nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2010‒09‒03
four papers chosen by
Koen Schoors
Ghent University

  1. The Long-Run Weight of Communism or the Weight of Long-Run History? By Roland, Gerald
  2. Natural Resources and State Fragility By Paul Collier; Anthony J. Venables
  3. Stock market reaction to debt financing arrangements in Russia By Godlewski, Christophe J.; Fungacova, Zuzana; Weill, Laurent
  4. Currency substitution in the economies of Central Asia: How much does it cost? By Isakova, Asel

  1. By: Roland, Gerald
    Abstract: This study provides evidence that culture understood as values and beliefs moves very slowly. Despite massive institutional change, values and beliefs in transition countries have not changed much over the last 20 years. Evidence suggests that culture is affected by the long run historical past, in particular the participation in empires for over 100 years. Current institutional evolutions in transition countries might be more affected by their long run past than by the communist experience of the twentieth century.
    Keywords: culture, institutional change, transition, economic history
    Date: 2010
  2. By: Paul Collier; Anthony J. Venables
    Abstract: This paper provides an overview of the relationships between natural resources, governance, and economic performance. The relationships run in both directions, with re-sources potentially altering the quality of governance, and governance being particularly important for resource poor countries. Both these relationships have threshold effects; if governance quality is above a certain level, then natural resources can lead to further improvement, while, below the threshold, further deterioration may take place. Theoretical and empirical work is reviewed, the interactions between the relationships discussed, and policy implications outlined.
    Keywords: Exhaustible resources ; resource curse; economic development ; revenue management
    Date: 2010–04–14
  3. By: Godlewski, Christophe J. (BOFIT); Fungacova, Zuzana (BOFIT); Weill, Laurent (BOFIT)
    Abstract: This paper investigates stock market reaction to debt arrangements in Russia. The analysis of the valuation of debt arrangements by stock markets provides information about the use of debt by Russian companies. We apply the event study methodology to check whether debt announcements lead to abnormal returns using a sample of Russian listed companies that issued syndicated loans or bonds between June 2004 and December 2008. We find a negative reaction of stock markets to debt arrangements that can be explained by moral hazard behavior of shareholders at the expense of debtholders. Further, we observe no significant difference between announcements of syndicated loans and bonds. Thus, our findings support the view that Russian companies could have incentives to limit their reliance on external debt.
    Keywords: corporate bonds; event study; Russia; stock returns; syndicated loans
    JEL: G14 G20 P30
    Date: 2010–08–25
  4. By: Isakova, Asel (BOFIT)
    Abstract: Underdeveloped financial markets and periods of high inflation have stimulated dollarization and currency substitution in the economies of Central Asia. Some authors argue that the latter can pose serious obstacles for the effective conduct of monetary policy and can affect households’ welfare.This study uses a model with money-in-the-utility function to estimate the elasticity of substitution between domestic and foreign currencies in three economies of Central Asia - Kazakhstan, the Kyrgyz Republic and Tajikistan. Utility derived from holding money balances is represented by a CES function with money holdings denominated in two currencies. The residents are assumed to diversify their monetary holdings due to instability of the domestic currency. The steady state analysis reveals that though currency substitution decreases governments’ seigniorage revenue, holding foreign money can be welfare generating if domestic currency depreciates vis-à-vis the currencies in which households’ foreign balances holdings are denominated. De-dollarization can only be achieved through further macroeconomic stabilization that will bring price and exchange rate stability. Financial sector development will also decrease currency substitution through the provision of reliable financial instruments and the gaining of public confidence.
    Keywords: currency substitution; dollarization; monetary policy; seigniorage; welfare; transition
    JEL: E41 E58 P20
    Date: 2010–07–26

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