Spillovers from Russia to Neighboring Countries: Transmission Channels and Policy Options
IMF Working Papers, September 8, 2023
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- Spillovers from Russia to Neighboring Countries: Transmission Channels and Policy Options
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Bibliographic details
- Authors: Shant Arzoumanian
- Published: September 8, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400254871.001
Key findings
- Russia’s output fluctuations are an important driver of output fluctuations of countries in the region.
- Spillovers are especially pronounced for oil importers.
- Transmission has been increasingly via trade and market confidence channels.
- The magnitude of cross-border spillovers is larger for countries with:
- relatively high bilateral trade concentration,
- low export diversification,
- weak external buffers.
- Stronger public institutional quality—especially in the fiscal area—may help insulate countries from volatility in the Russian sovereign debt market.
Transmission channels identified
- Trade channel: bilateral trade linkages transmit output fluctuations from Russia to neighboring countries.
- Market confidence channel: changes in market confidence amplify cross-border spillovers.
- Sovereign debt market channel: volatility in the Russian sovereign debt market affects neighboring economies, with fiscal institutional quality moderating effects.
Heterogeneity and vulnerability factors
- Country characteristics associated with larger spillovers:
- high bilateral trade concentration,
- low export diversification,
- weak external buffers.
- Oil importers are more affected than other countries in the region.
Policy options and institutional implications
- Strengthen public institutional quality, with emphasis on fiscal institutions, to reduce vulnerability to external sovereign debt volatility.
- Policies that diversify exports and reduce bilateral trade concentration can lower spillover magnitudes.
- Building stronger external buffers can mitigate the impact of Russian output fluctuations.
Research approach and scope
- Methods used: vector autoregression (VAR) and dynamic panel models.
- Subject areas: Balance of payments, Business cycles, Economic growth, Exports, Financial sector policy and analysis, International trade, Oil prices, Prices, Remittances, Spillovers.
- Keywords listed in the paper: Annex I. data definition, Business cycles, CIS economy, emerging markets, Exports, FDI, Global, international business cycles, market confidence, Oil prices, output fluctuation, policy option, remittances, Spillovers, spillovers from Russia, trade.
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