Financial Analytics: Science and Experience

Oil and the Russian ruble: two links of the same chain

Vol. 9, Iss. 16, APRIL 2016

Received: 17 February 2016

Accepted: 29 March 2016

Available online: 27 April 2016


JEL Classification: Е17, Е31, Е43

Pages: 2-19

Alekhin B.I. Russian State University for Humanities, Moscow, Russian Federation

Importance The article discusses the nominal rate of the Russian ruble and oil price.
Objectives I trace the relationship between the nominal price of a crude oil barrel and the nominal exchange rate of the Russian ruble using 835 weekly observations in between January 2000 and December 2015.
Methods I used econometric methods including the Bai–Perron test to detect structural breakpoints, augmented Dickey-Fuller test, Johansen cointegration test, vector model of error correction, Granger causality test and ordinary tests.
Results Stationarity, cointegration and causality tests were performed within the entire sample in five modes. I detected the cointegration of non-stationary Brent price and the Russian ruble rate in the modes after 2006. The outcome of the Johansen test looks more preferable in the mode of 9 June 2014 through 28 December 2015, where I noted the time threshold for recovery of the equilibrium between the crude oil Brent price and the Russian ruble rate in the current period after the price shock in the previous period.
Conclusions and Relevance I verified the hypothesis that the Russian ruble rate positively depended on the crude oil Brent price, though it was not only the price that determined it. The empirical model explains 96% of the rate variance, with the equation of the vector model of error correction with the crude oil Brent price substantiating for almost 40% of the rate variance.

Keywords: oil, Ruble, cointegration


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