nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒09‒04
nine papers chosen by
Maksym Obrizan, Kyiv School of Economics

  1. Did Grain Futures Prices Overreact to the Russia-Ukraine War? By Carter, Colin A.; Steinbach, Sandro
  2. Convergence Patterns of Regional Income Inequalities in Russia By Gluschenko, Konstantin
  3. Regional vulnerability to the green transition By Rodríguez-Pose, Andrés; Bartalucci, Federico
  4. Measuring the natural interest rate for the Macedonian economy: a multi-model approach By Mite Miteski; Magdalena Petrovska; Рртан Сулејмани
  5. The Belt and Road Initiative: Are China’s Investments Sensitive to the Quality of Governance in a Host Country? By Xinge Ruan; Nader Habibi
  6. Sharing, Social Norms, and Social Distance: Experimental Evidence from Russia and Western Alaska By E. Lance Howe; James J. Murphy; Drew Gerkey; Olga B. Stoddard; Colin Thor West
  7. Political Visits and Firm Value: Evidence from central leaders’ local tours in China By ITO Asei; LIM Jaehwan; ZHANG Hongyong
  8. Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis By Stephen Ayerst; Loren Brandt; Diego Restuccia
  9. Joint Latent Topic Discovery and Expectation Modeling for Financial Markets By Lili Wang; Chenghan Huang; Chongyang Gao; Weicheng Ma; Soroush Vosoughi

  1. By: Carter, Colin A.; Steinbach, Sandro
    Abstract: We study the impact of the 2022 Russian invasion of Ukraine on corn, wheat, and soybean futures prices. The war provides a natural experiment to evaluate whether futures markets are driven by investor herding. Using event study methods, we find that wheat futures prices rose by 30 percent above the counterfactual immediately after the invasion, more than corn futures prices, which were up by 10 percent. This relative price response cannot be explained by herding behavior. Instead, we argue the larger move in wheat was due to fundamental concerns over the possibility of a complete disruption of Black Sea grain exports, including exports from Russia, the world's largest wheat exporter. Soybean prices did not respond to the war, contradicting herding. There is no statistical evidence of abnormal speculative pressure in the market around the time of the invasion, and we conclude the markets put a fair price on the wartime risk of Black Sea grain shipment disruptions.
    Keywords: Russia-Ukraine war, war premium, event study, behavioral finance, herding
    JEL: G13 G14 Q02
    Date: 2023–08–01
  2. By: Gluschenko, Konstantin
    Abstract: The paper analyzes the evolution of dispersion of regional income inequalities in Russia in 1995-2022. The aim of the study is to reveal the ‘anatomy’ of regional inequality convergence that took place in 1995-2012, and the divergence that followed it, i.e. the internal structure of these processes. To this end, the paper explores the evolution of the regional Gini indices distribution, namely, that of main distribution statistics and the distribution itself (represented by a histogram). The results obtained suggest that convergence of regional levels of income inequality in Russia in 1995–2012 is almost exclusively due to "catching-up" of low-inequality regions with high-inequality regions. Therefore, this process cannot be considered positive. Divergence of regional inequalities in 2013-2022, on the contrary, was accompanied by a decrease in income inequalities in the regions, improving the situation with spatial inequality in Russia.
    Keywords: income inequality, convergence, divergence, Gini index, Galton’s fallacy, Russian regions
    JEL: D31 D61 R11
    Date: 2023–07–23
  3. By: Rodríguez-Pose, Andrés (Cañada Blanch Centre and Department of Geography and Environment, London School of Economics); Bartalucci, Federico (Cañada Blanch Centre and Department of Geography and Environment, London School of Economics)
    Abstract: The impacts of climate change are unevenly distributed across territories. Less is known about the potential effects of climate policies aimed at mitigating the negative consequences of climate change, while transitioning economies towards low-carbon standards. This paper presents an analytical framework for identifying and assessing the regional impacts of the green transition. We develop a Regional Green Transition Vulnerability Index, a composite measure of the regional vulnerability of European regions to the socio- economic reconfigurations prompted by the green transition. The index brings to light strong regional variations in vulnerability, with less developed, peri-urban, and rural regions in Southern and Eastern Europe more exposed to the foreseeable changes brought about by the green transition. We also draw attention to the potential rise of pockets of growing ‘green’ discontent, especially if the green transition contributes, as is likely to be the case, to leaving already left-behind regions further behind.
    Keywords: Green transition, environment, left-behind regions, development trap, European Union
    JEL: O44 Q56 R11
    Date: 2023–07
  4. By: Mite Miteski (National Bank of the Republic of North Macedonia); Magdalena Petrovska (National Bank of the Republic of North Macedonia); Рртан Сулејмани (National Bank of the Republic of North Macedonia)
    Abstract: This paper identifies the natural interest rate for the Macedonian economy using quarterly data for 2001Q4-2019Q3. To this end, the estimation is made by using different types of models, such as the Holston, Laubach, and Williams model and the full-fledged country-specific structural MAKPAM model. The empirical results show that the natural rate of interest in the Macedonian economy has declined over time, which is similar to the findings for other countries. The decomposition of the natural rate suggests that the main driver for the decline is the slowdown of the Macedonian potential GDP growth in the period after the global economic crisis, although there are signs of its recovery at the end of the sample period. In addition, the results indicate that the monetary policy conditions in the Macedonian economy have been broadly accommodative from 2011Q4 onwards. The substantive conclusions are unchanged across the multiple models used in this study.
    Keywords: Natural interest rate, interest rate gap, Holston, Laubach, and Williams model, MAKPAM Model
    JEL: C32 E43 E52 O40
    Date: 2023
  5. By: Xinge Ruan (Brandeis University); Nader Habibi (Brandeis University)
    Abstract: This article uses statistical analysis to explore the correlation between the quality of governance in a host country and the size and nature of China’s investments in that country, based on the available data for 2005-2020. We focus on two types of Chinese economic engagements with each host country: direct investment by Chinese firms and the volume of service contracts awarded to Chinese firms for construction projects. Overall, our statistical analysis demonstrates that China’s direct investments and service contracts both show significant correlations with the governance characteristics of the host country. At the same time, we observe a large degree of diversity in the significance of specific governance indicators across regions and economic sectors. The Regulation Quality indicator, for example, has a strong positive correlation with total investment and total service contract, but the significance is lost when the sample is restricted to the Middle East or South Asia. The most intriguing finding of our research is that in some sectors, the correlation between governance indicators and China's direct investments and service contracts varies significantly. The Voice and Accountability indicator has a positive correlation with China's direct investments but a negative correlation with China's service contracts for the entire sample. This suggests that China is awarded more service contracts in less democratic countries of these regions. An alternative explanation is that Chinese firms prefer to invest directly in more democratic countries and operate as contractors in less democratic countries. Similarly, we find a positive correlation between the absence of corruption and China's service contracts, but no significant correlation with its direct investments.
    Date: 2023–05
  6. By: E. Lance Howe (Department of Economics, University of Alaska Anchorage); James J. Murphy (Department of Economics, University of Alaska Anchorage); Drew Gerkey (Oregon State University); Olga B. Stoddard (Department of Economics, Bringham Young University); Colin Thor West (University of North Carolina, Chapel Hill)
    Abstract: This paper investigates how dictator giving varies by social context and worthiness of the recipient. We conduct lab-in-the-field experiments in Kamchatka, Russia, and Western Alaska, as well as a lab experiment with university students, in which we vary social distance and recipient characteristics across treatments. We ask what motivates individuals to share and whether offers from a dictator game, where dictators give from own-earnings, can tell us something more fundamental about social norms and sharing. Results indicate that subjects living in rural Indigenous communities, in both Russia and Alaska, who depend heavily on wild food harvests and possess strong sharing norms, are significantly more likely to give positive amounts compared to university students. We also find that in Indigenous communities, family relations and financial needs are prioritized in giving decisions. We suggest that treatment differences correspond to social norm differences in our study areas.
    Keywords: dictator game, experimental economics, lab-in-the-field experiments, sharing, risk pooling
    JEL: C93 D64
    Date: 2023–07–18
  7. By: ITO Asei; LIM Jaehwan; ZHANG Hongyong
    Abstract: This study investigates how Chinese central leaders choose firms to visit and how these visits affect the firm value and performance of the companies visited. We compile a list of visits made by General Secretary Xi Jinping and Premier Li Keqiang to Chinese listed companies from 2012 to 2022. Together with an event list for the Hu Jintao period, we apply an event study to estimate the determinants of firm selection and the short- and long-term effects of these visits on firm stock price and performance. The results reveal that political visits generated positive cumulative abnormal returns of 1.26%–5.97% for visited companies, depending on the individual leader. The findings also indicate that the visiting effects are qualitatively different among two administrations. Moreover, the visits made during the second term of the Xi administration increased cumulative abnormal returns prior to the visit, implying the possibility of suspicious pre-event trading due to information leaks. Regarding long-term effects, we find positive impacts on sales and bank loans of private firms. Results suggest while the business environments surrounding the Chinese companies have institutionalized, the value of political connections has not been diminished, but the way in which their effects manifest has been transformed.
    Date: 2023–07
  8. By: Stephen Ayerst; Loren Brandt; Diego Restuccia
    Abstract: The expansion in farm size is an important contributor to agricultural productivity in developed countries where more productive farms are larger, but in less developed economies the allocation of factor inputs to more productive farms is hindered. How do distortions to factor-input allocation affect farm dynamics and agricultural productivity? We develop a model of heterogeneous farms making cropping choices and investing in productivity improvements. We calibrate the model using detailed farm-level panel data from Vietnam, exploiting regional differences in agricultural institutions and outcomes. We focus on south Vietnam and quantify the effect of higher measured distortions in the North on farm choices and agricultural productivity. We find that the higher distortions in north Vietnam reduce agricultural productivity by 47%, accounting for 70% of the observed 2.5-fold difference between regions. Moreover, two-thirds of the productivity loss is driven by farms' choice of lower productivity crops and reductions in productivity-enhancing investment, which more than doubles the productivity loss from static factor misallocation.
    Keywords: Farm dynamics, productivity, size, distortions, misallocation, Vietnam.
    JEL: O11 O14 O4
    Date: 2023–08–18
  9. By: Lili Wang; Chenghan Huang; Chongyang Gao; Weicheng Ma; Soroush Vosoughi
    Abstract: In the pursuit of accurate and scalable quantitative methods for financial market analysis, the focus has shifted from individual stock models to those capturing interrelations between companies and their stocks. However, current relational stock methods are limited by their reliance on predefined stock relationships and the exclusive consideration of immediate effects. To address these limitations, we present a groundbreaking framework for financial market analysis. This approach, to our knowledge, is the first to jointly model investor expectations and automatically mine latent stock relationships. Comprehensive experiments conducted on China's CSI 300, one of the world's largest markets, demonstrate that our model consistently achieves an annual return exceeding 10%. This performance surpasses existing benchmarks, setting a new state-of-the-art standard in stock return prediction and multiyear trading simulations (i.e., backtesting).
    Date: 2023–05

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