Ladislav Tyll

Department of Strategy, University of Economics, Prague

Czech Republic

ladislav.tyll@vse.cz

The impact of economic sanctions on Russian economy and the RUB/USD exchange rate

Karel Pernica

Department of Strategy, University of Economics, Prague

Czech Republic

karel.pernica@vse.cz

Markéta Arltová

Department of Statistics and Probability, University of Economics, Prague

Czech Republic

arltova@vse.cz

Abstract. Current economic situation in Russia could be considered at least as dismal. Russian population, being largely under the influence of their political elite and mass media, blames Western countries that have been imposing economic sanctions on Russia. In this paper, we are trying to provide an objective overview of the impact of Western sanctions on some incremental economic indicators within the period from 02/01/2013 till 07/11/2016 and challenge the common opinion of many Russians. Looking at Russian economy which is highly dependent on oil exports it may sound obvious that besides Western sanctions and consequent Russian countermeasures, it would be rather the oil prices which have a fundamental effect on the living standards of many Russians. Considering also the Russian dependency on the imports of food and other products we may conclude that the exchange rate between ruble and USD has the most significant impact on the price level in the country and thus on the overall economic environment. We also tried to provide a statistically proven evidence that despite the general proclamations of the Russian Central Bank, the exchange rate of ruble is tightly bound to oil prices since the introduction of sanctions and thus there is no unmanaged floating rate anymore between ruble and USD.

Received: October, 2017

1st Revision: December, 2017

Accepted: January, 2018

DOI: 10.14254/2071-8330.2018/11-1/2

JEL Classification: E32, E44, E58, F31, F51

Keywords: exchange rate ruble/USD, oil prices, Russia, sanctions, countermeasures