nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒12‒19
eleven papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Sanctions and misallocation. How sanctioned firms won and Russia lost By Dzhamilya Nigmatulina
  2. Impacts of COVID-19 on Households’ Business, Employment and School Education: Evidence from Household Survey in CAREC Countries By Azhgaliyeva, Dina; Mishra, Ranjeeta; Long, Trinh; Morgan, Peter; Kodama, Wataru
  3. Regional Disparities and Economic Growth in Ukraine By Khrystyna Huk; Ayaz Zeynalov
  4. Macroeconomic performance of oil price shocks in Russia By Ayaz Zeynalov; Kristina Tiron
  5. BRI as chance for regional cooperation: Iran - Armenia economic relations By Margaryan, Atom; Grigoryan, Emil; Minassian, Armen
  6. Medium-term investment responses to activity shocks: the role of corporate debt By Barrela, Rodrigo; Lopez-Garcia, Paloma; Setzer, Ralph
  7. Evaluating COVID-19’s Impact on Firm Performance in the CAREC Region Using Night-Time Light Data: Azerbaijan, Georgia, Kazakhstan, and Mongolia By Karymshakov, Kamalbek; Azhgaliyeva, Dina; Mishra, Ranjeeta; Aseinov, Dastan
  8. Health Shocks and Overindebtedness: A Panel Data Analysis from Rural Viet Nam By Chhay, Panharoth; Rahut, Dil
  9. Global value chains’ participation and logistics performance: the case of post-Soviet economies By Elbek, Abdullaev; Taguchi, Hiroyuki
  10. Macroeconomic Effects of COVID-19 in a Commodity-Exporting Economy: Evidence from Mongolia By Doojav, Gan-Ochir
  11. Quality-adjusted price changes on the Hungarian mobile market between 2015-2021 By Pápai, Zoltán; Nagy, Péter; McLean, Aliz

  1. By: Dzhamilya Nigmatulina
    Abstract: Using a unique natural experiment of staggered firm-level sanctions against Russia in 2014-2020 and the data on over 900,000 Russian firms, I estimate the effect of sanctions on targeted firms and on the aggregate economy. Surprisingly, sanctioned firms on average gained 38% more capital inputs after sanctions relative to the industry trends. The effect is in part driven by sanctioned state-owned firms, getting 60% more capital relative to non-sanctioned firms. Using additional data on subsidies and government contracts, I find that this result is explained by the government protection of targeted firms, that more than compensated for a negative sanctions shock. However, the sanctioned firms were already too large and had too much capital prior to sanctions. I use a heterogeneous firm framework to show that the distortions between sanctioned and non-sanctioned firms, which existed before the sanctions, got exacerbated after the joint effect of sanctions and government protection. I combine the causal estimates with the quantitative frame-work and estimate that on the aggregate, the Russian TFP dropped at least by 0.33% reaching 3% in relevant sectors.
    Keywords: misallocation, macro development, state-ownership, political connections, SOEs, sanctions, Russia
    Date: 2022–11–23
  2. 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); Kodama, Wataru (Asian Development Bank Institute)
    Abstract: The impacts of the COVID-19 outbreak have heavily affected Central Asia Regional Economic Cooperation (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 employment and education in CAREC member countries. In order to better understand these impacts, computer-assisted telephone interviews (CATI) of households were conducted in 10 countries from the CAREC region (excluding the PRC). We estimate the impact of COVID-19 on employment, household business and education in schools in December 2020 compared with June 2020.
    Keywords: COVID-19; Central Asia; household survey; school education; employment; family business
    JEL: D14 G51 H12 H84 I10 I24
    Date: 2022–08
  3. By: Khrystyna Huk; Ayaz Zeynalov
    Abstract: This research is devoted to assessing regional economic disparities in Ukraine, where regional economic inequality is a crucial issue the country faces in its medium and long-term development, recently, even in the short term. We analyze the determinants of regional economic growth, mainly industrial and agricultural productions, population, human capital, fertility, migration, and regional government expenditures. Using panel data estimations from 2004 to 2020 for 27 regions of Ukraine, our results show that the gaps between regions in Ukraine have widened last two decades. The disparities can be explained by natural resource distribution, agricultural and industrial productions, government spending, and migration. We show that regional government spending is highly concentrated in Kyiv, and the potential of the other regions, especially the Western ones, has not been used sufficiently. Moreover, despite its historical and economic opportunity, the East region did not perform significant development during the last two decades. The inefficient and inconsistent regional policies played a crucial role in these disparities.
    Date: 2022–11
  4. By: Ayaz Zeynalov; Kristina Tiron
    Abstract: Oil price fluctuations severely impact the economies of both oil-exporting and importing countries. High oil prices can benefit oil exporters by increasing foreign currency inflow; however, an economy can suffer from a weakening of the manufacturing sectors and experience a significant downtrend in the country's price competitiveness as the domestic currency appreciates. We investigate the oil price fluctuations from Q1, 2004 to Q3, 2021 and their impact on the Russian macroeconomic indicators, particularly industrial production, exchange rate, inflation and interest rates. We assess whether and how much the Russian macroeconomic variables have been responsive to the oil price fluctuations in recent years. The outcomes from VAR model confirm that the monetary channel is more responsive to oil price shocks than the fiscal one. Regarding fiscal channel of the oil price impact, industrial production is strongly pro-cyclical to oil price shocks. As for the monetary channel, higher oil price volatility is pressuring the Russian ruble, inflation and interest rates are substantially counter-cyclical to oil price shocks.
    Date: 2022–11
  5. By: Margaryan, Atom; Grigoryan, Emil; Minassian, Armen
    Abstract: The Belt and Road Initiative is one of the platforms for regional cooperation that enables participating countries to develop and deepen economic ties. The South Caucasus has always had great historical, political, geographical and economic significance for Iran. Through the research, we tried to find out what is the level of infrastructure development of Armenia, Azerbaijan, Georgia, Türkiye and Iran, and what is the role of Iran in the trade of South Caucasus countries and Türkiye in 2002 and 2021. Armenia-Iran economic relations have been the closest. However, Armenia and Iran have not realized the full potential of cooperation. Providing a proper infrastructural base is one of the priority steps in that direction.
    Keywords: Silk Road Economic Belt,Economic Cooperation,Infrastructure,South Caucasus,Iran,Transit Hub,Economic Corridors
    Date: 2022
  6. By: Barrela, Rodrigo; Lopez-Garcia, Paloma; Setzer, Ralph
    Abstract: This paper analyses the implications of corporate indebtedness for investment following large economic shocks. The empirical analysis is based on a large Orbis-iBACH firm-level data set for euro area countries from 2005 to 2018. Our results suggest that investment of high-debt firms is significantly depressed for an extended period in the aftermath of economic crises. In the four years after a negative economic shock, the cumulative loss of capital of high-debt firms is around 15% higher than that of firms with lower debt burdens. The negative impact of high debt on investment is most evident for firms in Southern and Eastern Europe and for micro firms. These findings suggest a potentially significant negative impact of increased corporate indebtedness on investment in the post-COVID-19 recovery. JEL Classification: E22, F34, G31, G32
    Keywords: corporate debt, COVID shock, investment, leverage, local projections
    Date: 2022–11
  7. By: Karymshakov, Kamalbek (Asian Development Bank Institute); Azhgaliyeva, Dina (Asian Development Bank Institute); Mishra, Ranjeeta (Asian Development Bank Institute); Aseinov, Dastan (Asian Development Bank Institute)
    Abstract: We examine economic activity measured with firm performance indicators using the changes in intensity of night-time light in four Central Asia Regional Economic Cooperation economies: Azerbaijan, Georgia, Kazakhstan, and Mongolia. The empirical analysis is based on the World Bank Enterprise Survey data for 2019 and a follow-up survey conducted during the coronavirus disease (COVID-19) pandemic. The enterprise survey dataset was enhanced with data on night-time light intensity from Google Earth and the strictness of “lockdown-style” policies. Using the probit regression model, we investigate the impact of COVID-19 on firm performance and night-time light in CAREC countries. Firm performance is measured using four variables: decrease in sales, demand, export share, and working hours. Our results show that, as the night-time light increases, the likelihood of performance deterioration is reduced. Larger firms are more likely to maintain their performance than smaller firms. The sales in the manufacturing, clothing, and services sectors are more likely to decline than those in the food sector. Accordingly, the results point to a significant decline in the performance of firms operating in the service sector compared with those in the food sector during the pandemic.
    Keywords: Central Asia; COVID-19; big data; firm performance; gender; SMEs
    JEL: C13 C25 C55 L25
    Date: 2022–07
  8. By: Chhay, Panharoth (Asian Development Bank Institute); Rahut, Dil (Asian Development Bank Institute)
    Abstract: Rural households in developing countries have limited capacity to cope with and manage shocks, thereby resulting in chronic poverty, indebtedness, and a decline in overall well-being. We analyze the effects of health shocks on overindebtedness in rural Viet Nam using four rounds of a balanced panel data set of about 1,750 households observed over a decade (2007, 2010, 2013, 2016). Employing the household-level fixed-effect model, we find that health shocks reduce household income and increase health expenditure among rural Vietnamese households. We also find that households cope with health shocks mainly by borrowing from more sources. Households experiencing health shocks are 2.2 to 3.1 percentage points more likely to be overindebted, which occurs primarily among households without health insurance, suggesting that social health insurance can reduce households’ vulnerability to the consequences of health shocks. These findings strongly support efforts to expand access to social health insurance in rural Viet Nam.
    Keywords: health shocks; overindebtedness; social health insurance; household-level fixed effects; rural Viet Nam
    JEL: E21 E24 I13 I15
    Date: 2022–05
  9. By: Elbek, Abdullaev; Taguchi, Hiroyuki
    Abstract: This study evaluates the degree of global value chains (GVC)’ backward participation in manufacturing in the post-Soviet countries, and to examine its quantitative linkage with host countries’ logistics performances as a component of the service link. This study’s major contributions are to target the post-Soviet countries that has never been discussed in the context of GVC analyses, to use the UNCTAD-Eora Global Value Chain database, and to applies a structural gravity trade model setting. The statistical observations presented a positive correlation between GVC backward participation in manufacturing and income level in the post-Soviet economies. The empirical estimation by the structural gravity trade model identified the quantitative linkage between GVC backward participation and the logistics performance of the host country, and also demonstrated that the level of logistics performance accounts for 70 – 80 percent of the degree of GVC backward participation. The policy implication of this study is that there should still be a policy space for the post-Soviet economies to improve their logistics performances by removing a negative legacy from the Soviet Union.
    Keywords: Global value chains, Logistics performance, Post-Soviet countries, Manufacturing, UNCTAD-Eora Global Value Chain database, and Structural gravity trade model
    JEL: F12 F13 F14 O57
    Date: 2022–11
  10. By: Doojav, Gan-Ochir (Asian Development Bank Institute)
    Abstract: We examine macroeconomic effects and transmission mechanisms of COVID-19 in Mongolia, a developing and commodity-exporting economy, by estimating a Bayesian structural vector autoregression on quarterly data. We find strong cross-border spillover effects of COVID-19. Our estimates suggest that the People’s Republic of China’s GDP and copper price shocks account, respectively, for three-fifths and one-fifth of the drop in real GDP in 2020Q1. The recovery observed for Q2 2020–Q1 2021 is primarily due to positive external shocks. However, disruptions in credit and labor markets have been sustained in the economy. Two-thirds of the fall in employment in Q1 2021 could be attributed to adverse labor demand shocks. We also reveal novel empirical evidence for the balance sheet channel of the exchange rate, the financial accelerator effects, and an indirect channel of wage shock to consumer price passing through bank credit.
    Keywords: COVID-19; demand and supply shocks; macroeconomic fluctuations; structural vector autoregression; Bayesian analysis
    JEL: C32 E17 E27 E32 I15
    Date: 2022–08
  11. By: Pápai, Zoltán; Nagy, Péter; McLean, Aliz
    Abstract: Mobile technology and services have developed dramatically over the past decades, with mobile operators' competing commercial offers providing a wide menu of service packages with varied quality and quantity characteristics. The prices of these commercial offers do not directly reflect the continuous improvements in service characteristics and functionalities over time: the price changes need to be adjusted for quality. In this paper, we estimate the hedonic changes in residential mobile consumer prices on the Hungarian market by controlling for the changes in the relevant service characteristics and quality, between 2015 and 2021. We also attempt to separate the hedonic price changes from the effect of two specific government interventions that occurred in Hungary, namely the changes in the value added tax (VAT) levied on internet services, in 2017 and 2018. Our results show significant hedonic price changes over the observed period of over 30%, which turns out not to be primarily driven by the VAT policy change, but by real improvements in broadly defined service quality.
    Keywords: hedonic regression,mobile prices,mobile telecommunications,Hungary
    Date: 2022

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