nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒11‒21
fourteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Exposure to trade disruptions in case of the Russia-Ukraine conflict: a product network approach By Erik Braun; Emese Braun; András Gyimesi; Zita Iloskics; Tamás Sebestyén
  2. Rallying around the EU flag : Russia’s invasion of Ukraine and attitudes toward European integration By Steiner, Nils; Berlinschi, Ruxanda; Farvaque, Etienne; Fidrmuc, Jan; Harms, Philipp; Mihailov, Alexander; Neugart, Michael; Stane, Piotr
  3. A Blind and Militant Attachment: Russian Patriotism in Comparative Perspective By Mikhail Alexeev; William Pyle
  4. Rebuilding Ukraine: How the EU should support Ukraine's reconstruction and recovery By Bergmann, Julian; Romanyshyn, Iulian
  5. The effects of sanctions on Russian banks in TARGET2 transactions data By Drott, Constantin; Goldbach, Stefan; Nitsch, Volker
  6. Perspectives of Armenian: Iranian economic relations within Belt and Road Initiative By Grigoryan, Karen; Arpanahi, Ali
  7. Political economy of growth regimes in Poland and Turkey By Akcay, Ümit; Jungmann, Benjamin
  8. The impact of natural disasters on banks' impairment flow: Evidence from Germany By Shala, Iliriana; Schumacher, Benno
  9. State-business relations and access to external financing By Tkachenko, Andrey
  10. A Glimpse of Freedom: Allied Occupation and Political Resistance in East Germany By Martinez, Luis R.; Jessen, Jonas; Xu, Guo
  11. Managing bank liquidity hoarding during uncertain times : The role of board gender diversity By Davydov, Denis; Garanina, Tatiana; Weill, Laurent
  12. Exporting and Female Labor Market Outcomes in Georgia By Hollweg,Claire Honore; Ong Lopez,Anne Beline Chua
  13. Formation of the EU-Vietnam Free Trade Agreements Domestic Advisory Group: What it means for the civil society in Vietnam? By Chi, Do Quynh
  14. A new landscape for space applications: Illustrations from Russia’s war of aggression against Ukraine By Marit Undseth; Claire Jolly

    Abstract: The recent outbreak of the Russia-Ukraine military conflict is expected to affect the world economy through global value chains due to sanctions imposed on the Russian economy and a severe decline in Ukrainian production. This study provides a first-cut analysis of the possible economic impact of this war on third countries. Using product-level export data from international trade statistics, we first identify the most important products exported by Ukraine and Russia. Then, applying a comprehensive indicator of exposure, we measure the dependence of third countries on products imported from Ukraine or Russia, taking into consideration indirect trade connections and the substitutability of imports with domestic production. The results show that Ukraine is dominant in global trade through exporting iron products and agricultural products, while Russia is important through exporting energy sources, raw materials, and iron products. Analysing countries’ total exposures, we found that the post-Soviet and European countries have high exposure to Russian imports, confirming the energy dependence of these countries. The Middle East and African countries heavily depend on Ukraine, especially for grain imports, possibly causing food security problems. Finally, the results explain why some European countries hesitate to apply sanctions on Russia in the field of energy sources.
    Keywords: International trade, Global value chains, Russia-Ukraine war, Network analysis, Exposure.
    Date: 2022–05
  2. By: Steiner, Nils; Berlinschi, Ruxanda; Farvaque, Etienne; Fidrmuc, Jan; Harms, Philipp; Mihailov, Alexander; Neugart, Michael; Stane, Piotr
    Abstract: This paper uses a survey among students at European universities to explore whether Russia’s invasion of Ukraine has affected attitudes toward European integration. Some respondents completed the survey just before Russia’s assault on February 24, 2022, and some did so just afterwards, thus delivering a quasi-experimental design situation, which we exploit. Our results suggest that the ominous news about the Russian attack increased the participants’ interest in EU politics, consolidated their attachment to the EU, and made them more mindful and appreciative of the benefits of deeper European integration. In effect, the war so close to the EU Eastern border provoked a rally around the supranational EU flag, with convergence of public opinion toward shared European values.
    JEL: F02 F5 H77 N44 Z18
    Date: 2022–10–24
  3. By: Mikhail Alexeev; William Pyle
    Abstract: Much of the literature on patriotic sentiment in post-Soviet Russia leans on the results of public opinion surveys administered to Russian citizens. Absent a comparison group, such evidence, while helpful, can leave one adrift in trying to assess the significance of any particular polling result. Here, we draw on a shared set of questions from multiple waves of the Inter-national Social Survey Program’s National Identity and Role of Government modules, as well as the World Values Survey, to benchmark the responses of Russians to those of citizens in a diverse group of middle and high income countries. This exercise highlights that while Russians are not unusual in the degree to which they have a benign attachment to and/or pride in their country, they stand out for espousing a patriotism that has remained consistently blind and militant since at least the mid-1990s. We speculate as to the underlying cause and highlight a potential consequence: the nature of Russian patriotism has lowered the cost to the Russian leadership of military aggression.
    Keywords: patriotism, Russia, post-imperial syndrome
    JEL: P00 P20
    Date: 2022
  4. By: Bergmann, Julian; Romanyshyn, Iulian
    Abstract: Russia's brutal war against Ukraine has disastrous consequences for the country. Although an end to the war is currently not in sight, it is already clear that a huge international effort will be required to support Ukraine's reconstruction. At the Ukraine Recovery Conference in July, the Ukrainian government presented a National Recovery Plan that envisions a deep modernisation of the country. The Ukrainian government's reconstruction priorities are well in sync with the European Union's (EU) ambition to promote Ukraine's transformation towards an EU member state and to foster the country's green and digital transition. The National Recovery Plan fully embraces the "build back better" principle and closely aligns the reconstruction plans with the EU's norms and standards. The EU, on its part, is willing to bear a major share of the international effort required for Ukraine's recovery. However, the same degree of unity and resolve that the EU showed when forging its initial response to the war will be needed to realise a strong EU leadership role in supporting Ukraine's long-term reconstruction. To provide a sustainable basis for Ukraine's recovery, the EU and member states need to combine ad hoc humanitarian assistance with predictable, long-term support for reconstruction. In doing so, they should consider the following key recommendations: Adopt a two-phase approach to reconstruction. The modernisation and transformation of Ukraine towards an EU member state will take several years. At the same time, the vast infrastructure losses that Ukraine is currently facing need to be addressed urgently, ideally before the winter sets in. Hence, international donors should prioritise the reconstruction of infrastructure related to basic needs, including schools, hospitals, housing, electricity grids and roads. In a second phase, deeper modernisation efforts and institutional reforms that are of relevance for eventual accession to the EU should follow. Set up adequate governance mechanisms for the joint management and oversight of reconstruction efforts. The Ukrainian government and the EU should set up a coordination platform that also involves other international partners and Ukrainian civil society actors. This platform should then develop institutional governance mechanisms for the management and oversight of projects, and ensure close coordination between the Ukrainian government and international partners. Negotiate a comprehensive agreement on the EU's contribution to the reconstruction of Ukraine. A timely agreement on the governance and funding of the EU's long-term assistance to Ukraine is needed. A mixed strategy that includes borrowing capital on behalf of the EU on the markets and funnelling additional contributions by member states to the EU's budget might be a potential way forward. In addition, the EU should swiftly examine legal possibilities to channel sanctioned Russian assets towards Ukraine's recovery. Continue and expand military assistance to Ukraine. Substantive investments in Ukraine's reconstruction should not come at the expense of necessary military aid. One priority should be to strengthen Ukraine's ability to protect its skies against Russian missile attacks. Moreover, the EU should realise its plans for an EU military training mission, provided that it creates real added value to existing efforts and matches Ukrainian needs.
    Keywords: Ukraine,European Union,EU foreign policy,Russia's war in Ukraine,Ukraine's reconstruction,development assistance,humanitarian aid,macro-financial assistance,European Peace Facility
    Date: 2022
  5. By: Drott, Constantin; Goldbach, Stefan; Nitsch, Volker
    Abstract: This short paper examines the effect of financial sanctions at the most disaggregated level possible, individual bank accounts. Using data from the Eurosystem's real-time gross settlement system TARGET2, we provide empirical evidence that sanctions imposed by the European Union on Russian banks following the country's military interventions in Ukraine in 2014 and 2022 have sizably reduced financial transactions with sanctioned Russian bank accounts. Among the various sanction measures taken, exclusion from SWIFT, a global provider of secure financial messaging services, turns out to have the largest effects.
    Keywords: financial flows,transactions,restrictions
    JEL: F38 F51 G28
    Date: 2022
  6. By: Grigoryan, Karen; Arpanahi, Ali
    Abstract: Armenia-Iran North South Transport corridor is vital for Iran and Armenia and also for all parties involved. Recently, India increased its interest in Armenia and would like to see the INSTC passing through the Armenian territories, keeping in mind that Armenia is also the only country in the EAEU that has a land border with Iran. Taking into account Iran's desire to become a full member of the EAEU in the future, as well as India's interest in the EAEU structure and possible future membership, Armenia's chances of joining regional trade projects would be high. North South Transport Corridor route via India, Iran, Armenia, Georgia and Russia. This route is 30% cheaper and 40% shorter than the current traditional route. A country with a small domestic market like Armenia, of course, needs to expand its economic and trade ties with other countries in the world. The "One Belt, One Road" initiative can provide such an opportunity. An opportunity will also be created for the development of the Armenian transport infrastructure. Armenia aimed to construct the "North-South" transport road, 550-km long, to facilitate communication with Iran and Georgia and beyond.
    Keywords: Belt and Road Initiative,Armenia,Iran,China,India,trade,transport infrastructure,Silk RoadRoute
    Date: 2022
  7. By: Akcay, Ümit; Jungmann, Benjamin
    Abstract: In this paper, we aim to contribute to the recently growing body of political economy literature on growth regimes. Theoretically, we apply the demand and growth regime approach developed within post-Keynesian macroeconomics. This is complemented by a critical comparative political economy perspective to analyse the socio-political underpinnings of a demand and growth regime by using the concept of dominant social blocs and their growth strategies. We posit that the concept of growth strategy is useful to uncover the intention of a dominant social bloc to consolidate or change the current demand and growth regime. Using this framework, we examine the demand and growth regimes of Poland and Turkey from 1999 to 2020. We identify a domestic demand-led regime in Poland between 1999 and 2008, which transitioned to a weakly export-led regime between 2009 and 2020. In Turkey, we identify a domestic demand-led regime before the Global Financial Crisis (GFC) that became a private debt-led regime until the taper tantrum in 2013. Since then, a development towards a more export-led regime is observable, albeit at lower and unstable growth levels. We argue that in both countries the trend toward a more export-led regime after the GFC is associated to changes in the dominant social blocs. Both of the new dominant social blocs that established themselves during the 2010s - represented by the PiS-party in Poland and the AKP in Turkey - pursue a growth strategy toward "national capitalism". Politically, these strategies have come with a democratic backlash. Economically, they aim to gain more control over key sectors such as banking and finance while developing a more competitive export sector through domestic re-industrialisation initiatives.
    Keywords: Post-Keynesian macroeconomics,comparative political economy,growth regimes,growth strategies,Poland,Turkey
    JEL: B52 E65 E66 F43 O43 P16 P52
    Date: 2022
  8. By: Shala, Iliriana; Schumacher, Benno
    Abstract: Climate change causes natural disasters to occur at higher frequency and increased severity. Using a unique dataset on German banks, this paper explores how regionally less diversified banks in Germany adjusted their loan loss provisioning following the severe summer flood of 2013, which affected widespread regions mostly in Eastern Germany. The analysis uses a difference-in-differences estimation with banks being allocated to the treatment and control group based on the region of their primary operational activities. This paper yields various results: German savings and cooperative banks located in the affected regions experienced a significantly higher, but ephemeral, impairment flow in the years following the flood. Impairments were mostly driven by corporate loans concentrated in specific sectors, such as agriculture and manufacturing, and to some extent by retail mortgage loans. While results suggest that the profitability of banks is impacted by additional factors, we do not find evidence that banks suffered from damages to their own property. The results are robust to various model specifications.
    Keywords: Natural disaster,climate change,credit risk,profitability,difference-in-differences
    JEL: C12 C21 C23 G21 Q54
    Date: 2022
  9. By: Tkachenko, Andrey
    Abstract: Firms' contractual relations with a state may give lenders a positive signal and facilitate access to debt. This paper studies the impact of public procurement contracts on firms' access to debt using an extensive survey of Russian manufacturing firms combined with accounting and procurement data. It shows that earnings from state-to-business contracts increase the short-term debt twice as much as revenue from private contracts. Long-term debt is not affected by public contracts differently compared to private contracts. The debt sensitivity to public contracts is four times larger for politically connected firms, although it is still positive and significant for non-connected and small firms. The paper concludes that political connection does not entirely suppress the beneficial access to debt that public contracts create.
    JEL: G18 G32 H57
    Date: 2022–10–25
  10. By: Martinez, Luis R. (University of Chicago); Jessen, Jonas (European University Viadrina, Frankfurt / Oder); Xu, Guo (UC Berkeley)
    Abstract: This paper exploits the idiosyncratic line of contact separating Allied and Soviet troops within East Germany at the end of WWII to study political resistance in a non-democracy. When Nazi Germany surrendered, 40% of what would become the authoritarian German Democratic Republic was initially under Allied control but was ceded to Soviet control less than two months later. Brief Allied exposure increased protests during the major 1953 uprising. We use novel data on the appointment of local mayors and a retrospective survey to argue that even a "glimpse of freedom" can foster civilian opposition to dictatorship.
    Keywords: East Germany, political resistance, protest, autocracy, spatial RDD, World War II
    JEL: F51 H10 N44 P20
    Date: 2022–09
  11. By: Davydov, Denis; Garanina, Tatiana; Weill, Laurent
    Abstract: This paper examines the effect of executive board gender diversity on the relationship between economic policy uncertainty (EPU) and bank liquidity hoarding (LH). We focus on the Russian banking sector, which, relative to most of the world, has a high share of women on bank executive boards. Using the news-based EPU index developed by Baker, Bloom, and Davis (2016) and LH measures proposed by Berger, Guedhami, Kim, and Li (2022), we exploit a unique dataset from the Russian banking sector. While higher economic policy uncertainty tends to increase liquidity hoarding, we find this effect diminishes as gender diversity of the board increases. We attribute this finding to the moderating influence of gender diversity on stability and overreaction in decision-making. Additionally, we find that the channel through which board gender diversity affects the impact of economic policy uncertainty on liquidity hoarding takes place via the hoarding of liquid assets. Our findings are robust to the use of alternative measures for economic policy uncertainty and gender diversity. As women are still significantly under-represented on bank boards in most countries, these results argue for policies to promote gender diversity of bank boards as a means of limiting detrimental effects of economic policy uncertainty.
    JEL: G18 G21 G34 P26
    Date: 2022–11–02
  12. By: Hollweg,Claire Honore; Ong Lopez,Anne Beline Chua
    Abstract: Using firm-level data for Georgia, the paper estimates the quasi-elasticity of employment and wages with respect to the share of exports in total sales, to explore whether changes in the structure of sales (exporting versus selling to the domestic market) matter for labor market outcomes. The methodology uses exogenous fluctuations in exchange rates combined with firms' initial exposure to various markets as instrumental variables to identify a causal effect. The results differentiate employment levels and average wages by gender and consider whether export destination or the competiveness of economies matters for the magnitude of this elasticity. The data are from the National Statistics Office of Georgia Statistics Survey of Enterprises merged with customs data for 2006-17. The instrumental variables regression results show that the act of exporting improves female employment but reduces overall average wages and female wages. Increasing exports to the European Union as well as high-income countries drives this positive result for female employment, whereas exporting to upper-middle-income countries is found to have a negative relationship with female employment.
    Keywords: Rural Labor Markets,International Trade and Trade Rules,Labor Markets,Plastics&Rubber Industry,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing
    Date: 2020–10–08
  13. By: Chi, Do Quynh
    Abstract: The Domestic Advisory Groups of the EU and Vietnam under the EVFTA (EU-Vietnam Free Trade Agreement) were officially established and met for the first time on November 12th, 2021 - nearly half a year later than originally planned. The formation of the Vietnam Domestic Advisory Group (DAG) was historic, as it is the first time non-governmental organisations (NGOs) in Vietnam are formally engaged in the review/monitoring process of a trade agreement. The research analysed the impacts of the DAG formation on the Vietnamese civil society and its relations with the government from a contextualised perspective. The conceptual framework is based on the combination of the imperfect reproduction model, which theorises the negotiation between rule-makers and rule-takers and the negotiating approach to the state-society relations in Vietnam, attempting to capture the nuances in the relationship between the authoritarian state and the civil society. On the one hand, the partystate imposed a tough legal framework that generally weakens and marginalises civil society from formal political processes; on the other hand, the state has shown certain concessions to civil society campaigns and contestations. The research showed that with the continuous pressure from the EU Parliament, the negative impacts of Covid-19 pandemic on Vietnam's economy, the prolonged internal political debate eventually led to the concession, though minimal, to include civil society organisations in the DAG. Upon consideration of the statesociety relations in Vietnam, this can be regarded as a small but important progress.
    Keywords: trade agreements,domestic advisory groups,civil society,Vietnam
    JEL: F53 F62 F65
    Date: 2022
  14. By: Marit Undseth; Claire Jolly
    Abstract: For decades, governments have relied on space systems for intelligence gathering and satellite connectivity in remote areas, but today’s situation marks a distinct break with the past. Extended coverage, advances in digital technologies and, importantly, free and/or commercial availability of space products allow many new uses by both government and non-government actors. This brings important benefits for users and citizens, but also leads to new challenges in terms of data management, infrastructure and supply chain resilience, and international co-operation. This paper uses illustrations from the war in Ukraine to highlight recent developments in the sector, placing them in a broader context of digitalisation and government space investments. It discusses the growing importance of space technologies for society and provides policy options and resources from other strains of OECD work.
    Date: 2022–11–04

This nep-tra issue is ©2022 by Maksym Obrizan. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.