This study takes into account two crucial economic variables in its analysis of the relationship between oil prices and Rouble exchange rate, namely, nonlinear adjustment dynamics and impulse response functions. Employing a Markov-switching vector error correction model, this allows us to discriminate long-run and time-varying short-run dynamics. Our findings suggest not only that short-run adjustments of Rouble exchange rate exhibit significantly asymmetry across regimes, but also that the

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... rse relationship between oil price and Rouble exchange rate is mainly derived by high volatility regime, which seems closely relate to recession of Russian business cycle.