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on Confederation of Independent States |
| By: | Berger, Allen N. (BOFIT); Hasan, Iftekhar (BOFIT); Korhonen, Iikka (BOFIT); Zhou, Mingming (BOFIT) |
| Abstract: | Conventional wisdom in banking argues that diversification tends to reduce bank risk and improve performance, but the recent financial crisis suggests that aggressive diversification strategies may have resulted in increased risk taking and poor performance. This paper addresses this important question by evaluating the empirical relationship between diversification strategies and the risk-return tradeoff in banking. Our data set covers Russian banks during the 1999-2006 period and finds somewhat mixed results. Specifically, we find that banks’ performance tends to be non-monotonically related to their diversification strategy. The marginal effects of focus indices (inverse measures of diversification) on performance are nonlinearly associated with the level of risk and foreign ownership. A focused strategy is found to be associated with increased profit and decreased risk only up to a certain threshold. Additionally, when foreign ownership is either very high or very low, banks tend to benefit more from being diversified. This analysis provides important strategic and policy implications for bank managers and regulators in Russia as well as in other emerging economies. |
| Keywords: | banks; diversification; focus; Russia; foreign ownership; scope economies |
| JEL: | G21 G28 G34 |
| Date: | 2010–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2010_009&r=cis |
| By: | Karas, Alexei (BOFIT); Pyle, William (BOFIT); Schoors, Koen (BOFIT) |
| Abstract: | We explore how the introduction of explicit deposit insurance affects deposit flows into and out of banks of varying risk levels. Using evidence from a natural experiment in Russia, we employ a difference-in-difference estimator to isolate the change in the deposit flows of a newly insured group (households) relative to an uninsured “control” group (firms). This approach improves on earlier studies seeking to identify the effect of deposit insurance on market discipline. We find that the relative sensitivity of households to bank capitalization diminished markedly with the introduction of an insurance program covering their deposits. This was not true for firms, however. We then show the finding is not an artifact of the two groups responding differently to a minor banking crisis that arose at roughly the same time. |
| Keywords: | deposit insurance; market discipline |
| JEL: | E65 G21 G28 P34 |
| Date: | 2010–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2010_008&r=cis |
| By: | Ponomarenko, Alexey A. (BOFIT); Vlasov, Sergey A. (BOFIT) |
| Abstract: | This study examines the expanding role of fiscal policy at a time of financial crisis. It analyses the stimulative fiscal measures of the Russian government in 2008-2010 and compares these with simi-lar actions taken in other countries. The risks and limitations associated with the development and implementation of the measures are analyzed. The macroeconomic effects of the fiscal policy measures are estimated using a structural vector autoregressive (SVAR) model, the fiscal multip-liers are calculated, and factors influencing multiplier size are examined. |
| Keywords: | fiscal stimulus; fiscal sustainability; SVAR; fiscal multiplier; financial crisis; Russia |
| JEL: | E62 H30 H60 |
| Date: | 2010–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2010_012&r=cis |
| By: | Holzmann, Robert (World Bank) |
| Abstract: | This paper presents a World Bank led and Russia trust fund financed work program to measure financial capability and the effectiveness of financial education in low and middle income countries. The two activities and their staging have been motivated by the lessons of high-income countries with financial literacy programs and the deviating characteristics of low and middle income countries. While progress has been made in high-income countries to measure financial capability, there is little robust empirical evidence that financial education can improve it. While applying the financial capability concept in low and middle-income countries looks promising it will need to be adjusted to their characteristic and supported by innovative interventions and rigorous impact evaluation to improve it. |
| Keywords: | financial literacy, financial capability, financial education, impact evaluation |
| JEL: | C93 G29 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5114&r=cis |