The Impact of Oil Price Hike on the Belarusian Economy

This paper attempts to empirically examine the impact of oil price hike on the macro-economic activities in the Republic of Belarus. In order to capture both short-run and long-run dynamic effects, we use a co-integrated vector auto-regression (VAR) model with the data from the first quarter of 1996 to the second quarter of 2008. The analysis leads to the finding that a 1% increase in oil prices contributes to real GDP growth by 0.3% in the long run, whereas it has almost no effect in the short run (12 quarters). Additionally, it was found that exports and inflation rate are, respectively, positively and negatively related to the oil shock in the preceding period. In particular, the latter is significant.