nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒10‒07
38 papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Markets and democracy in Russia By Ivanenko, Vlad
  2. Liquidity provision in transition economy: the lessons from Russia By Dorbec , Anna
  3. Choice of the substitution currency in Russia: How to explain the dollar's dominance? By Dorbec, Anna
  4. Equilibrium exchange rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) diseased? By Égert, Balázs
  5. Demand for money in transition: Evidence from China's dis-inflation By Mehrotra , Aaron
  6. Taking the temperature – forecasting GDP growth for mainland China By Curran , Declan; Funke, Michael
  7. Profitability of foreign banks in Central and Eastern Europe: Does the entry mode matter? By Havrylchyk , Olena; Jurzyk, Emilia
  8. Effects of WTO membership on income distribution and labour movement in China – A CGE analysis By Wang, Jiao; Mayes, David; Wan, Guanghua
  9. Inflation in mainland China – modelling a roller coaster ride By Funke, Michael
  10. Non-wage benefits, costs of turnover, and labor attachment: Evidence from Russian firms By Juurikkala, Tuuli; Lazareva, Olga
  11. Coping with missing public infrastructure: An analysis of Russian industrial enterprises By Solanko, Laura
  12. Monetary transmission mechanism in Central and Eastern Europe: Gliding on a wind of change By Coricelli, Fabrizio; Égert , Balázs; MacDonald, Ronald
  13. Lobbying at the local level: Social assets in Russian firms By Juurikkala, Tuuli; Lazareva, Olga
  14. A ten-year retrospection of the behavior of Russian stock returns By Anatolyev, Stanislav
  15. Exchange rate regimes, foreign exchange volatility and export performance in Central and Eastern Europe: Just another blur project? By Égert , Balázs; Morales-Zumaquero, Amalia
  16. Exchange and interest rate channels during a deflationary era - Evidence from Japan, Hong Kong and China By Mehrotra, Aaron
  17. Dealing with financial fragility in transition economies By Bonin , John; Wachtel , Paul
  18. Air Pollution Costs in Ukraine By Elena Strukova; Alexander; Anil Markandya
  19. Trade specialisation patterns: The case of Russia By Algieri , Bernadina
  20. Bank supervision Russian style: Rules versus enforcement and tacit objectives By Claeys, Sophie; Lanine , Gleb; Schoors, Koen
  21. Russia’s common market takes shape: Price convergence and market integration among Russian regions By Gluschenko, Konstantin
  22. Collective action and post-communist enterprise: The economic logic of Russia’s business associations By Pyle, William
  23. Migrant Opportunity and the Educational Attainment of Youth in Rural China By Alan de Brauw; John Giles
  24. Cross listing and firm value - corporate governance or market segmentation? An empirical study of the stock market By Ji, Gang
  25. Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis By Égert , Balázs; Halpern , László
  26. Assessing a feasible degree of product market integration. (A pilot analysis) By Gluschenko , Konstantin; Kulighina, Darya
  27. Regional impacts of Russia ' s accession to the World Trade Organization By Rutherford, Thomas; Tarr, David
  28. Information Asymmetry, Share Mispricing and the Coordination Problem: Investor Portfolio Choice in Czech Voucher Privatization By Elena Yusupova
  29. Probability of default models of Russian banks By Peresetsky, Anatoly A.; Karminsky , Alexandr A.; Golovan , Sergei V.
  30. A note on exchange rate pass-through in CIS countries By Korhonen, Iikka; Wachtel, Paul
  31. A meta-analysis of business cycle correlation between the euro area and CEECs: What do we know – and who cares? By Fidrmuc , Jarko; Korhonen, Iikka
  32. Ex-ante dynamics of real effects of monetary policy: Theory and evidence for Poland and Russia, 2001-2003 By Charemza , Wojciech W.; Makarov, Svetlana
  33. Biases in cross-space comparisons through cross-time price indexes: The case of Russia By Gluschenko, Konstantin
  34. Optimal regulatory design for the Central Bank of Russia By Claeys, Sophie
  35. Measuring Economics Research in the Czech Republic: A Comment By Daniel Munich
  36. S&T activities and firm performance - microeconomic evidence from manufacturing in Shanghai By Zhu, Pingfang; Li, Lei; Lundin, Nannan
  37. Russian equity market linkages before and after the 1998 crisis: Evidence from time-varying and stochastic cointegration tests By M. Lucey , Brian; Voronkova, Svitlana
  38. Political Instability and the August 1998 Ruble Crisis By Tatiana Fic; Omar F. Saqib

  1. By: Ivanenko, Vlad (University of Western Ontario, London, Canada)
    Abstract: The paper looks into convergence of Russian institutions with those of other democratic, free-market-oriented states, and considers definitions of "normalcy" that incorporate the concepts of free market, democracy, and government efficiency. The author provides an estimate of Russia’s institutional convergence to the standards of the G7 and the “Big Five” group of large, middle-income countries that includes Brazil, China, and India. In some areas Russia outperforms "Big Five" countries, in others it trails behind. Finally, public mistrust, corruption, and inefficient governance in Russia are discussed in light of the Putin administration’s current reform policies.
    Keywords: free market; democracy; institutions; Russia
    JEL: O57 P30 P52
    Date: 2005–12–30
  2. By: Dorbec , Anna (Université Paris X Nanterre)
    Abstract: This paper provides micro and macroeconomic analysis of the economic role of banks in the Russian economy. Using a large panel containing Russian enterprises’ balance sheet and income statement data, we evaluate the determinants of bank financing. Econometric model put out the existence of liquidity providing activity of Russian banks. Even though the overall liquidity provision system suffers from certain deficiencies, we demonstrate its importance in the macroeconomic context, using time series econometric analysis. Bank credit appears to be a significant factor in explaining the non-payment dynamics and use of informal financing. Finally, the uncertainty concept helps us to understand the reasons for a limitation of Russian banks in their liquidity providing role.
    Keywords: liquidity; finance; transition; Russia; uncertainty; banks; inter-enterprise credit
    JEL: D80 G21
    Date: 2004–11–01
  3. By: Dorbec, Anna (University of Paris X Nanterre)
    Abstract: The analysis of external economic relations of Russia reveals a paradox: while Europe is the main trade and direct investment partner of Russia, this is far from being the case concerning its currency’s role in Russia's financial activities. The dollar is much preferred by economic agents for financial operations. This paper proposes a disaggregated approach to this issue by separating the ‘means of exchange’ and ‘store of value’ components of the use of substitution currencies. The influence of three main factors (inertial component, real trade relations and exchange rate fluctuations) on the relative demand for the euro by Russian economic agents is tested for the period 1999-2004. Finally we suggest a theoretical interpretation of the results based on the conventions theory approach.
    Keywords: dollarisation; euroisation; transition; Russia; currency substitution; asset substitution; network externalities; hysteresis; conventions
    JEL: E41 E52 F31 F41 G20
    Date: 2005–12–01
  4. By: Égert, Balázs (Oesterreichische Nationalbank)
    Abstract: This paper investigates the equilibrium exchange rates of three Southeastern European countries (Bulgaria, Croatia and Romania), of two CIS economies (Russia and Ukraine) and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. For Russia, a first look is taken at the Dutch Disease phenomenon as a possible driving force behind equilibrium exchange rates. A unified framework including productivity and net foreign assets completed with a set control variables such as openness, public debt and public expenditures is used to compute total real misalignment bands.
    Keywords: Balassa-Samuelson; Dutch Disease; Bulgaria; Croatia; Romania; Russia; Ukraine; Turkey
    JEL: E31 O11 P17
    Date: 2005–06–27
  5. By: Mehrotra , Aaron (BOFIT)
    Abstract: We examine money demand in the Chinese economy during a period characterized by significant disinflation and outright deflation, coupled with strong output growth. Our study establishes a stable money demand system for broad money M2. Inflation affects the adjustment of the system towards equilibrium, and shocks to broad money are found to lead to higher inflation in the context of an impulse response analysis. No evidence of non-linearity in money demand is found for the disinflationary period. The results provide support for the PBoC’s policy of specifying intermediate targets for money growth. Importantly, our results suggest that movements in the nominal effective exchange rate should be taken into account in a successful implementation of such a policy.
    Keywords: money demand; disinflation; deflation; China
    JEL: E31 E41
    Date: 2006–08–18
  6. By: Curran , Declan; Funke, Michael (Hamburg University, Germany)
    Abstract: We present a new composite leading indicator of economic activity in mainland China, es-timated using a dynamic factor model. Our leading indicator is constructed from three se-ries: exports, a real estate climate index, and the Shanghai Stock Exchange index. These series are found to share a common, unobservable element from which our indicator can be identified. This indicator is then incorporated into out-of-sample one-step-ahead forecasts of Chinese GDP growth. Recursive out-of-sample accuracy tests indicate that the small-scale factor model approach leads to a successful representation of the sample data and provides an appropriate tool for forecasting Chinese business conditions.
    Keywords: forecasting; China; leading indicator; factor model; growth cycles
    JEL: C32 C52 E32 E37
    Date: 2006–06–02
  7. By: Havrylchyk , Olena; Jurzyk, Emilia (K.U. Leuven, Belqium)
    Abstract: Using data for 265 banks in Central and Eastern European Countries for the period of 1995-2003, this paper analyses the differences in profitability between domestic and for-eign banks. We show that foreign banks, especially greenfield institutions, earn higher profits than domestic banks. However, this effect is acquired rather than inherited, since there is evidence that foreign banks tend to take over less profitable institutions. Profits of foreign banks in CEECs also exceed profits of their parent banks, explaining the reasons for their entry. Further, we study benefits and costs of foreign ownership by analyzing de-terminants of profitability for domestic, takeover, and greenfield banks. Profits of foreign banks are less affected by macroeconomic conditions in their host countries. However, greenfield banks are sensitive to the situation of their parent banks. Only domestic banks enjoy higher profits in more concentrated banking markets, whereas takeover banks suffer from diseconomies of scale due to the fact that they acquired large institutions.
    Keywords: foreign banks; bank profits; multinational banking; transition economies
    JEL: F36 G15 G21
    Date: 2006–04–25
  8. By: Wang, Jiao (London South Bank University, now at Access Economics (Australia)); Mayes, David (Bank of Finland); Wan, Guanghua (UNU-WIDER)
    Abstract: Using a CGE model (PRCGEM) updated to 2002, the paper explores how WTO membership could affect earnings in 40 industries across 31 regions (and 8 regional blocks) of China during the period 2002–2007. Taking into account labour movement between regions within China, the direct contribution of WTO membership to overall economic growth and development is predicted to be small, with a rise in real GDP of only 6.48% short term and 5.6% long term. However, structural economic change and the WTO shock should increase regional output, especially in the established coastal economies. Regional labour movement is found to increase 69.2% at the completion of economic structural reforms. A slight decrease in the Gini coefficient for income inequality is also anticipated.
    Keywords: applied CGE modelling; China; WTO; labour movement; inequality
    JEL: C68 O18 R12 R23
    Date: 2005–12–30
  9. By: Funke, Michael (Hamburg University)
    Abstract: The New Keynesian Phillips curve (NKPC) posits the dynamics of inflation as forward looking and related to marginal costs. In this paper we examine the empirical relevance of the NKPC for mainland China. The empirical results indicate that an augmented (hybrid) NKPC gives results that are consistent with the data generating process. It is in this respect that the NKPC provides useful insights into the nature of inflation dynamics in mainland China as well as useful insights for the conduct of monetary policy.
    Keywords: China; inflation; New Keynesian Phillips curve
    JEL: C22 E31
    Date: 2005–07–08
  10. By: Juurikkala, Tuuli (BOFIT); Lazareva, Olga (Centre for Economic and Financial Research, Moscow)
    Abstract: Just as in established market economies, many Russian firms provide non-wage benefits such as housing, medical care or day care to their employees. Interpreting this as a strategic choice of firms in an imperfect labor market, this paper examines unique survey data for 404 large and medium-size industrial establishments from 40 Russian regions. We find strong evidence that Russian industrial firms use social services to reduce the costs of labor turnover in the face of tight labor markets. The strongest effect is observed for blue-collar workers. We also find that the share of non-monetary compensation decreases with improved access to local social services.
    Keywords: non-wage benefits; labor turnover; labor attachment; Russia
    JEL: J32 J33 J42 J63 M52 P31
    Date: 2006–04–13
  11. By: Solanko, Laura (BOFIT)
    Abstract: During the Soviet period industrial firms not only formed the backbone of the economy but also directly provided a wide range of benefits to their municipalities. Firms were in charge of supplying a great variety of social services, such as housing, medical care and day care. The need to divest at least some of these functions was generally accepted already in the early 1990s. Industrial firms' engagement in the provision of infrastructure services, such as heating, electricity and road upkeep has to date received much less attention. Using a unique dataset of 404 large and medium-sized industrial enterprises in 40 regions of Russia, this paper examines public infrastructure provision by Russian industrial enterprises. We find that, first, to a large degree engagement in infrastructure provision – as proxied by district heating production – is a Soviet legacy. Second, firms providing district heating to users outside their plant area are more likely to have close relations with the local public sector along many other dimensions.
    Keywords: Russia; infrastructure; firm performance
    JEL: H54 P31 P35
    Date: 2006–04–20
  12. By: Coricelli, Fabrizio (University of Siena, University of Ljubljana and CEPR); Égert , Balázs (Oesterreichische Nationalbank); MacDonald, Ronald (University of Glasgow and CESIfo)
    Abstract: This paper surveys recent advances in empirical studies of the monetary transmission mechanism (MTM), with special attention to Central and Eastern Europe. In particular, while laying out the functioning of the separate channels in the MTM, it explores possible interrelations between different channels and their impact on prices and the real economy. The empirical findings for Central and Eastern Europe are then briefly compared with results for industrialized countries, especially for the euro area. We highlight potential pitfalls in the literature and assess the relative importance, and potential development, of the different channels, emphasizing the relevant asymmetries between Central and Eastern European countries and the euro area.
    Keywords: monetary transmission; transition; Central and Eastern Europe; credit channel; interest rate channel; interest-rate pass-through; exchange rate channel; exchange rate pass-through; asset price channel
    JEL: E31 E51 E58 F31 O11 P20
    Date: 2006–08–14
  13. By: Juurikkala, Tuuli (BOFIT); Lazareva, Olga (Centre for Economic and Financial Research, Moscow)
    Abstract: IIn the planned economy firms were made responsible for providing their workers with so-cial services, such as housing, day care and medical care. In the transforming Russia of the 1990s, social assets were to be transferred from industrial enterprises to the public sector. The law on divestment provided little more than general principles. Thus, for a period of several years, property rights concerning a major part of social assets, most notably hous-ing, were not properly defined, as transfer decisions were largely left to the local level players. Strikingly, the time when assets were divested varied considerably across firms. In this paper we utilize recent survey data from 404 medium and large industrial enterprises in 40 Russian regions and apply survival data analysis to explore the determinants of dives-titure timing. Our results show that in municipalities with higher shares of own revenues in their budget and thus weaker fiscal incentives, firms used their social assets as leverage to extract budget assistance and other forms of preferential treatment from local authorities. We also find evidence that less competitive firms were using social assets to cushion them-selves from product market competition. At the same time, we do not find any role for lo-cal labor market conditions in the divestment process.
    Keywords: housing divestment; lobbying; firms; muncipalities; Russia
    Date: 2006–04–13
  14. By: Anatolyev, Stanislav (New Economic School)
    Abstract: We study three aspects of the Russian stock market – factors influencing stock returns, integration of the stock market with world .financial markets, and market efficiency – from 1995 to present, putting emphasis on how these evolved over time. We .find many highly unstable relationships, and indeed, greater instability than that generated by financial crises alone. While most computed statistics exhibit constant ups and downs, there are recently clear tendencies in the development of the Russian stock market: a sharp rise in explainability of returns, an increased role of international financial markets, and a decrease in the profitability of trading.
    Keywords: Russia; transition; stock returns; integration; efficiency
    JEL: C22 F36 G14 G15
    Date: 2005–07–15
  15. By: Égert , Balázs (Oesterreichische Nationalbank); Morales-Zumaquero, Amalia (University of Málaga and Centro de Estudios Andaluces)
    Abstract: This paper attempts to analyze the direct impact of exchange rate volatility on the export performance of ten Central and Eastern European transition economies as well as its indirect impact via changes in exchange rate regimes. Not only aggregate but also bilateral and sectoral export flows are studied. To this end, we first analyze shifts in exchange rate volatility linked to changes in the exchange rate regimes and second, use these changes to construct dummy variables we include in our export function. The results suggest that the size and the direction of the impact of forex volatility and of regime changes on exports vary considerably across sectors and countries and that they may be related to specific periods.
    Keywords: exchange rate volatility; export; trade; transition; structural breaks
    JEL: F31
    Date: 2005–07–11
  16. By: Mehrotra, Aaron (BOFIT)
    Abstract: We examine the role of the exchange and interest rate channels during recent deflation episodes in Japan, Hong Kong and China. We estimate open-economy structural vector autoregressive (SVAR) models for the three economies with different monetary regimes and varying degrees of openness. In both Japan and Hong Kong, shocks to the nominal effective exchange rate have a statistically significant impact on prices, with a notably stronger effect in Hong Kong. Our results provide evidence about the role of external influences in the deflation episodes of these economies, and could also be seen to weakly support suggestions to depreciate the currency in order to escape from a liquidity trap. The importance of the interest rate channel is also found to be high in Japan and Hong Kong. In China, where interest rates have not been an important monetary policy tool, neither exchange nor interest rate shocks significantly influence price developments.
    Keywords: deflation; zero lower bound; SVAR
    JEL: E31 F41
    Date: 2005–12–30
  17. By: Bonin , John (Wesleyan University); Wachtel , Paul (New York University)
    Abstract: We examine the efforts of transition economies to deal with financial fragility and resolve banking cries We characterize the birthing process of banking in transition and the three essential features of banking crises in transition economies: (i) bad loans and the relationship to state owned industries, (ii) development of institutional infrastructure and (iii) credible commitments to resolution and privatization. We then discuss the experiences of seven important transition countries in order to identify the salient features of their efforts to resolve banking crises.
    JEL: G21 P34
    Date: 2004–12–30
  18. By: Elena Strukova (World Bank); Alexander (Environmental Defense); Anil Markandya (Fondazione Eni Enrico Mattei)
    Abstract: The paper presents estimation of the health losses from urban air pollution in Ukraine. The methodology developed by US EPA and adjusted in Russia for Eastern European transition countries was applied for health risk assessment. PM2.5 was identified as the major source of human health risk, based on experience from the Russian studies. In the absence of reliable computed concentrations of PM2.5, the study was based on monitoring data of total suspended particle (TSP) emissions in Ukraine. Additional cases of mortality and morbidity were calculated based on reporting data on TSP concentration that was recalculated into PM2.5. Then the concentration–response function was applied to estimate individual risk. Next, individual risk was applied to the population exposed to the concentration reported for each city included in the analysis (we selected most polluted cities). For each city we considered individual data on baseline mortality and morbidity and population structure. In total, air pollution related mortality represents about 6 percent of total mortality in Ukraine. In Russia the corresponding indicator totals about 4 percent. The relative mortality risk attributed to air pollution calculated per 100 000 population in both countries is about 55-59 cases. Since applied method is sensitive to the primary data uncertainties we conducted sensitivity analysis applying Monte-Carlo method. Economic damage related to mortality risk was estimated at about 4 percent of GDP. There was no relevant WTP study in Ukraine therefore we applied the benefit-transfer method in order to estimate VSL, since mortality attributed to air pollution is major component of health losses (about 94 percent). In order to compare and aggregate mortality and morbidity risks we recalculated them in DALY. Then morbidity represents about 30 percent of total air pollution health load. Data on baseline morbidity is less reliable than data on baseline mortality; therefore the morbidity risk estimates are more uncertain than mortality estimates. It is likely that morbidity risk is underestimated. Regardless of uncertainties mentioned above and some problems with reported data we can conclude that the mortality risk attributed to air pollution is significant. Therefore, costs of air pollution in Ukraine are sizable and in the nearest future may offset the economic growth. Recovery of the Ukrainian economy based on restoration of polluting industries may lead to stagnation since mortality and morbidity risks not only puts burden on the economy, but also reduce labor force.
    Keywords: Air Pollution, Ukraine, Environmental Damages
    JEL: Q53 I10 I18
    Date: 2006–09
  19. By: Algieri , Bernadina (University of Naples)
    Abstract: This paper considers trade specialisation in Russia, examining changes in trade patterns at the sectoral level over the transition period. Trade based on inter-industry specialisation and intra-industry trade (IIT) are empirically distinguished using the Aquino and Grubel-Lloyd indices. The Aquino index is applied to measure the degree of inter-industry specialisation by sector, while the Grubel-Lloyd index is used to establish the level of IIT between industries. The empirical results support recent trade theory, which predicts an increasing level of intra-industry trade with liberalisation processes. They also suggest how inter- and intra-industry trade coexist. The final econometric estimation of the factor content of Russia’s exports (specialisation in resource-intensive products) supports the index analysis.
    Date: 2004–12–31
  20. By: Claeys, Sophie (CERISE); Lanine , Gleb (CERISE); Schoors, Koen (CERISE)
    Abstract: We focus on the conflict between two central bank objectives – individual bank stability and systemic stability. We study the licensing policy of the Central Bank of Russia (CBR) during 1999-2002. Banks in poorly banked regions, banks that are too big to be disciplined adequately, and banks that are active on the interbank market enjoy protection from license withdrawal, which suggests a tacit concern for systemic stability. The CBR is also found reluctant to with-draw licenses from banks that violate the individual's deposits-to-capital ratio as this conflicts with the tacit CBR objective to secure depositor confidence and systemic stability.
    Keywords: bank supervision; bank crisis; Russia
    JEL: E50 G20 N20
    Date: 2005–09–05
  21. By: Gluschenko, Konstantin (Institute of Economics and Industrial Engineering, Siberian Branch of the Russian)
    Abstract: This paper analyzes the spatial structure of goods market integration in Russia, characterizing regions into three states: (a) integrated, (b) not integrated but trending toward integration, and (c) not integrated and not trending toward integration. Using time series of the cost of a staples basket across 75 regions of Russia for 1994-2000, I exploit a nonlinear cointegration relationship with an asymptotically subsiding trend to capture movement toward integration. The analysis suggests that 36% of Russian regions were integrated with the national market over 1994-2000, 44% were in the process of integrating with the national market, and 20% of regions were not integrated and not trending toward integration.
    Keywords: market integration; law of one price; price dispersion; convergence; Russian regions
    JEL: C32 P22 R10 R15
    Date: 2006–06–22
  22. By: Pyle, William (Middlebury College)
    Abstract: Drawing on a unique set of surveys, this article explores the question of whether Russia’s post-communist business associations are generally antithetical to or supportive of the broad objectives of economic restructuring. Contrary to the most widely cited analysis as to the purposes of collective action in the business community, the survey evidence demonstrates that association members have embraced market-adapting behaviors at greater rates than non-members. The responses of both firms and associations, moreover, suggest that the associations themselves are, at least in part, directly responsible. These findings point to the conclusion that in contemporary Russia the net returns to collective action in support of market development are high relative to those for purposes that are less benign.
    Date: 2005–12–30
  23. By: Alan de Brauw (International Food Policy Research Institute); John Giles (Michigan State University and IZA Bonn)
    Abstract: In this paper, we investigate how reductions of barriers to migration affect the decision of middle school graduates to attend high school in rural China. Change in the cost of migration is identified using exogenous variation across counties in the timing of national identity card distribution, which made it easier for rural migrants to register as temporary residents in urban destinations. We show that timing of ID card distribution is unrelated to local rainfall shocks affecting demand for migration, and not related to proxies reflecting time-varying changes in village policy or administrative capacity. We find a robust negative relationship between migrant opportunity and high school enrollment. The mechanisms behind the negative relationship are suggested by observed increases in subsequent local and migrant non-agricultural employment of high school age young adults as the size of the current village migrant network increases.
    Keywords: migration, educational attainment, rural China
    JEL: O12 O15 J22 J24
    Date: 2006–09
  24. By: Ji, Gang (BOFIT)
    Abstract: This study investigates the economic consequences of cross-listing on the Chinese stock market. We argue that by adopting a higher disclosure standard through cross- listing firms voluntarily commit themselves to reducing information asymmetry. As a result, cross-listed firms are able to benefit from growth opportunities with less appropriated cash flow and lower cost of capital. The empirical evidence shows that cross-listed firms indeed command higher valuations than their non-cross-listed counterparts, after controlling for certain firm-specific attributes. This lends support to the corporate governance hypothesis of cross-listing on the Chinese stock market. The study also argues that an overall upgrad-ing of accounting standards cannot substitute for the cross-listing mechanism.
    Keywords: corporate governance; listing; China
    Date: 2005–11–11
  25. By: Égert , Balázs (Oesterreichische Nationalbank); Halpern , László (Oesterreichische Nationalbank)
    Abstract: This paper analyses the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis. The results indicate that the real misalignments reported in the literature are systematically influenced, inter alia, by the underlying theoretical concepts (Balassa-Samuelson effect, Behavioural Equilibrium Exchange Rate, Fundamental Equilibrium Exchange Rate) and by the econometric estimation methods. The important implication of these findings is that a systematic analysis is needed in terms of both alternative economic and econometric specifications to assess equilibrium exchange rates.
    Keywords: equilibrium exchange rate; Balassa-Samuelson effect; meta-analysis
    JEL: C15 E31 F31 O11 P17
    Date: 2005–06–29
  26. By: Gluschenko , Konstantin (Institute of Economics and Industrial Engineering of SB RAS, Novosibirsk,); Kulighina, Darya (Novosibirsk State University)
    Abstract: Perfect integration eludes the real world, so we suggest a realistic benchmark standard for judging the extent of market integration in various economies. We estimate the degree of integration in the US product market, widely acknowledged to be the most integrated among geographically large economies, so as to provide a reference for measuring Russian market integration. Prices for 27 grocery items across 29 cities of the United States in the first quarter of 2000 are used as empirical data. The estimated degree of integration turns out to be very close to values obtained for Russia for 2000. Apparently, market integration in Russia has in recent years moved toward conditions found in advanced market economies. The roles of other factors that could potentially cause segmentation of the US market are also analyzed.
    Keywords: market integration; price dispersion; law of one price; United States; Russia
    JEL: F14 F15 L81 R11
    Date: 2006–04–19
  27. By: Rutherford, Thomas; Tarr, David
    Abstract: In this paper we develop a computable general equilibrium model of the regions of Russia to assess the impact of accession to the World Trade Organization (WTO) on the regions of Russia. We estimate that the average gain in welfare as a percentage of consumption for the whole country is 7.8 percent (or 4.3 percent of consumption); we estimate that three regions will gain considerably more: Northwest (11.2 percent), St. Petersburg (10.6 percent) and Far East (9.7 percent). We estimate that the Urals will gain only 6.2 percent of consumption, considerably less than the national average. The principal explanation in our central analysis for the differences across regions is the ability of the different regions to benefit from a reduction in barriers against foreign direct investment. The three regions with the largest welfare gains are clearly the regions with the estimated largest shares of multinational investment. But the Urals has attracted relatively little FDI in the service sectors. An additional reason for differences across regions is quantified in our sensitivity analysis: regions may gain more from WTO accession if they can succeed in creating a good investment climate.
    Keywords: Economic Theory & Research,ICT Policy and Strategies,Free Trade,Markets and Market Access,Investment and Investment Climate
    Date: 2006–09–01
  28. By: Elena Yusupova
    Abstract: Voucher privatization in the Czech Republic presented a natural experiment of the ability of investors to construct their portfolios under conditions of asymmetric information and the absence of stock market prices. This paper provides a theoretical model of an optimal portfolio choice made by the investors maximizing their expected return and at the same time solving a coordination problem in a non-cooperative game with other investors. The perception of share misvaluation and private information are endogenized. The model offers an interpretation and theoretical justification of earlier empirical findings and explains the crucial role of the auctioneer, different optimal strategies for different types of investors and the redundancy of legal limits constraining ownership stakes in firms. The results provide implications for the design of voucher privatization, which should lead to more efficient share distribution and price setting.
    Keywords: Voucher privatization, Asymmetric information, Portfolio and strategic investors, Portfolio choice, Mispricing
    JEL: D81 D82 G11
    Date: 2006–07
  29. By: Peresetsky, Anatoly A. (New Economic School); Karminsky , Alexandr A. (Gazprombank, Moscow, Russia); Golovan , Sergei V. (New Economic School)
    Abstract: This paper presents results from an econometric analysis of Russian bank defaults during the period 1997–2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. We find that preliminary expert clustering or automatic clustering improves the predictive power of the models and incor-poration of macrovariables into the models is useful. Heuristic criteria are suggested to help compare model performance from the perspectives of investors or banks supervision authorities. Russian banking system trends after the crisis 1998 are analyzed with rolling regressions.
    Keywords: banks; Russia; probability of default model; early warning systems
    Date: 2004–12–30
  30. By: Korhonen, Iikka (BOFIT); Wachtel, Paul (Stern School of Business, New York University)
    Abstract: We assess the extent and speed of exchange rate pass-through in the countries of the Commonwealth of Independent States (CIS). We do this in the framework of vector autoregressive regressions, utilising impulse functions and variance decompositions with monthly data that starts in 1999 in order to avoid periods of very high inflation and the Russian crisis. We find that exchange rate movements have a clear impact on price developments in the CIS countries. The speed of the pass-through is also fairly high: in most cases the full effect is transmitted into domestic prices in less than 12 months. Unlike in many other emerging market economies, an additional effect from US prices on to domestic prices is not significant. The extent of the exchange rate pass-through is usually much higher than in our benchmark group of emerging market countries. Variance decomposition shows that the relative share of exchange rates in explaining changes in domestic prices is higher in the CIS countries than in the benchmark group. Our results indicate that policy-makers in the CIS countries need to pay more attention to exchange rate movements than in many other emerging market countries.
    Keywords: exchange rate pass-through; inflation; exchange rate regime; transition countries
    JEL: E31 E42 F31 F42
    Date: 2005–06–10
  31. By: Fidrmuc , Jarko (Oesterreichische Nationalbank); Korhonen, Iikka (BOFIT)
    Abstract: We review the literature on business-cycle correlation between the euro area and Central and Eastern European countries (CEECs), a topic that has gained attention in recent years as new EU entrants prepare for participation in the monetary union. Our meta-analysis suggests several CEECs already have comparably high correlation with the euro area business cycle. We also find that estimation methodologies can have a significant effect on correlation coefficients. While central bankers are more conservative in their estimates, we find no evidence of a geographical bias in the studies.
    Keywords: monetary union; optimum currency area; business cycles; meta-analysis
    JEL: C42 E32 F15 F31
    Date: 2004–12–30
  32. By: Charemza , Wojciech W. (National Bank of Poland and University of Leicester, UK); Makarov, Svetlana (European University at St. Petersburg, Russia and National Bank of Poland)
    Abstract: The paper proposes a new indicator of expected real effects of a policy aimed at controlling inflation. The indicator, called real effect of inflation targeting (REIT), involves the comparison of expected and output-neutral inflation. It is shown that it can be derived from a simple two-dimensional vector autoregressive model of inflation and output gap. The microdynamics of such model are explained in terms of the foundations of Taylor-type staggered wage contracts. It is assumed that the monetary authority has some discretion regarding the timing of monetary actions. Here REIT can be used to set the optimal times for such actions, if the control of output is regarded as a secondary policy target. A simulation experiment illustrates the rationale of such a device for timing monetary measures. The REIT has been used by the Polish Monetary Policy Council since 2001 in it's inflation targeting and is thought to have contributed to a substantial decline in Polish inflation in 2003 and to an increase in output growth in 2004. A similar indicator computed for Russia as a means of monitoring monetary policy rather than as an active tool confirms that active expansionary policy in 2002 and 2003 might have contributed to Russian economic growth in 2004 and 2005, whereas similar policy measures for 2004 are likely to prove ineffective.
    Date: 2005–12–30
  33. By: Gluschenko, Konstantin (Institute of Economics and Industrial Engineering, Siberian Branch of the Russian)
    Abstract: Lacking data on price levels across locations (countries, national regions, etc.) for cross-space comparisons, researchers resort to local consumer price indexes (CPIs) over time to evaluate these levels. This approach unfortunately fails to specify, even generally, the exactness of such proxies. Worse, the method is silent on whether the results are consistent, at least qualitatively, with those obtained using actual price levels. This paper aims to find an answer empirically, using data across Russian regions. Through comparison of CPI-proxied price levels with direct evaluations of regional price levels (i.e. Surinov spatial price indexes and the costs of a purchasing power basket), biases that distort the qualitative pattern of inter-regional differences are identified. Cross-region distributions for real income (calculated with CPI-proxied and directly evaluated price levels) for several points in time are estimated and compared. The CPI-induced biases are found to generally overstate inter-regional disparities.
    Keywords: consumer price index; spatial price index; real income; nonhomothetic prefer-ences; Russia; Russian regions
    JEL: C43 E31 P22 R19
    Date: 2006–08–18
  34. By: Claeys, Sophie (BOFIT)
    Abstract: The Central Bank of Russia (CBR) assumes a wide range of functions not raditional to a central bank. In addition to the daily conduct of monetary policy, it acts as a regulator and supervisor of the banking sector. It is currently overssing the implementation of a deposit insurance scheme and is the main owner of Russia's largest commercial bank, Sberbank. As this additional functions may conflict with the CBR policy objectives, I review how the current design of the CBR deviates from the optimal allocation of regulatory powers within a central bank prescribed in the literature. I then empirically investigate the need for a supervisory body within the CBR. Using a simple Taylor rule framework I find that the CBR does not use its "hands-on" supervisory information to maintain financial stability, but rather to accomodate state-owned banks' balances.
    Keywords: Central Bank; Prudential Regulation and Supervision; Monetary Policy Rules; Russia
    JEL: G21 G28
    Date: 2005–07–08
  35. By: Daniel Munich
    Abstract: Turnovec (2005) represents the first rigorous attempt to quantify and compare research of economists affiliated with Czech institutions as well as total output by these institutions. In this comment, I reconsider some of his results. My key finding is that a research-accounting methodology that closely reflects the widely differing quality of publications in economics leads to notably different results from those presented by Turnovec, who used an accounting scheme favoring quantity of publications over their quality.
    Keywords: Impact factor, Publications, Czech Republic, Research
    JEL: A10 A11
    Date: 2006–07
  36. By: Zhu, Pingfang (Research Institute of Econometrics and School of Economics, Shanghai University of Finance and Economics.); Li, Lei (Research Institute of Econometrics and School of Economics, Shanghai University of Finance and Economics.); Lundin, Nannan (Örebro University and Trade Union Institute for Economic Research (FIEF))
    Abstract: This paper examines the impact of R&D expenditure and technology import on the level and the growth of productivity, as well as on the general economic performance in manufacturing firms with various ownership structures in Shanghai, China. The empirical analyses are based on the firm-level information of a sample of manufacturing firms for the period 1998–2003. We find clear-cut evidence indicating that firms with foreign participation have a productivity advantage over their domestic counterparts. The expenditures on technology import not only have a direct and positive effect on productivity, but also indirectly enhance the absorptive capacity of firms to facilitate in-house R&D activities. This is particularly true for firms with foreign participation, or for firms in sectors with relatively high technical standards. Furthermore, R&D expenditure and technology import may also have positive effects on profitability and export performance, depending on the ownership structure of the firm and the technical standard in the sector.
    Keywords: Science and Technology policy; Science and Technology investment; R&D
    JEL: L52 O32 O38
    Date: 2005–07–08
  37. By: M. Lucey , Brian (BOFIT); Voronkova, Svitlana (BOFIT)
    Abstract: This paper examines the relationships between the Russian and other Central European (CE) and developed countries’ equity markets over the 1995-2004 period. Along with the traditional Johansen and Juselius (1990) multivariate cointegration tests, we apply novel cointegration approaches, including Gregory-Hansen (1996) test, which allows for a structural break in the relationships, as well as the newly developed stochastic cointegration test by Harris, McCabe and Leybourne (2002) and the non-parametric cointegration method of Breitung (2002). The latter tests point to a significant agreement that in the aftermath of the Russian crisis of 1998 there was an increasing degree of comovements of the Russian market with other developed markets, but not with CE developing markets. This result is further confirmed by dynamic conditional correlation modeling, which allows us to investigate graphically the evolution of comovements in the system. The results of detailed cointegration analysis suggest a. that the time-varying nature of equity markets comovements should be explicitly accounted for while modeling long run relationships b. that there is a decline in diversification benefits for foreign investors seeking to invest in Russian equities over the long horizon.
    Keywords: Stock Market Integration; CEE Stock markets; Russian Stock Market; Cointegration
    JEL: G10 G15
    Date: 2005–10–20
  38. By: Tatiana Fic; Omar F. Saqib
    Abstract: The main objective of this study is to highlight the importance of political instability, defined as frequent changes in and of government, in undermining the Russian exchange rate based stabilization program of the 1990s. The empirical evidence supports the significance of political instability along with economic fundamentals in determining Russian real effective exchange rate and exchange market pressure, used as a proxy to the crisis.
    Keywords: Currency crises, political instability
    JEL: F31 C13
    Date: 2006

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