How Russia Affects the Neighborhood Trade, Financial, and.pdf

WP/09/277 How Russia Affects the Neighborhood: Trade, Financial, and Remittance Channels Fahad Alturki, Jaime Espinosa-Bowen, and Nadeem Ilahi © 2009 International Monetary Fund WP/09/277 IMF Working Paper Middle East and Central Asia Department How Russia Affects the Neighborhood: Trade, Financial, and Remittance Channels Prepared by Fahad Alturki, Jaime Espinosa-Bowen, and Nadeem Ilahi 1 Authorized for distribution by Ana Lucía Coronel December 2009 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. We test the extent to which growth in the 11 CIS countries (excluding Russia) was associated with developments in Russia, overall, as well as through the trade, financial and remittance channels over the last decade or so. The results point to the continued existence of economic links between the CIS countries and Russia, though these links may have altered since the 1998 crisis. Russia appears to influence regional growth mainly through the remittance channel and somewhat less so through the financial channel. There is a shrinking role of the trade (exports to Russia) channel. Russian growth shocks are associated with sizable effects on Belarus, Kazakhstan, Kyrgyz Republic, Tajikistan, and, to some extent, Georgia. JEL Classif