Hydrocarbon prices shocks, fiscal stability and consolidation: Evidence from Russian Federation

The current transition to a greener economy affects world markets dynamics. Given the considerable hydro-carbon dependency, we scrutinise the resilience of the Russian fiscal stance to international oil and gas prices at the first phase of this study. In doing so, we apply Cross-Quantilogram and Dynamic Simulated Autoregressive Distributed Lags (DSARDL) to analyse time-series data from January 2011 to August 2021. Our investigation demonstrates the fiscal stance (FS) positively responds to positive oil price shocks at medium quantile of FS and at lower to the higher quantile of oil price. The degree of responsiveness of FS to oil price is profound in the medium memory due to the time lag of the transaction process of the oil trade. Russian fiscal stance is also anchored with the international gas price, but connectivity is less vigorous than oil. We assess fiscal consolidation in the second phase in the case of hydrocarbon prices induced fiscal deficit and surplus. Russian government follows the expenditure side adjustments, mainly the national and social expenditures in fiscal management. Our study provides several practical policy implications to balance fiscal stability towards sustainable development.