The aim of this study, is the modeling of the oil market, the identification of several oil price shocks, and the detection of their effect on the Russian economy. We perform an empirical analysis of the determinants of the oil price. Through the estimation of a SVAR model, we identify three oil price shocks, from the demand and the supply side. Moreover, we model the oil market using different measures for global economic activity. Through some forecasting analysis, we find that the OECD IP is the best indicator for modeling the oil market. Afterward, we conduct an empirical analysis of the effects of oil price shocks on a developing and oil-exporter country: Russia. The relationship between oil price shocks and the Russian economy has not been studied as much as the relationship itself, but for other countries (for example United States). We expect the effects of these shocks to be different in oil-exporting countries. We use two different models to detect the effect of the oil price shocks on the Russian GDP Growth and Inflation: the Autoregressive Distributed Lag (ARDL) model and the MIDAS model. We study the effect of two different types of shocks on the Russian economy: temporary shocks and accumulated shocks. Analyzing the IRF we find that the two demand shocks have a positive and significant effect on Russian GDP growth, while the effect of the oil supply shock is more muted and almost non-existent. Moreover, the aggregate demand shock and the oil supply shock have a non-significant effect on Russian inflation, while the oil-specific demand shock has a negative effect on Russian inflation. We use the ARDL and MIDAS models to forecast the Russian GDP growth and inflation. Based on predictive power, the best model to forecast the Russian main macroeconomic variables is the ARDL model. Different oil shocks have a different effect on Russia's economic growth and inflation as an oil exporter. As a result, not disentangling oil price shocks based on their underlying source could cause difficulties in estimating the real effect of oil price changes in the main macroeconomic aggregates for Russia.
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