Construction and evaluation of the model of foreign trade of Russia with regard to its membership in the EAEU

Построение и оценка модели внешней торговли России с учетом её членства в ЕАЭС

Alexander Knobel and Chentsov, Alexander (Ченцов, Александр) ()
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Chentsov, Alexander (Ченцов, Александр): The Russian Presidential Academy of National Economy and Public Administration

Working Papers from Russian Presidential Academy of National Economy and Public Administration

Abstract: During 2014-2015, a sharp depreciation of ruble has facilitated import reduction and growth of domestic production in Russia. In this article, we evaluate the effects of import substitution by estimating demand functions for imported and domestically produced commodities using the Rotterdam model. We calculate price and income elasticities for 17 aggregated commodity groups, and decompose changes in consumption into income and substitution effects. The effects of price changes and real incomes deterioration are extracted and analyzed. In the paper, we claim that the main factor that affected consumption demand during that period was a sharp appreciation of import. In a number of cases, this factor completely explains the changes in consumption, including some of the commodities, which Russia has embargoed in 2014. For several commodity groups, including Meat, and Preparations of vegetables and fruit, the import appreciation was a single main factor that affected the drop in import quantities (by 53% and 28% weight amount respectively) and a growth of demand for domestic goods (by 34% and 55%). The second factor that affected demand was a decline of real incomes. For example, in the case of alcoholic beverages, the real income reduction explained the 14% decrease of demand for domestically produced goods, and the 34% drop in import. A minor role in the events had played a substitution due to changes in domestic goods prices. This effect had a determining and statistically significant influence only in the case of demand reduction for domestically produced fish (by 12%).

Keywords: EURASIAN ECONOMIC UNION; INTEGRATION POLICY; FREE TRADING ZONE; TARIFF AND NONTARIFF BARRIERS; EXCHANGE RATE; VOLATILITY EXCHANGE COURSES; FOREIGN EXCHANGE; INTERNATIONAL TRADE; IMPORT DEMAND MODEL; ROTTERDAM DEMAND MODEL; “ALMOST THE PERFECT DEMAND MODEL” (search for similar items in EconPapers)
Pages: 78 pages
Date: 2019-04
New Economics Papers: this item is included in nep-cis
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