Diagnosing the ‘Russian Disease’: Growth and Structure of the Russian Economy

Abstract

The Russian economy is experiencing ‘Russian Disease’ (R-D) whose major symptom is a strong positive relationship between the real output growth and oil prices from 1995 through 2010. The symptoms differ significantly from those characterizing Dutch Disease. We also show that there is no negative impact of the real exchange rate on output growth in Russia. Second, we find a long-run positive relationship between oil prices and the real exchange rate. Third, we show that the effect of oil prices can be captured by terms of trade and trading gains in the System of National Accounts. Fourth, we show that the increase in imports due to real appreciation of rubles, in turn, contributed to GDP growth in the trade sector, which is a major source of overall Russian growth and a symptom of R-D.