nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2023‒05‒22
thirteen papers chosen by

  1. Global food policy report 2023: Rethinking food crisis responses: Synopsis [in French] By International Food Policy Research Institute (IFPRI)
  2. Time for Change in EU Economic Policy By Kurt Bayer
  3. Climate change and sustainable growth: international initiatives and European policies. By Leonor Dormido; Isabel Garrido; Pilar L´Hotellerie-Fallois; Javier Santillán
  4. Assessment of generation adequacy taking into account the dependence of the European power system on natural gas By Maike Spilger; Dennis Schneider; Christoph Weber
  5. L’impact de la guerre et des sanctions sur l’économie russe By Sergei Guriev
  6. Powering Up Cleaner Choices: A Study on the Heterogenous Effects of Social Norm-Based Electricity Pricing on Dirty Fuel Purchases By Salim Turdaliev
  7. Optimizing Portfolios for the BREXIT: An Equity-Commodity Analysis of US, European and BRICS Markets By Ayedi Ahmed; Marjène Gana; Stéphane Goutte; Khaled Guesmi
  8. Managing Portfolio Risk During the BREXIT Crisis: A Cross-Quantilogram Analysis of Stock Markets and Commodities Across European Countries, the US, and BRICS By Ayedi Ahmed; Marjène Gana; Stéphane Goutte; Khaled Guesmi
  9. Transmission of risks between energy and agricultural commodities: Frequency time-varying VAR, asymmetry and portfolio management By Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
  10. The strange case of Romania’s Nicolae Ceaușescu: when the liquidation of sovereign debt results in country total damaging By Georgescu, George
  11. Le prix de l'inflation : Perspectives 2023-2024 pour l’économie française By Mathieu Plane; Elliot Aurissergues; Bruno Coquet; Ombeline Julien de Pommerol; Pierre Madec; Raul Sampognaro
  12. A snapshot of Central Bank (two year) forecasting: a mixed picture By Goodhart, C. A. E.; Pradhan, Manoj
  13. Is irrigation fit for purpose? A review of the relationships between scheme size and performance of irrigation systems By McCarthy, Nancy; Ringler, Claudia; Agbonlahor, Mure Uhunamure; Pandya, A. B.; Iyob, Biniam; Perez, Nicostrato

  1. By: International Food Policy Research Institute (IFPRI)
    Abstract: In 2022, the world faced multiple crises. Disruptions to food systems from the protracted COVID-19 pandemic, major natural disasters, civil unrest and political instability, and the growing impacts of climate change continued, as the Russia-Ukraine war and inflation exacerbated a global food and fertilizer crisis. The growing number of crises, their increasing impact, and rising numbers of hungry and displaced people have galvanized calls to rethink responses to food crises, creating a real opportunity for change.
    Keywords: agriculture; development; food security; hunger; policy; resilience; crises
    Date: 2023
  2. By: Kurt Bayer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: For a number of years it has become obvious to an increasing number of observers that the economic policy framework of the EU and the euro area is no longer ‘fit for purpose’. This effectiveness gap in economic governance has become even more visible during recent multiple crises (ranging from the financial crisis, the Covid-19 pandemic and the ever more manifest climate emergency, to the energy and inflation crises reinforced by the Russian invasion of Ukraine). The EU reacted to all of these crises with a large array of instruments, in more or less effective ways. However, going forward the EU needs an effective ex ante framework geared towards the objective of improving the well-being of its citizens with adequate instruments, across the whole geographical area of the EU, rather than the current focus on individual member states.
    Keywords: EU forward looking strategy: concentration on internal market and EU area as a whole
    JEL: E61 E62 E63
    Date: 2023–05
  3. By: Leonor Dormido (Banco de España); Isabel Garrido (Banco de España); Pilar L´Hotellerie-Fallois (Banco de España); Javier Santillán (Banco de España)
    Abstract: In recent years, the fight against climate change and for sustainable growth has been gaining prominence on the international agenda. Reducing pollutant emissions depends on a sufficiently large number of countries adopting efficient mitigating measures that are in line with international agreements. International cooperation is essential to deliver on the commitments undertaken pursuant to these agreements, implement the energy transition and stop climate change. Both the G-20, some of whose members are among the largest greenhouse gas emitters, and the International Monetary Fund are increasingly taking into account climate issues when performing their functions. The European Union plays an active and leading role in this global commitment and is pursuing increasingly ambitious goals. In compliance with the European Green Deal, the European Union has enshrined its goal of climate neutrality in the European Climate Law and has launched a number of groundbreaking policies to implement it, such as the “Fit for 55” package. The war in Ukraine adds an element of uncertainty to this path, given the importance of Russia as a supplier of fossil fuels to the European Union.
    Keywords: climate change, decarbonisation, European Union, G-20, IMF, COP, Green Deal, Ukraine/Russia.
    JEL: F53 P18 H23 H87 Q54 F64 F68
    Date: 2023–01
  4. By: Maike Spilger; Dennis Schneider; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Reductions in gas supply following the Russian invasion of Ukraine have affected the security of supply of the European power system along with other stress factors like low availability of French nuclear reactors. Consequently, more sophisticated approaches to investigate generation adequacy and to anticipate risks in security of supply are needed. Especially a thorough assessment of generation adequacy taking into account both the variability of renewable infeed and the availability of thermal power plants based on a probabilistic approach has been missing so far. In this paper, we apply a novel integrative approach to analyze generation adequacy in a case study for Central Western Europe during the winter half year 2022/2023. The approach makes use of a multivariate probabilistic framework built on publicly available data. For assessing generation adequacy, stochastic distributions are fitted to the data and Monte Carlo simulations are performed to identify future threats to generation adequacy. Results show that based on data available at the end of September 2022, generation adequacy (GA) was at risk in several core European countries, yet that the European interconnected power grid contributed to a strong risk reduction.
    Keywords: Security of Supply, Generation Adequacy, Probabilistic, Monte Carlo, Energy System Modeling
    Date: 2023–03
  5. By: Sergei Guriev (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, Sciences Po - Sciences Po)
    Abstract: En engageant son pays dans une guerre brutale et injuste contre l'Ukraine, Vladimir Poutine a sous-estimé la force et le courage de la résistance ukrainienne et surestimé sa propre armée. Il a aussi sous-estimé l'unité et la détermination de l'Occident et l'impact que les sanctions occidentales pourraient avoir sur l'économie russe.
    Keywords: guerre en Ukraine, Russie, sanctions occidentales, économie russe, marché du travail
    Date: 2023–02
  6. By: Salim Turdaliev (Institute of Economic Studies, Faculty of Social Sciences, Charles University)
    Abstract: This paper examines the heterogeneous effects of the experimental introduction of increasing-block-tariffs (IBT) for residential electricity on the propensity to purchase dirty fuels using panel household data (RLMS-HSE) in a number of regions of Russia. The study demonstrates that despite the design of the IBT being based on prescribed social norms and accounting for various household and dwelling characteristics, the adverse effects of this policy (in the form of increased propensity to purchase dirty fuels) are still more pronounced among households with higher base energy consumption, those receiving subsidies for utilities, and those in a vulnerable social position where the household head's primary occupation is childcare or housekeeping. Additionally, the paper finds that households headed by females are actually 20% less likely to purchase dirty fuels due to the introduction of IBT. The findings suggest that policymakers should fine-tune the calculation of social norms to minimize the negative impacts of IBT. Furthermore, the study's results may be relevant and useful for policymakers in other developing and transition economies that aim to implement various energy reforms, including IBT.
    Keywords: residential electricity pricing, increasing-block-tariffs, heterogeneous treatment effects, social norms, dirty fuels, post-Soviet economy, Russia, natural experiment
    JEL: Q41 Q48 L98 L94
    Date: 2023–04
  7. By: Ayedi Ahmed (UP8 - Université Paris 8 Vincennes-Saint-Denis); Marjène Gana (HEC Montréal - HEC Montréal); Stéphane Goutte (UMI SOURCEE - Université Paris-Saclay); Khaled Guesmi (PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)
    Abstract: The objective of this study is to create optimal two-asset portfolios consisting of stocks from Western Europe, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa), as well as sixteen commodity types during the BREXIT period. We utilized dynamic variances and covariances from the GARCH model to derive weights for the two-asset portfolios, with each portfolio consisting of one equity factor and one commodity factor. Subsequently, hedge ratios were calculated for these various assets. Our findings indicate that portfolios consisting of European stocks do not require the inclusion of commodities, whereas the other equities do.
    Keywords: Equity markets, commodity markets, BREXIT, portfolio optimization
    Date: 2023–04–14
  8. By: Ayedi Ahmed (UP8 - Université Paris 8 Vincennes-Saint-Denis); Marjène Gana (HEC Montréal - HEC Montréal); Stéphane Goutte (Université Paris-Saclay); Khaled Guesmi (PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)
    Abstract: Against the backdrop of the United Kingdom's withdrawal from the European Union (BREXIT), this study examines predictability in the stock markets of sixteen European countries, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa) by analyzing how their returns predict the returns of sixteen commodities at different quantile levels. The study builds upon existing literature on predictability and extends it by investigating the impact of the BREXIT crisis on these markets. The findings suggest that investors can hedge their portfolios with various commodities during times of the BREXIT crisis, but caution is advised, and the trend of both equities and commodities should be closely monitored before making investment decisions.
    Keywords: Equity markets, commodity markets, predictability, BREXIT
    Date: 2023–04–14
  9. By: Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
    Abstract: This paper examines energy and agricultural commodities' short-run and long-run connectedness by using the Time-varying parameter vector autoregressions (TVP-VAR). It applies the frequency version of the TVP-VAR model, which is a modified version of the dynamic TVP-VAR model. The frequency decomposition definition also decomposes into short-run and long-run connectedness. We further the analysis by investigating the effect of asymmetry in returns on connectedness. It also examines how portfolio management strategies would lead to a maximization of profits with minimal risks. Empirical evidence indicates that only 32.52% and 31.38% of connectedness in oil and gas, respectively, are transmitted to agricultural commodities, which suggests their weak tendencies in influencing agricultural commodities; the total connectedness index hovers around 40-60% in the 2018-2019 period; however, it dropped below 40% in 2020-2021 when the COVID-19 pandemic contributed to disintegrate the connectedness between energy and agricultural commodities but increased further during the 2022 Russia-Ukraine saga. The findings also indicate that corn, wheat, and flour are net transmitters of risks to oil and natural gas in the long and short-run, and wheat-flour pairwise connectedness is the strongest in the connectedness. Asymmetry is also pronounced in the network of connectedness. Portfolio analyses indicate that investors require a low proportion of energy in a portfolio of energy-agricultural commodities to achieve an optimum profit. The findings will offer exciting insights into the connectedness of agricultural and energy commodities, particularly during periods of high price uncertainty.
    Keywords: Agricultural commodity; Asymmetry; Frequency TVP-VAR; Optimal weight; Risk
    JEL: C22
    Date: 2023–02–03
  10. By: Georgescu, George
    Abstract: The study focuses on 1980s sovereign debt crisis in Romania under the impact of internal and external factors, intending to provide a more realistic image of this dramatic episode. The global economy faced a severe economic and financial crisis at the beginning of the 1980s, when more than 30 developing countries entered default or restructured the sovereign debt. In the case of Romania, the impact of the crisis triggered in 1981-1982 has proved extremely hard worsened by the domestic vulnerabilities accumulated in the previous decade and the external shock coming from the major changes in the global economic, financial and geopolitical context at the end of 1979. The FED monetary policy at that time (twenty percent funds rate in order to fight inflation), has led to the explosive rise in interest rates of the outstanding loans contracted from international commercial banks, to which Romania was highly indebted. The decision of simple-minded Nicolae Ceaușescu to liquidate the foreign debt and other errors concerning the crisis management had a destructive impact on the country, which degenerated in a system crisis ended with its implosion in December 1989. Some lessons from this crisis could be learned for the current indebtedness situation of Romania, amid international circumstances characterized by two-digit inflation, high interest rates and government bond yields, energy crisis, climate changes, Ukraine war, global geopolitical tensions.
    Keywords: foreign debt crisis; oil crisis shocks; IMF; FED monetary policy; inflation; interest rates; sovereign debt restructuring; Romania
    JEL: B22 E44 E62 F34 H63 N44
    Date: 2023–04
  11. By: Mathieu Plane (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Elliot Aurissergues (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Bruno Coquet; Ombeline Julien de Pommerol; Pierre Madec (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Raul Sampognaro (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)
    Abstract: La reprise de l'activité post-Covid a été violemment freinée par de multiples événements, en premier lieu les conséquences de l'invasion de l‘Ukraine par la Russie. La crise énergétique, le retour du spectre de l'inflation, les tensions internationales et les difficultés d'approvisionnement, la remontée brutale des taux… l'ensemble de ces chocs amputeraient la croissance du PIB de 3 points sur trois ans malgré les mesures budgétaires déployées. Si le reflux des prix de l'énergie depuis le pic de l'été 2022 devrait permettre d'éviter officiellement une récession, l'économie française ne devrait cependant croître que de 0, 8 % en 2023, marquée encore par la diffusion des chocs monétaire et énergétique. En 2024, sous l'hypothèse d'une relative stabilité des prix de l'énergie et sans crise financière majeure, la croissance du PIB serait de 1, 2 %. La croissance de l'activité serait principalement impactée par la diffusion de la hausse des taux et une politique budgétaire plus restrictive. Tirée par les prix de l'alimentaire, l'inflation resterait élevée jusqu'à la fin de l'année 2023 oscillant entre 5, 5 % et 6, 5 %. Elle commencerait à se dégonfler seulement à partir de 2024 pour converger vers 3 % à la fin de l'année prochaine. Au total, l'inflation mesurée par l'IPC, augmenterait en moyenne de 5, 8 % en 2023 et de 3, 8 % en 2024. Le pouvoir d'achat par unité de consommation baisserait de 1, 2 % sur la période 2022-24. Il reviendrait en 2024 à un niveau proche de 2019 malgré les mesures fiscales déployées. Le taux d'épargne des ménages, encore près de 3 points au-dessus de son niveau de 2019 à la fin 2022, convergerait vers son niveau d'avant-crise à l'horizon de la prévision, soutenant ainsi la consommation. La « sur-épargne » accumulée depuis le début de la crise Covid représenterait 12, 6 % du revenu annuel des ménages, hors taxe inflationniste sur le patrimoine, à la fin de l'année 2024. La résilience des entreprises, visible dans la bonne tenue du climat des affaires contraste avec les déficits extérieurs. Cependant, le moindre restockage et la stabilité attendue du taux d'investissement, couplés à un rattrapage partiel des parts de marché avec notamment l'amélioration de la situation dans l'aéronautique, permettrait au commerce extérieur de contribuer positivement à la croissance au cours des trimestres à venir. L'année 2023 devrait être l'année du retournement du marché du travail, le taux de chômage augmentant à partir du second semestre, avec la baisse de l'apprentissage et la hausse de la durée du travail. Nous attendons 100 000 pertes d'emplois entre la fin de l'année 2022 et 2024 et un taux de chômage à 7, 9 % à la fin de l'année prochaine (contre 7, 2 % actuellement). Cependant la productivité du travail ne retrouverait pas sa tendance d'avant-crise d'ici la fin 2024, révélant un cycle de productivité encore largement creusé. Le déficit public à 4, 7 % du PIB en 2022, diminuerait légèrement, sous l'effet de l'extinction progressive des mesures sanitaires et énergétiques pour atteindre 4 % du PIB en 2024. Le ratio entre dette publique et PIB baisserait, passant de 111, 6 % en 2022 à 107, 8 % en 2024, ce dernier bénéficiant d'une croissance du PIB nominal vigoureuse avec la hausse marquée des prix du PIB. L'inflation élevée relève comptablement le niveau de déficit qui stabilise la dette en points de PIB, allégeant ainsi le poids de la dette.
    Date: 2023–04–13
  12. By: Goodhart, C. A. E.; Pradhan, Manoj
    Abstract: Central Banks normally adjust monetary policy so that inflation hits the Inflation Target (IT) within two years. Since a central bank must believe its policy stance is appropriate to achieve this goal, its inflation forecast at the two-year horizon should generally be close to target. We examine whether this has held for three main Central Banks, Bank of England, ECB and Fed. During the IT period, there have been two crisis periods, The Great Financial Crisis (GFC), and then Covid/Ukraine. We examine how the two-year forecasts differed depending on whether we were in a crisis, or more normal, period. Although over the whole IT period, up until 2022, both forecasts and outcomes were commendably close to target, we found that this was due to a sizeable forecast underestimate of the effects of policy and inherent resilience to revive inflation after each crisis hit, largely offset by an overestimate of the effect of monetary policy to restore inflation to target during more normal times. We attribute such latter overestimation to an unwarranted belief in forward looking, ‘well anchored’, expectations amongst households and firms, and to a failure to recognise the underlying disinflationary trends, especially in 2010-2019. We outline a novel means for assessing whether these latter trends were primarily demand driven, e.g. secular stagnation, or supply shocks, a labour supply surge. Finally, we examine how forecasts for the uncertainty of outcomes and relative risk (skew) to the central forecast have developed by examining the Bank of England’s fan chart, again at the two-year horizon.
    Keywords: forecasting; expectations
    JEL: D10 D21 D80 D89 E17 E31 E37 E47 E59
    Date: 2023–03–29
  13. By: McCarthy, Nancy; Ringler, Claudia; Agbonlahor, Mure Uhunamure; Pandya, A. B.; Iyob, Biniam; Perez, Nicostrato
    Abstract: Irrigation is increasingly being called upon to help stabilize and grow food and water security in the face of multiple crises; these crises include climate change, but also recent global food and energy price crises, including the 2007/08 food and energy price crises, and the more recent crises triggered by the COVID 19 pandemic and the war on Ukraine. While irrigation development used to focus on public, large-scale, surface- and reservoir-fed systems, over the last several decades, private small-scale investments in groundwater irrigation have grown in importance and are expected to see rapid future growth, particularly in connection with solar-powered pumping systems. But is irrigation ‘fit-for-purpose’ to support population growth, economic development, and multiple food, energy and climate crises? This paper reviews how fit-for-purpose irrigation is with a focus on economies of scale of surface and groundwater systems, and a particular examination of systems in Sub-Saharan Africa where the need for expansion is largest. The review finds challenges for both larger surface and smaller groundwater systems in the face of growing demand for irrigated agriculture and dwindling and less reliable water supplies. To support resilience of the sector, we propose both a holistic design and management improvement agenda for larger surface systems, and a series of suggestions to improve sustainability concerns of groundwater systems
    Keywords: SUB-SAHARAN AFRICA; AFRICA; ASIA; irrigation; agriculture; food security; water security; crises; climate change; Coronavirus; coronavirus disease; Coronavirinae; COVID-19; Ukraine; development; scaling; solar energy; economics; groundwater;
    Date: 2023

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