nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒05‒02
fourteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Domestic Supplier Spillovers of Global Value Chains in Central and Eastern European Countries By Knez, Klemen
  2. The impact of the Ukraine-Russia war on world stock market returns By Whelsy Boungou; Alhonita Yatié
  3. Russia today: The Russian invasion of Ukraine and Russia's public finances By Weichenrieder, Alfons J.
  4. Russia. The Background of the Russian Invasion of Ukraine By Hanappi, Hardy
  5. Stock Prices and the Russia-Ukraine War: Sanctions, Energy and ESG By Ming Deng; Markus Leippold; Alexander F. Wagner; Qian Wang
  6. EU Sanctions on Belarus as an Effective Policy Tool By Anders Aslund; Jan Hagemejer
  7. Political Shocks and Inflation Expectations: Evidence from the 2022 Russian Invasion of Ukraine By Lena Dräger; Klaus Gründler; Niklas Potrafke
  8. Spreading Consensus: Correcting Misperceptions about the Views of the Medical Community Has Lasting Impacts on Covid-19 Vaccine Take-up By Vojtech Bartos; Michal Bauer; Jana Cahliková; Julie Chytilová
  9. Impacts of COVID-19 on Households in CAREC Countries By Azhgaliyeva, Dina; Mishra, Ranjeeta; Long, Trinh; Morgan, Peter
  10. The Survival of Latvian Products and Firms in Export Markets By Konstantins Benkovskis; Peter Jarrett; Ze'ev Krill; Olegs Tkacevs; Naomitsu Yashiro
  11. Regional Economic Impacts of Trans-Caspian Infrastructure Improvement: Implications for the Post-COVID-19 Era By Li, Xinmeng; Wang, Kailai; Chen, Zhenhua
  12. What Determines the Adaptation of Enterprises to COVID-19 in CAREC Member Countries: Empirical Evidence from Azerbaijan, Georgia, Kazakhstan, and Mongolia By Aseinov, Dastan; Sulaimanova, Burulcha; Karymshakov, Kamalbek; Azhgaliyeva, Dina
  13. From Low to High Inflation: Implications for Emerging Market and Developing Economies By Ha, Jongrim; Kose, Ayhan M.; Ohnsorge, Franziska
  14. Machine learning model to project the impact of Ukraine crisis By Javad T. Firouzjaee; Pouriya Khaliliyan

  1. By: Knez, Klemen
    Abstract: The article extends existing sectoral analyses of the internationalisation process in the EU by complementing qualitative studies of supplier linkages with a novel aggregate input-output approach to measuring the structure of supplier linkages. Examining changes in the structure of domestic and global supplier linkages over the period 2000 to 2014, we find that the new Central and Eastern European EU Member States exhibit a specific pattern that differs from that of the old EU countries. Above-average decreases in purely domestic value chains and a decrease in the share of global integration with complex domestic supplier linkages combined with an above-average increase in global integration with no domestic supplier linkages show the uneven pattern of the internationalisation process in the European Union and reveal the structural position of the European Eastern integrated peripheries.
    Keywords: European integration, integrated periphery, supplier linkages, input-output analysis, middle income trap
    JEL: F1 F4 F6 R1
    Date: 2022–03–15
  2. By: Whelsy Boungou (PSB - Paris School of Business); Alhonita Yatié (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)
    Abstract: As a topical topic, this paper studies the responses of world stock market indices to the ongoing war between Ukraine and Russia. The empirical analysis is based on daily stock market returns in a sample of 94 countries and covers the period from 22 January 2022 to 3 March 2022. We consistently document a negative relationship between the Ukraine-Russia war and world stock market returns. Furthermore, our results reveal that returns have been significantly lower since the invasion of Russian troops into Ukraine on 24 February 2022. Overall, we provide the first empirical evidence of the effect of the Ukraine-Russia war on international stock market returns.
    Keywords: H56,G11,G14,G15 War,Russia,Ukraine,Stock index
    Date: 2022–03–16
  3. By: Weichenrieder, Alfons J.
    Abstract: This policy letter collects elementary economic statistics and provides a very basic look on Russian public finances (i) to inform the reader's opinion on a possible planning process behind the war against Ukraine and (ii) to discuss prospects of an energy embargo and its capability to affect the stability of the Russian economy.
    Keywords: Energy Embargo,Invasion,Public Finance,Russia,Ukraine
    Date: 2022
  4. By: Hanappi, Hardy
    Abstract: This paper presents an interpretation of the underlying dynamics of global political economy, which has led to the invasion of Ukraine by Russia in February 2022. It thus is an alternative to interpretations that view the individual psychological traits of Vladimir Putin as the driving force behind this event. To enable a more sensible account, it turns out to be necessary to go back in the history of the conflict between Russia and NATO to the times of the Cold War. Briefly, two important fields of methodology – a theory of power and game theory – have to be touched upon. Finally, the justified emotional disgust concerning Putin’s aggressive war and the somewhat more detached scientific analysis are tried to be reconciled in the concluding paragraphs.
    Keywords: Russia, Ukraine, Political Economy, War, Game Theory
    JEL: C73 F5 F51 F52 F54
    Date: 2022–03–15
  5. By: Ming Deng (University of Zurich - Department of Banking and Finance); Markus Leippold (University of Zurich; Swiss Finance Institute); Alexander F. Wagner (University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute); Qian Wang (University of Zurich - Department of Banking and Finance; Inovest Partners AG)
    Abstract: An extraordinary mix of factors affected firm values in early 2022. In the build-up to and in the weeks after the Russian invasion of Ukraine, stocks strongly exposed to the regulatory risks of the transition to a low-carbon economy did well. This was true especially of US stocks. However, in Europe, these stocks tended to underperform after the invasion, arguably because of stronger expected policy responses supporting renewable energy sources in the face of the pronounced dependence of Europe on Russian oil and gas. Investors thus expect the speed of transition to a low-carbon economy to be diverging between the US and Europe. Relating six different Environmental, Social, and Governance (ESG) ratings with stock price performance yields mixed results, suggesting that investors cannot blindly rely on such ratings in general to indicate corporate resilience against crises. Companies which more frequently refer to inflation in their conference calls with analysts performed worse than their peers. Internationally oriented firms did poorly, and investors were particularly concerned regarding companies' exposure to China. Overall, the results offer a preview of the future economic impact of the Russia-Ukraine war.
    Keywords: Climate transition risk, energy, ESG, event study, inflation, resilience, Russia-Ukraine war, stock returns
    JEL: E3 G14 G01 Q54
    Date: 2022–04
  6. By: Anders Aslund; Jan Hagemejer
    Abstract: The situation of Belarus is currently quite clear. Lukashenka is hanging on to power because of his continued grasp on the security forces and Putin’s support. Russia controls as much as it wants to control. So far, no significant cracks have appeared in Lukashenka’s hold on the security forces. While the popular protests of 2020 were far stronger than any previous popular Belarusian protests, Lukashenka is a survivor. He has persisted during several political and financial crises. He hopes to also survive this time and he is playing for time. The Belarusian democratic movement understands, and it fears that its time is running out, so it calls for maximum pressure on Lukashenka. The EU should follow its lead. This runs contrary to the standard procedure of ratcheting sanctions up step by step. The aim of Western sanctions should be to maximize the cost to not only Belarus but also to Russia to ease Russian interest in controlling Belarus as early as possible. The targets of the sanctions should be multiple: Lukashenka, his family and cronies; culprits of human rights violations; Belarusian state financial institutions; the big Belarusian state companies; Russian state banks in Belarus; big Kremlin-related companies in Belarus; Russian businessmen assisting the Kremlin in Belarus; and the Belarusian arms trade. International financial institutions should not be allowed to assist the Belarusian state. Bona fide Belarusian private enterprises and their trade should not be sanctioned.
    Keywords: Belarus, EU, Russia, Economic Sanctions, Financial Sanctions, International Trade, Cronyism
    JEL: F15 F51
    Date: 2021
  7. By: Lena Dräger; Klaus Gründler; Niklas Potrafke
    Abstract: How do global political shocks influence individuals’ expectations about economic outcomes? We run a unique survey on inflation expectations among 145 tenured economics professors in Germany and exploit the 2022 Russian invasion in Ukraine as a natural experiment to identify the effect of a global political shock on expectations about national inflation rates. We find that the Russian invasion increased short-run inflation expectations for 2022 by 0.75 percentage points. Treatment effects are smaller regarding mid-term expectations for 2023 (0.47 percentage points) and are close to zero for longer periods. Text analysis of open questions shows that experts increase their inflation expectations because they expect supply-side effects to become increasingly important after the invasion. Moreover, experts in the treatment group are less likely to favour an immediate reaction of monetary policy to the increased inflation, which gives further evidence of the shock being interpreted primarily as a supply-side shock.
    Keywords: inflation expectations, belief formation, natural experiment, 2022 Russian invasion of Ukraine, survey, economic experts
    JEL: E31 E71 D74 D84
    Date: 2022
  8. By: Vojtech Bartos; Michal Bauer; Jana Cahliková; Julie Chytilová
    Abstract: Identifying sources of vaccine hesitancy is one of the central challenges in fighting the Covid- 19 pandemic. In this study, we focus on the role of public misperceptions of doctors’ views. Motivated by widespread concern that media reports create uncertainty in how people perceive expert opinions, even when broad consensus exists, we elicited trust in Covid-19 vaccines held by 9,650 doctors in the Czech Republic. We found evidence of a strong consensus: 90% of doctors trust the vaccines. Next, we conducted a nationally representative survey (N=2,101), and document systemic misperceptions of doctors’ views: more than 90% of respondents underestimate doctors’ trust; the most common belief is that only 50% of doctors trust the vaccines. Finally, we integrate randomized provision of information about the true views held by doctors into a longitudinal data collection, and regularly measure its impacts on vaccine take-up during a nine-month period when the vaccines were gradually rolled out. We find that the treatment recalibrates beliefs and leads to a lasting and stable increase in vaccine demand: individuals who receive the information are 4 percentage points more likely to be vaccinated nine months after the intervention. This paper illuminates how the engagement of professional medical associations, with their unparalleled capacity to elicit individual views of doctors on a large scale, can help to create a cheap, scalable intervention that corrects misperceptions and has lasting impacts on behavior.
    Keywords: Covid-19 vaccine, beliefs, misperceptions, expert consensus, information
    JEL: C93 D83 I12
    Date: 2022
  9. By: Azhgaliyeva, Dina (Asian Development Bank Institute); Mishra, Ranjeeta (Asian Development Bank Institute); Long, Trinh (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute)
    Abstract: The impacts of the COVID-19 outbreak have heavily affected CAREC member countries, which include Afghanistan, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, the People’s Republic of China (PRC), Tajikistan, Turkmenistan, and Uzbekistan. The COVID-19 crisis and the resulting falls in demand and supply due both to uncertainty and policy measures such as lockdowns, “social distancing,” and travel restrictions are having a severe impact on CAREC member countries. In order to better understand these impacts, computer-assisted telephone (CATI) interviews of households were conducted in 10 countries from the CAREC region (excluding the PRC). We estimate the impact of COVID-19 on income declines, expenditure changes, and financial difficulty in December 2020 compared with June 2020.
    Keywords: COVID-19; CAREC; Central Asia; household survey; household income; employment
    JEL: D14 G51 H12 H84 I10 I24 J60
    Date: 2022–01
  10. By: Konstantins Benkovskis (Latvijas Banka, Stockholm School of Economics in Riga); Peter Jarrett (OECD); Ze'ev Krill (OECD); Olegs Tkacevs (Latvijas Banka); Naomitsu Yashiro (OECD)
    Abstract: This paper investigates factors that contribute to the survival of export relationships at the firm and product levels using a large anonymised firm-level database for Latvia. It finds that some characteristics of exporting firms, such as a higher productivity level, larger size, lower indebtedness and higher profitability are associated with longer duration of export relationships. Firms that innovated prior to exporting are also likely to enjoy longer export spells, while participation in an EU-fund support programme did not alter duration. Younger staff and management of the firm are associated with a better survival of a new export product. Furthermore, this paper reveals novel roles of export product characteristics in survival, in particular an interesting tension between the complexity of new export products and their "distance" from the existing export bundle. While aiming high, that is, exporting products that are more complex, pays off as such products are associted with longer-lasting trade relationships, aiming too high, that is exporting new products that are far more complex than the exporter's existing product bundle, tends to lower their survival probability.
    Keywords: exports, economic complexity, trade, productivity, innovation
    JEL: F10 F14 P45 H81
    Date: 2022–04–25
  11. By: Li, Xinmeng (Asian Development Bank Institute); Wang, Kailai (Asian Development Bank Institute); Chen, Zhenhua (Asian Development Bank Institute)
    Abstract: With the implementation of the Belt and Road Initiative (BRI) in the People’s Republic of China (PRC), the Trans-Caspian International Transport Route (TITR) has received increasing attention. The corridor connects the PRC and Europe via Central Asian countries. Hence, it plays an important role in facilitating international trade through its transportation infrastructure network systems. As the corridor is opening up substantial economic opportunities for transit countries, it is becoming essential to have a proper understanding of the economic impact of potential transportation infrastructure investment on these countries along the TITR corridor. We conduct a regional economic impact assessment of transportation infrastructure investment to fill this research gap, using a computable general equilibrium analysis. To capture the uncertainty of infrastructure investment given the influence of COVID-19, we evaluated different impacts of the shocks, such as different modes of freight transportation (including rail, road, sea, and air), types of trade (exporting and importing), and levels of investor confidence. The results show that infrastructure investment has heterogeneous multiplier effects on the regional economy (due to the differences in infrastructure quality and country endowment). The impacts of infrastructure investment primarily result from the promotion of exports, and the impacts vary substantially by mode. Overall, we suggest that, although TITR countries are facing investment uncertainty due to the influence of COVID-19, strengthening infrastructure investment can be a useful tool to stimulate the economy while reducing the negative impact of the epidemic.
    Keywords: Trans-Caspian International Transport Route; transportation infrastructure; trade cost; computable general equilibrium
    JEL: F16 H54 J60
    Date: 2021–07
  12. By: Aseinov, Dastan (Asian Development Bank Institute); Sulaimanova, Burulcha (Asian Development Bank Institute); Karymshakov, Kamalbek (Asian Development Bank Institute); Azhgaliyeva, Dina (Asian Development Bank Institute)
    Abstract: We investigate the factors affecting firms’ ability to adjust production in response to the COVID-19 outbreak. We used firm-level survey data from the enterprise survey implemented by the World Bank Group, including a standard enterprise survey (baseline) and two waves of follow-up surveys conducted in 2020 and 2021, which included questions related to COVID-19 and firm behavior during the pandemic. We used data from four CAREC member countries: Azerbaijan, Georgia, Kazakhstan, and Mongolia. Using a probit model, we studied how different factors, including firm characteristics and government policy, affected the probability that a firm would be able to adjust its activities to the changed conditions. The results showed that firms which successfully adapted to the COVID-19 crisis were younger, foreign firms that had been innovative in the recent past, with female managers, a formal firm strategy with key performance indicators, and their own website.
    Keywords: COVID-19; micro; MSMEs; digitalization; adaptation; Central Asia; Caucasus
    JEL: D22 J63 L25 O53
    Date: 2022–01
  13. By: Ha, Jongrim; Kose, Ayhan M.; Ohnsorge, Franziska
    Abstract: Recent energy and food price surges, in the wake of Russia’s invasion of Ukraine, have exacerbated inflation pressures that are unusually high by the standards of the past two decades. High and rising inflation has prompted many emerging market and developing economy (EMDE) central banks and some advanced-economy central banks to increase interest rates. Inflation is expected to ease back towards targets over the medium-term as recent shocks unwind, but the 1970s experience is a reminder of the material risks to this outlook. As inflation remains elevated, the risk is growing that, to bring inflation back to target, advanced economies need to undertake a much more forceful monetary policy response than currently anticipated. If this risk materializes, it would imply additional increases in borrowing costs for EMDEs, which are already struggling to cope with elevated inflation at home before the recovery from the pandemic is complete. EMDEs need to focus on calibrating their policies with macroeconomic stability in mind, communicating their plans clearly, and preserving and building their credibility.
    Keywords: Global Inflation; Commodity Price; War in Ukraine; Global Recession; Great Inflation; Monetary Policy Tightening
    JEL: E31 E32 E37 Q43
    Date: 2022–03–29
  14. By: Javad T. Firouzjaee; Pouriya Khaliliyan
    Abstract: Russia's attack on Ukraine on Thursday 24 February 2022 hitched financial markets and the increased geopolitical crisis. In this paper, we select some main economic indexes, such as Gold, Oil (WTI), NDAQ, and known currency which are involved in this crisis and try to find the quantitative effect of this war on them. To quantify the war effect, we use the correlation feature and the relationships between these economic indices, create datasets, and compare the results of forecasts with real data. To study war effects, we use Machine Learning Linear Regression. We carry on empirical experiments and perform on these economic indices datasets to evaluate and predict this war tolls and its effects on main economics indexes.
    Date: 2022–03

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