rate,foreign direct investment,government consumption expenditure and balance of trade.This master's thesis seeks to identify the impact of oil prices and risk exposure of exchange rate volatility on economic growth in Russian economy on annual data of from year 1997 to 2016.Based on results it is estimated that imports,inflation,exports,interest rate,government consumption expenditure and foreign direct investm ent has a significant impact on real effective exchange rate in the long run and short run.Secondly,Engle Granger results indicate that relationship is significant in the long run and its error correction adjustment mechanism in short runs is significant and correctly signed for Russia.