Discovering the signs of Dutch disease in Russia

This paper examines the problem of Dutch disease in Russia during the oil boom of the 2000s, from both the theoretical and empirical points of view. Our analysis is based on the classical model of Dutch disease by Corden and Neary (1982). We examine the relationship between changes in the real effective exchange rate of the ruble and the evolution of the Russian economic structure during the period 2002-2013.We empirically test the main effects of Dutch disease, controlling for the specific features of the Russian economy, namely the large role of state-owned organizations. We estimate the resource movement and spending effects as determined by the theoretical model and find the presence of several signs of Dutch disease: the negative impact of the real effective exchange rate on the growth in the manufacturing sector, the growth of the total income of workers, and the positive link between the real effective exchange rate and returns on capital in all three sectors. However, the shift of labor from manufacturing to services cannot be explained by the appreciation of the ruble alone.