Title: On the economic effect of Western sanctions on Russia
Authors: Anna Pestova - NRU HSE and CMASF (Russia) [presenting]
Mikhail Mamonov - Center for Macroeconomic Analysis and Short-term Forecasting (Russia)
Abstract: An empirical test of Bayesian VAR model is developed and provided for the Russian economy. On the basis of Bayesian VAR forecasting model we estimate the economic effect of Western sanctions on the Russian economy controlling for the fall in oil price that occurred simultaneously. To disentangle the effects of different external shocks, we perform two counterfactual experiments with BVAR model for Russia: we make out-of-sample conditional projections of the key Russian macroeconomic variables conditioning on the two sets of realized external conditions in 2014-2015: first, only on the oil price and second, on the oil price and the Russian corporate external debt (as a proxy for the short-term effect of economic sanctions). We found that the fall in oil prices alone cannot explain the depth of the current crisis in the Russian economy, however if we add the actual path of corporate external debt deleveraging, we get more accurate results. We treat the difference between these two projections, which is significant for the most of variables, as the effect of EU and US sanctions against Russia.