A Markov Switching VECM Model for Russian Real GDP, Real Exchange Rate and Oil Prices
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Abstract
This paper considers an application of the Markov switching vector error correction model to the analysis of the long-run and the short-run dependence of Russian real GDP and real exchange on oil prices. An algorithm for estimation of the model with a priori information on a state of hidden Markov chain in some periods of time is provided. It is shown that for the period of 1999–2018 two different regimes are well defined: with a slow adjustment of real exchange rate and a sharp reaction of GDP in response to oil price shock and with a fast adjustment of real exchange rate and a slow adjustment of GDP in response to shock. We have concluded that floating ruble exchange rate is a natural stabilizer of the Russian economic activity.Keywords: Russian economy, GDP, real exchange rate, oil prices, error correction model, Markov switching model.JEL Classifications: С22, C51, E52, F31, F41DOI: https://doi.org/10.32479/ijeep.10667Downloads
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Published
2021-02-01
How to Cite
Bedin, A. F., Kulikov, A. V., & Polbin, A. V. (2021). A Markov Switching VECM Model for Russian Real GDP, Real Exchange Rate and Oil Prices. International Journal of Energy Economics and Policy, 11(2), 402–412. Retrieved from https://econjournals.com/index.php/ijeep/article/view/10667
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