nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2017‒03‒19
eleven papers chosen by

  1. Cyclicality of bank liquidity creation By Davydov, Dennis; Fungáčová, Zuzana; Weill, Laurent
  2. Corporate Governance and Investment: Evidence from Russian Unlisted Firms By Carsten Sprenger; Olga Lazareva
  3. Turkish and BRICS Engagement in Africa: Between humanitarian and economic interests By Elem Eyrice, Tepeciklioğlu; M. Evren, Tok; Syed Abul, Basher
  4. Exploring the Role of Foreign Investors in Russia's Local Currency Government Bond (OFZ) Market By Yinqiu Lu; Dmitry Yakovlev
  5. Paying ‘Til it Hurts: High Medical Spending among the Poor and Elderly in Ten Developed Countries By Katherine Baird
  6. Finance and Income Inequality in Kazakhstan: Evidence since Transition with Policy Suggestions By Shahbaz, Muhammad; Bhattacharya, Mita; Mahalik, Mantu Kumar
  7. Internal Devaluation and Labor Market Outcomes: Evidence from Latvia By H. Lehmann; T. Razzolini; A. Zaiceva
  8. The Incidence of High Medical Expenses by Health Status in Seven Developed Countries By Katherine Baird
  9. Household’s Expenditure in Health and Education: Effects on Poverty and Child Poverty Estimates in Five Middle Income Countries: India, Mexico, South Africa, Russian Federation and Peru By Hicham Ait Mansour
  10. Israel's Immigration Story: Globalization Lessons By Assaf Razin
  11. Child Poverty in Middle-Income Countries By Emily Nell; Martin Evans; Janet Gornick

  1. By: Davydov, Dennis; Fungáčová, Zuzana; Weill, Laurent
    Abstract: This paper investigates the cyclicality of bank liquidity creation. Since liquidity creation is a major economic function of banks, their liquidity creation behavior may amplify business cycle fluctuations. Using the methodology of Berger and Bouwman (2009) to compute liquidity creation measures, we analyze the relation between GDP growth and liquidity creation of Russian banks from 2004 to 2015. Detailed quarterly data on a very large sample of banks and coexistence of different bank ownership types (state-owned, domestic private and foreign banks), makes Russia an ideal natural laboratory for study of cyclicality of liquidity creation for banks. We find that liquidity creation of banks is procyclical. We show that the liquidity creation behavior of state-owned banks and foreign banks is similar to that of domestic private banks in terms of procyclicality. We further find that the magnitude of procyclicality is higher for liquidity creation than for lending. Thus, while ownership of banks does not influence the liquidity creation behavior of banks, such behavior can amplify business cycle fluctuations.
    JEL: G21
    Date: 2017–03–10
  2. By: Carsten Sprenger (National Research University Higher School of Economics); Olga Lazareva (National Research University Higher School of Economics)
    Abstract: This paper investigates how corporate governance of unlisted firms in an emerging market economy affects financing constraints, measured by the sensitivity of investment to cash flow. We develop two original corporate governance indices based on a large-scale survey of Russian enterprises – one for shareholder protection and one for transparency. We estimate standard investment regressions where the cash flow variable is interacted with our corporate governance indices and variables capturing the ownership structure. The central result is that better shareholder protection diminishes the cash flow sensitivity of investment, particularly in firms with an outside controlling owner and in firms with low managerial ownership. In contrast, more transparency exacerbates financing constraints in some cases. We address the problem of the endogeneity of corporate governance by using fixed-effects regressions and a novel instrumental variable based on particular legal provisions for corporate governance in Russia depending on the number of shareholders
    Keywords: corporate governance, shareholder protection, transparency, financing constraints, ownership structure.
    JEL: G31 G32 G34
    Date: 2017
  3. By: Elem Eyrice, Tepeciklioğlu; M. Evren, Tok; Syed Abul, Basher
    Abstract: This paper studies the political economy of Turkey’s relations with Sub-Saharan Africa (SSA) since 2002 while under the Justice and Development Party’s (AKP) rule. It argues that Turkey has focused its engagement in Africa mostly on humanitarian assistance and the economy. Contextualizing Turkey’s relations with SSA vis-à-vis other emerging market economies, especially the BRICS (Brazil/Russia/India/China/South Africa) bloc, provides ample insights into the nature of Turkey’s engagement in SSA. While Turkey’s involvement has some similarities to that of the BRICS, there are greater fundamental and structural differences from how the BRICS established their presence in SSA. These differences mostly find resonance in when we juxtapose the activism of non-governmental actors engaging in humanitarian missions and charity work with trade related economic investments and activism.
    Keywords: Turkey; Sub-Saharan Africa; political economy; BRICS; trade; humanitarian assistance
    JEL: F50 N77
    Date: 2017–03–15
  4. By: Yinqiu Lu; Dmitry Yakovlev
    Abstract: Local currency government bonds (OFZ bonds) are an important fixed-income instrument in Russia’s financial markets. In this paper, based on granular data, we explore the development of the OFZ bond market with a focus on foreign investors. As this fixed-income market has experienced a liberalization of the domestic trading and settlement infrastructure, and weathered several episodes of market stresses since the 2008–09 global financial crisis, the role of foreign investors can be observed along with these events. What we have found is that foreign investors had influenced the market before they became an important player and since then they have contributed to the development of the market while not necessarily destabilizing it in episodes of shocks.
    Keywords: Foreign investment;Russian Federation;Bonds;Currencies;Bond markets;Supply and demand;local currency government bonds; Russia; financial market development
    Date: 2017–02–10
  5. By: Katherine Baird
    Abstract: This paper measures high medical expenses in ten developed countries, both overall and by income and age, providing some of the best evidence to date on the extent of high medical spending across and within countries. Using comparable household-level data on out-of pocket (OOP) medical expenditures made available through the Luxembourg Income Study (LIS), we measure high spending when it exceeds a threshold share of household income. The results show that the U.S. is far from alone in its failure to protect individuals from large medical expenses. In five of the other nine countries, one-quarter or more of poor households devoted at least 5 percent of household income to OOP expenses. The rate of high spending in the US is similar to Japan’s, but below that in Russia, Poland, Israel, and Switzerland. The high levels of exposure to large medical expenses in most countries indicates the need to develop robust measures of excessive spending that capture both future risk as well as past burdens.
    Keywords: out of pocket spending, health care financing, financing equity, comparative health policy
    Date: 2016–02
  6. By: Shahbaz, Muhammad; Bhattacharya, Mita; Mahalik, Mantu Kumar
    Abstract: Kazakhstan gained independence in 1990 and has undergone significant changes in economic, social and trade conditions since then. We analyse the effects of financial development on income inequality in Kazakhstan, incorporating economic growth, foreign investment, education and the role of democracy as the drivers. We establish that income inequality in Kazakhstan is impaired by financial development. In summary, we send the three messages for policy purposes. First, strengthening financial sector is necessary to close the gap between ‘haves and have-nots’. Second, attracting foreign direct investment beyond the hydrocarbon sector is necessary to alleviate inequality. Finally, adaptation of education system to the new social and economic environment would help in improving income distribution.
    Keywords: Kazakhstan, Finance, Inequality, Central Asia
    JEL: C3
    Date: 2017–03–03
  7. By: H. Lehmann; T. Razzolini; A. Zaiceva
    Abstract: This paper analyzes the policy response and labor market adjustment of Latvia, which faced the most severe recession in Europe and globally. Latvia’s adjustment and recovery from the 2008 economic crisis represents “a rare case study”, which “has been an object of intense attention” (Blanchard et al., 2013) as country’s authorities, despite many experts’ recommendations, decided to maintain its currency peg and adjust through fiscal austerity and internal devaluation implementing major structural reforms. Three years later Latvia returned to a positive growth path and in 2014 joined the Euro zone. The main question in the literature is whether this adjustment represents a success story and can provide a lesson for other countries in the Euro area. We provide details on the adjustment in the Latvian labor market employing individual level data over the years 2002 to 2012. We show that with flexible labor markets, weak unions and relatively low employment protection, adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. Underemployment constitutes another important adjustment channel, while the evidence for informal employment is more mixed. Wage regressions suggest that job mobility is not associated with increased labor productivity during and immediately after the crisis. We also identify groups particularly affected by the crisis and provide suggestions for the right mix of policy interventions.
    JEL: J6 J21 P16
    Date: 2017–03
  8. By: Katherine Baird
    Abstract: Health care policy seeks to ensure that citizens are protected against excessive out-of-pocket (OOP) expenses. Yet rising health care costs are pressuring private and social insurance schemes to shift toward more cost-sharing measures. This paper uses household surveys from seven countries to measure the burden of health expenditures for individuals with similar health conditions. It compares countries based on the extent to which citizens—those with health problems in particular—devote a large share of their income to medical expenses. The paper finds that in all countries but France, and to a lesser extent Slovenia, unhealthy citizens face considerably higher medical costs than do the healthy. As many as one-quarter of less healthy citizens in the U.S., Poland, Russia and Israel have large OOP expenses. The paper finds increased exposure to high medical expenses within countries is also associated with increased disparities between the unhealthy and healthy in the financial burden of OOP costs. The levels of high OOP spending uncovered, and their disparate weight on those with health problems (who are also disproportionately poor and elderly) underscore the potential for high OOP expenses to undermine core objectives of health care systems, including those of equitable financing, equal access, and improved medical outcomes.
    Keywords: Cost of illness, Health insurance, Health policy, Healthcare financing, Cost sharing
    Date: 2016–05
  9. By: Hicham Ait Mansour
    Abstract: There is a wide agreement among poverty research community that conventional estimates of poverty (i.e., money-metric measures) do not take into account out of pocket payments of health care. Significant household health spending would overestimate total household expenditure, which results in an underestimation of poverty measured in terms of household expenditure. The present working paper uses Luxembourg Income Study Center data to explore the impact of household health payments on poverty and child poverty estimates in five middle-income countries (India, Mexico, South Africa, Russian Federation and Peru). It also extends this analysis to cover education expenditure as well and how it might exert similar effects on these poverty estimates.
    Keywords: poverty, child poverty, expenditure poverty, out of pocket health expenditure, out of pocket education expenditure, middle income countries.
    Date: 2016–06
  10. By: Assaf Razin
    Abstract: The exodus of Soviet Jews to Israel in the 1990s was a unique event. The extraordinary experience of Israel, which has received migrants from the Former Soviet Union (FSU) at the rate of 17 percent of its population, within a short time, is also relevant for the current debate about migration and globalization. The immigration wave was distinctive for its large high skilled cohort, and its quick integration into the domestic labor market. Among various ethnic groups the FSU immigrants ranked at the top of intergenerational upward mobility. Immigration also changed the entire economic landscape: it raised productivity, underpinning technological prowess, and had significant impact on income inequality and the level of redistribution in Israel’s welfare state.
    JEL: F02 F22 J1
    Date: 2017–03
  11. By: Emily Nell; Martin Evans; Janet Gornick
    Abstract: This paper aims to better understand the income factors that influenced child poverty rates across a group of four diverse middle-income countries in 2010. We use data from LIS to analyze child poverty using harmonized measures of income in Russia, Mexico, South Africa, and Colombia. The paper addresses three main questions: First, how poor were children relative to other age groups in each country? Second, what income sources, including support from families and state transfers, protected children from higher rates of child poverty? For this question, we disaggregated incomes to identify tax and transfer profiles and their gross effect on poverty risk. Third, how did this look across a group of middle-income countries?
    Date: 2016–03

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