The Interaction between Oil Price and Basic Macroeconomics Indicators: Evidences from Russia

This study empirically analyzes the causation between GDP, unemployment rate, inflation and oil price in through analyzing Russian quarterly data from 2005:Q1 to 2014:Q3 and employing Vector Error Correction (VECM). The main findings of the paper are in line with general theory and are as follows: i) changes in oil prices in direct ratio affect the level of production, in other words increase in hydrocarbon cost pushes Russian economy up, ii) high oil price, among other things, causes the unemployment rate in Russia to decline, iii) in the short run, inflation favorably, but weakly influences the level of production as well as employment in Russia, iv) unemployment rate in Russia, as expected, has adverse impact on the total output level, v) in accordance with error correction terms GDP and unemployment rate needs about 3 quarters to return to the equilibrium level after the structural changes. Based on the results, some policy recommendations are presented.