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IMF Country Report No. 17/198

RUSSIAN FEDERATION

SELECTED ISSUES

July 2017

This Selected Issues paper on the Russian Federation was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on June 19, 2017.

Copies of this report are available to the public from

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© 2017 International Monetary Fund

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RUSSIAN FEDERATION

SELECTED ISSUES

June 19, 2017

Approved By

European Department

Prepared by Alexander Culiuc, Gabriel Di Bella, Oksana Dynnikova, Zoltan Jakab, Annette Kyobe, and Marzie Taheri Sanjani.

Contents

  • RUSSIA’S NON-COMMODITY EXPORTS: WHY THE MUTED RESPONSE TO THE RECENT DEVALUATION?

  • A. Introduction and Summary

  • B. Export Elasticities During Terms-of-Trade Driven Depreciations

  • C. Trading Partner Growth

  • D. Market Access

  • E. Quantifying Structural Transformation

  • F. Outlook and Policy Implications

  • FIGURES

  • 1. Russia’s exports composition and competitiveness

  • 2. Estimated Elasticities with Respect to the REER

  • 3. NPL evolution (p.p. change since 2014 Q1)

  • 4. Export Commodity Prices and Partner Growth

  • 5. Trading Partner Growth and Manufacturing Exports in Large EMs

  • 6. Consequences of Russia’s Dependence on Neighbouring Markets

  • 7. Regional Trade Agreements: Russia Against other EMs and other Large Economies

  • 8. MA-OTRI Index of Restrictions Faced by Exporters

  • 9. Manufactured Exports Growth Decomposition

  • 10. EXPY Levels and Changes for Large EMs

  • 11. EXPY for Manufactured Goods: Levels and Changes for large EMs

  • TABLE

  • 1. Panel Estimations of Elasticities of Manufactured Exports with Respect to the REER

  • ANNEX

  • I. Defining Manufactured Exports

  • II. Export Growth Decomposition: Methodology and Extended Results

  • References

  • EVALUATING FISCAL RULES?

  • A. Introduction

  • B. Russia’s Fiscal Rules

  • C. Simulations of Fiscal Rules

  • BOXES

  • 1. Russia’s Previous Fiscal Frameworks

  • 2. Determining a Benchmark Oil Price

  • FIGURES

  • 1. Fiscal Rules or Lack Thereof: Central Government Revenue and Expenditure

  • 2. Procyclical Fiscal Policies and Insufficient Savings

  • 3. Counter Factual: Deviations from Actual Outcomes

  • 4. Evolution of Net Debt: Oil Shock Scenarios

  • APPENDIX

  • I. Table and Figures

  • ANNEXES

  • I. FSGM for Russia

  • II. Russia’s Proposed Oil Price Benchmark

  • FISCAL FEDERALISM AND REGIONAL PERFORMANCE

  • A. Introduction

  • B. Russia’s Fiscal Federalism in Context

  • C. Fiscal Federalism at Work: Achievements and Challenges

  • D. Conclusions and Issues for Discussion

  • FIGURES

  • 1. Features of Russia’s Fiscal Federalism

  • 2 Own Fiscal Revenues, Per Capita Income and GRP Composition

  • 3. Federal Transfers and Per Capita Income

  • 4. Federal Transfers and Accumulation of Factors of Production

  • 5. Federal Transfers, Public Sector Expansions and TFP Increases

  • TABLES

  • 1. Definition of Variables

  • 2. Regressions for Bilateral Regional Per Capita GDP Growth Correlations

  • 3. Regressions for Bilateral Regional Per Capita GDP Growth Correlations: Results

  • 4. Federal Transfers in a Simultaneous Equations System

  • 5. Federal Transfers in a Simultaneous Equations System: Results

  • APPENDIX

  • I. Fiscal Federalis—Further Details

  • References

  • PUTTING THE CURVE BACK IN RUSSIA’S PHILIPS CURVE: A TIME-VARYING APPROACH

  • A. Introduction

  • B. Avoid Bivariate Relationship and Adopt Multivariate Structural Model

  • C. Results—How Does the Philips Curve Evolved Over Time?

  • D. Conclusions

  • FIGURES

  • 1. Inflation-Unemployment Trade-off

  • 2. Bivariate Relationship—Subcomponents of CPI Inflation (1996Q1–2016Q3)

  • 3 Bivariate Relationship—Various Inflation Measures (1996Q1–2016Q3)

  • 4. Data

  • 5. Time-Varying Parameters of Phillips Curve

  • 6. Unemployment Rate and NAIRU

  • 7. Inflation and Fitted Value

  • 8. Phillip-Curve Estimations in Russia, AEs and EMs

  • ANNEXES

  • I. Identification and Bayesian Estimation

  • II. Fit of the Constant Time Coefficient Model

  • III. Time-Variation in Slope, Headline Versus Core

  • References

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Russian Federation: Selected Issues
Author:
International Monetary Fund. European Dept.