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on Confederation of Independent States |
| By: | Dmitry Kreptsev (Bank of Russia, Russian Federation); Alexey Porshakov (Bank of Russia, Russian Federation); Sergey Seleznev (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | The aim of this paper is to measure the equilibrium interest rate for Russia both in the short and long run, based on three definitions of the equilibrium interest rate. A general equilibrium model for the Russian economy is being built and gauged. In this real business cycle of a commodity-centred economy with investment, we find that short-run estimates come with very extended confidence intervals (approx. +/-10 pp). In the long run, equilibrium interest rates in the model are set by one of its equilibrium conditions, which in practice will often be applied discretely to find the equilibrium interest rate. This condition-based estimate comes very sensitive to unknown parameters, and is also very uncertain. Additionally, we use the general equilibrium model to study how the equilibrium interest rate reacts to changing oil prices, a rising global rate and growth in consumers’ propensity to save. These calculations complement with panel data-based calculations (those for the long-run equilibrium) and computation built on semi-structural methods (for the current equilibrium). Such estimates are also characterised by a high, for practical purposes, degree of uncertainty for the long-run equilibrium, with its point estimates equalling to 1.0% è 3.0%. The point estimate of the current equilibrium short interest rate based on semi-structural methods comes at the level of around 0.5%, and the one derived from the interest rate parity is 2.7%. The uncertainty in the measures of equilibrium interest rates calls for a central bank to apply robust monetary policy rules. |
| Keywords: | equilibrium (natural) interest rate, real business cycle with investment model, potential GDP growth, uncovered interest rate parity, minor open economy of a commodity exporting country |
| JEL: | E32 E43 E52 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps13&r=cis |
| By: | Peter Havlik (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Vladimir Putin’s presidency will last until 2024 – longer than most other Russian or Soviet leaders ruled. This Policy Note provides a brief review of past economic developments and reform attempts. We argue that past reforms have in effect failed yet the main economic challenges currently facing Russia remain essentially the same as two decades ago excessive dependence on energy, lack of diversification, poor investment climate, corruption, etc. What has changed is the resort to assertive behaviour and inward-looking economic policies which replaced the European integration vector prevalent at the beginning of the 2000s. We argue that without normalisation of external relations, there will be no breakthrough in the vicious circle of sanctions, protectionism, and lack of investments and economic integration. Otherwise, Russia will likely face not only economic stagnation, but even the risk of economically falling behind the peers in the East, South and West – ultimately endangering the social and eventually even political stability at home and in the neighbourhood. |
| Keywords: | Russia, Vladimir Putin, economic reforms, economic integration |
| JEL: | E6 F4 O4 O5 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:20&r=cis |
| By: | Yulia Ushakova (Bank of Russia, Russian Federation); Dmitry Chernyadyev (Bank of Russia, Russian Federation) |
| Abstract: | We estimate the impact of the Russia-specific shocks of 2014 on the short-term real equilibrium interest rate. We have used two approaches. The first approach is based on theoretical model calculations. The second rests on empirical estimates based on the results of IMF cross-country research on the sensitivity of the equilibrium interest rate to shifts in investment demand and supply (savings) curves. Our estimates suggest that the 2014 financial shock that restricted external borrowing for Russian issuers triggered 0.6-1.4 pp growth of the short-term equilibrium interest rate. However, the economy adjusted to the financial shock in 2016-2017 thanks to the macroeconomic policy pursued: the CDS risk premium declined, investment resumed growth and the net investment position gradually decreased. As a result, the effect of the financial shock on the short-term equilibrium interest rate has almost entirely vanished Length: 13 pages |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:note11&r=cis |
| By: | Marques II, Israel |
| Abstract: | When does business support the expansion of social policy in the developing world? Existing work on managers’ preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. Such firms will support social policy even where institutions are poor. I test this argument using a survey of 666 firms in 10 Russian regions. |
| JEL: | L21 L33 O15 H53 |
| Date: | 2018–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_007&r=cis |
| By: | Sergey Vlasov (Bank of Russia, Russian Federation); Elena Deryugina (Bank of Russia, Russian Federation) |
| Abstract: | The paper covers the theoretical and practical issues related to estimating fiscal multipliers for the Russian economy. The analysis of the main determinants affecting the size of multipliers suggests a relatively low effect of changes in fiscal variables on output growth. Estimation of the general government revenue and spending multipliers are generally in line with these expectations as well as with the results available for emerging market economies and stands at the values of - 0.75 and 0.28 respectively. The negative direct impact on GDP growth from the medium-term fiscal consolidation is estimated as relatively small (cumulatively about 0.3 percentage points through 2018-2020). Fiscal consolidation scheduled for the medium-term is expected to have a negative impact on output. However, since it is intended to be carried out mainly at the expense of the expenditure part of the budget, this should be less harmful to output growth and could promote greater efficiency in public spending. The direct impact from a reduction in expenditures can be fully offset by a significant positive indirect impact on GDP from an increase in confidence about long-term fiscal sustainability. |
| Keywords: | E62, H20, H50, O47 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps28&r=cis |
| By: | Alexey Ponomarenko (Bank of Russia, Russian Federation) |
| Abstract: | In 2014-2015, inflation acceleration was driven mainly by external factors. As they were exhausted, CPI growth decreased predictably. At the same time, our estimates show that domestic factors currently fail to ensure a decline in the price growth to 4% in 2017. A slowdown in the growth rate of the wide range of domestic nominal indicators is necessary in order that the Bank of Russia may achieve its inflation target. Otherwise, further inflation deceleration may prove to be unsustainable in the medium term. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:note2&r=cis |
| By: | Svetlana Popova (Bank of Russia, Russian Federation); Natalia Karlova (Bank of Russia, Russian Federation); Alexey Ponomarenko (Bank of Russia, Russian Federation); Elena Deryugina (Bank of Russia, Russian Federation) |
| Abstract: | This work provides an analysis of the debt burden of Russian companies and raises the issue of debt-level heterogeneity across economic sectors. In order to identify the causes of this heterogeneity, we estimated a regression model that included both the fundamental explanatory variables of companies and industry fixed effects. The results of the analysis demonstrated that standard variables such as profitability, company size, asset turnover and fixed-asset turnover ratio have a strong statistical significance. However, these do not fully explain the variation in the debt levels of companies in different sectors. According to model estimation, there are industry specific factors that produce an imbalance between fundamental factors and companies' debt levels. An understanding of the formation process and structure of debt burden in individual industries is extremely important for the financial stability of companies, and effective monetary policy. |
| Keywords: | debt burden, capital structure, sector analysis, microdata of Russian companies, emerging markets. |
| JEL: | C23 D24 E44 G32 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps29&r=cis |
| By: | Andrey Sinyakov (Bank of Russia, Russian Federation); Dmitry Chernyadyev (Bank of Russia, Russian Federation); Arina Sapova (Bank of Russia, Russian Federation) |
| Abstract: | This analytical note investigates the exchange rate pass-through mechanism at the micro level, i.e. at the level of individual enterprises. Theoretical models of the optimal behavior of companies and analysis of their actual activities demonstrate that when the national currency weakens (or strengthens), large companies with a relatively low proportion of import costs can raise (cut) prices more intensively than that proportion dictates. This variation is achieved through active margin management, i.e. increasing or decreasing of the margin in response to anticipated pricing activity of competitors. The pass-through effect, therefore, is not determined solely by the amount companies spend on imported materials and components or by the market share of importers. In order to estimate the intensity of the effect it is also important to know the number of companies in the market, as well as its structure, and, accordingly, the extent to which companies take into account their competitors actions. Using Russian data we have compared the estimates of the pass-through effect calculated on the basis of expenses with the estimates that take into account the ability of a company to manage their margin and the extent to which they consider competitors actions. The study shows that, first, the estimated pass-through effect calculated on the basis of expenses at the micro level was 0.18, which lies within the range of published macroeconomic estimates. Surveys indicate that the pass-through effect is asymmetrical: when the ruble weakens, the effect is twice as strong as when the ruble strengthens. Secondly, the pass-through effect estimates change only slightly when companies motivation to manage their margin actively is taken into account. In part, this reflects the insignificant intra-industry variation of the proportion of imports in costs, which reduces a companys motivation to correct the pass-through effect; moreover, to a certain degree, it reflects the different directions of pass-through effects at the industry level, which offset each other in the total price index. Our estimates show that in agriculture and food production the pass-through effect is strongly affected by companies behaviour: they closely track the pricing policy of their competitors. These industries are generally represented by several very large enterprises, which have a relatively high proportion of imports in costs, and a large number of small companies with smaller import ratios (regional producers). When the exchange rate is weakening, major market players have to decrease their margin in order to maintain their market share, whereas small companies can aggressively raise prices to improve their financial standing (at the cost of their larger competitors). Our estimates demonstrate that, as far as food production is concerned, the total market influence of small producers is prominent enough for the pass-through effect to be greater than the effect of transfer based on costs. As a result, prices turn out to be more volatile within given ruble exchange rate range (growing more intensively when the ruble weakens and falling when it strengthens) than they would be in a more homogeneous industry. Therefore, the strengthening of the ruble in 2016-2017 had an additional minor disinflationary effect in agriculture and food production due to the competition structure in these industries. This can help explain variation in the dynamics of food and core inflation in 2017 as well as the contribution of the pass-through effect to the food and core inflation in September, estimated at the macro level. Exchange rate shifts not only create price effects in the above industries, but also lead to the redistribution of profits between producers. When the ruble is falling (such as in 2014-2015), this redistribution negatively impacts the financial standing of larger borrowers (who usually have a large proportion of imports in costs) in the short term. This can lead to increased risks for financial stability. At the same time, small companies obtain additional resources for development and investments. As a result, in the midterm, the financial stability of these industries improves. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:note12&r=cis |
| By: | Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Aggregate real GDP growth in CESEE is at its strongest level for six years, and in 2017 all economies in the region expanded for the first time in a decade. External conditions are highly supportive of growth in CESEE. All the big engines of the global economy – the US, China and the eurozone – are expanding strongly together for the first time since 2010. The coordinated global upswing has further to run, and we expect CESEE economies to continue to benefit in the coming years. EU-CEE and Turkey will grow strongly during our forecast period, while activity in the Western Balkans will pick up from recent years. The CIS and Ukraine will remain the regional laggards, but will continue to recover slowly. We do not think that any economy in the region is ‘overheating’, although there are growing risks in Romania and Turkey. We expect inflation to remain very subdued in most of CESEE during the forecast period. In parts of CESEE, large-scale Ukrainian migration is helping to relieve labour market tightness. Wage increases in most of CESEE have been strong, but are concentrated largely in the manufacturing sector, and have been more than offset by rising labour productivity and non-price competitiveness. External competitiveness is not in danger. Across the region, investment will rise faster than headline real GDP growth in 2018-2020, driven by low interest rates, high capacity utilisation, stronger confidence, EU funds and still low base effects. Most countries have seen their export/GDP shares rise in the past decade, which increases their ability to take advantage of the current upswing. Many are moving up the value chain. Banking sectors in CESEE are generally on a much stronger footing than a few years ago. However, the old pre-crisis, highly leveraged model reliant on foreign inflows is mostly a thing of the past, meaning that credit growth will be relatively low by historical standards in the coming years. Downside risks to regional growth emanating from local and global factors are significant. In particular, we are worried about a trade war, the exit of major central banks from extraordinarily loose monetary policy, pockets of high corporate and government leverage, east/west EU splits, the undermining of institutional independence in some countries, geopolitical tensions, the Ukraine crisis, and potential spill-overs from a renewed outbreak of volatility in the eurozone, or a Chinese debt crisis. Convergence with Western European income levels will proceed in the long term. However, there is a risk that specialisation in parts of the supply chain where little value is created will condemn the region to a permanent ‘semi-periphery trap’. |
| Keywords: | CESEE, economic forecast, Europe, Central and Eastern Europe, Southeast Europe, Western Balkans, new EU Member States, CIS, Russia, Ukraine, Poland, Romania, Czech Republic, Hungary, Turkey, convergence, overheating, external risks, EU funds, investment, exports, tourism, unemployment, employment, wage growth, unit labour costs, migration, inflation, competitiveness, external debt, public debt, semi-periphery trap, demographics |
| JEL: | E20 F34 G12 O47 O52 O57 P24 P27 P33 P52 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fpaper:fc:spring2018&r=cis |
| By: | Abuselidze, George |
| Abstract: | In the last decade of XX century, has expanded the area of capital movements, which included the former socialist countries. Thus, the countries that are attracting some of the centers of the capital and at the same time, participate in the export of capital, it is impossible not to have engaged in a global economy. Our country has been greatly involved in the processes of globalization. At the same time, Georgia's future development will depend on how the country is adapting to globalization with the need for policy implementation, the political, economic and organizational actuating levers. In this regard, the need for more emphasis on the intellectual forces of international finance - financial institutions with their own interests, the use of integrated approaches to economic development, high rates of achievement, social and economic policy harmonization, social inequality mitigation. Finally, the orientation of foreign economic priorities have to be organic in conjunction with the ongoing processes, it must define the strategic objectives of the national economy. |
| Keywords: | Public Finance,Financial Aspects,Economic Integration,Macroeconomic Policy,Fiscal Policy |
| JEL: | F36 H30 E60 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:175659&r=cis |
| By: | Beqiraj, Elton; Di Bartolomeo, Giovanni; Di Pietro, Marco; Serpieri, Carolina |
| Abstract: | Applying the Bayesian approach, a small open economy DSGE model was estimated using a sample of quarterly data for a macro-region formed by six Central Europe and Baltic economies: Czech Republic, Estonia, Hungary, Lithuania, Poland, and Slovakia. Estimates have been employed to investigate the effects of a financial crisis, exploring the role played by country differences in the relative performances. We also use our Bayesian estimations to compute two measures of resilience in the considered region. |
| Keywords: | resilience,Bayesian estimations,financial crisis,macroeconomic performance,emerging markets |
| JEL: | E02 E32 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:175242&r=cis |
| By: | Shahbaz, Muhammad; Zakaria, Muhammad; Syed, Jawad; Kumar, Mantu |
| Abstract: | This paper empirically examines the inter-linkages between energy consumption and economic growth in top ten energy-consuming countries i.e. China, the USA, Russia, India, Japan, Canada, Germany, Brazil, France and South Korea. We use the quantile-on-quantile (QQ) approach of Sim and Zhou (2015) to explore some nuanced features of the energy-growth nexus and to capture the relationship in its entirety. The results show a positive association between economic growth and energy consumption, with considerable variations across economic states in each country. A weak effect of economic growth on energy consumption is noted for the lower quantiles of economic growth in China, India, Germany and France, which suggests that energy as an input has less importance at low levels of economic growth. A weak effect of economic growth on energy consumption is also noted for the highest quantiles of income in the United States, Canada, Brazil and South Korea, which indicates that energy demand decreases with the increase in economic growth as these countries have become more energy efficient. The weakest effect of energy consumption on economic growth is observed at lower quantiles of energy consumption in China, Japan, Brazil and South Korea. The results of the present study can help in the design of energy development and conservation policies for sustainable and long-term economic development. |
| Keywords: | Energy Consumption, Economic Growth, Quantile-on-Quantile Approach |
| JEL: | A1 |
| Date: | 2018–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84920&r=cis |
| By: | Nijolë Valinskytë (Bank of Lithuania); Erika Ivanauskaitë (Bank of Lithuania); Darius Kulikauskas (Bank of Lithuania); Simonas Krëpðta (Bank of Lithuania) |
| Abstract: | This paper aims to explain the relationship between risk-based and LR requirements and the motivation for the macroprudential use of LR requirements. The rest of the paper is structured as follows. First, we define the LR and the microprudential requirement that is based on it (Chapter 1) and discuss the merits and drawbacks of risk-weighted and nonrisk-weighted capital requirements, assessing how LR requirements can improve the current capital regulation framework (Chapter 2). Then, we turn to the stylized quantitative relationship between the two kinds of requirements and illustrate the rationale for macroprudential LR add-ons (Chapter 3). Further on, we consider legal issues, with a focus on the EU (Chapter 4) and review the country experience with LR requirements (Chapter 5). Finally, we take a look at the LR situation in the Lithuanian banking sector (Chapter 6) and conclude. |
| Date: | 2018–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:lie:opaper:18&r=cis |