MA Theses 2003

Aleksynska Mariya: “Foreign Direct Investment And Economic Growth In Economies In Transition”


This thesis investigates the impact of foreign direct investment on economic growth of economies in transition. Using the model developed in the framework of endogenous growth theory, the author empirically estimates the direction and channels of the impact of FDI for 18 economies in transition, and finds statistically significant positive effect of FDI on growth. FDI is also found to be positively interacting with the absorptive capacity of a host economy, its level of human capital and domestic investment. In addition, the author addresses the issue of Granger causality relationship between growth and FDI but does not find it. The paper concludes with explaining the results and suggesting some policy recommendations.


Badunenko Oleg: “Technological Change, Technological Catch-up, And Capital Deepening: Relative Contributions To Growth And Convergence During 90’S”


In this thesis labour productivity growth is decomposed into efficiency change, technological change and change of capital stock using data envelopment analysis. This approach is used to investigate the sources of growth in the world and to study the evolution of world income distribution in terms of tripartite decomposition during 90’s. The author takes advantage of methodology developed by Kumar and Russell (2002) and complements their analysis by (i) including number of transition economies and by (ii) considering 90’s. In contrast to previous study, which confirmed that capital deepening was the major force of growth and changing the world income distribution over 1965-1990, my analysis shows that during 90’s technological change constituted the main driving force of growth and evolution of world income distribution, whereas capital accumulation played the minor role.


Bokovyy Andriy: “Mortality Crisis In Transitional Economies: The Case Of Ukraine”


Using a panel data approach, this paper is investigating the mortality crisis in the transitional economies and estimating the losses for Ukraine. On the basis of cross-section data of 24 transitional countries for 12 years, we found out that some determinants of life expectancy that are considered to be important in the literature on the subject are not that influencing for transitional economies (like malnutrition, rising poverty etc.) while some factors are of extreme importance and have both negative (economic changes, social stresses, adverse change in life styles) and positive (higher education enrollment, health system functioning) effects. Our empirical model proves to be quite successful in predicting the real mortality trends for transitional countries. To control for the effect of the Chernobyl disaster in some countries of the former Soviet Union, we are enhancing the investigation by including the proxy for radioactive pollution into model and obtaining even better predictive power. Policy implementations and recommendations of how to overcome the crisis can be found in the conclusive part.


Boyarchuk Dmytro: “A Neoclassical Theory Of Wage Arrears In Transition Economies”


In the thesis I try to evaluate the losses of society from wage arrears phenomenon. For the purpose it was used the model developed by Lilia and Serguei Maliar. It is a standard one-sector neoclassical growth model. The neoclassical firms in transition make losses and use wage arrears as the survival strategy. At the agents’ level, the randomness in the timing and extent of wage payments acts as idiosyncratic shocks to earnings. The model was calibrated for Ukrainian data and significant losses of consumption and social welfare were defined.


Chervachidze (Kolbasyuk) Iryna: “Network Externalities In Telecommunications And Economic Growth”


Research on infrastructure has been in the center of economists’ attention for at least ten past years. Telecommunications, as a part of infrastructure, has been an especially fascinating area for researchers mainly because of the mechanisms that can translate growth in telecoms sector into economy-wide productivity gains. Due to these mechanisms, named “network externalities,” social marginal benefits of network expansion are always greater then the private marginal benefits, that are experienced by a new subscriber. This paper investigates the effects of network externalities in the telecommunications sector in the context of transitional countries. As the empirical part shows, telecommunications has positive but diminishing returns with a threshold level of 40% penetration rate. More specifically, expansion of telecommunications network to penetration rates higher than 40% substantially reduces positive growth effects. Diminishing returns is what characterizes telecoms sector in transitional countries as the impact of network externalities in the developed countries has been found to have positive and increasing returns. Estimated elasticity of economic growth to telecommunications is about 0.50, which corroborates the results of previous research on infrastructure.


Chukhai Anna: “The Wage Effect Of The Occupational Segregation: The Case Of Ukraine”


The aim of the thesis is to study the main characteristics of the labor market of Ukraine, namely, to estimate the gender wage differential and, what is more important, to explain why individuals are remunerated differently. Two methods of the wage gap decomposition are utilized for this purpose. First, with a help of standard Oaxaca decomposition the justifiable (explained by differences in endowments) and unjustifiable (unexplained) parts are estimated. Second, the wage differential is decomposed into intra- and inter-occupational parts of the gap in order to estimate the impact of the occupational segregation on the individuals’ wages. For estimation two data sets are used: Household Survey performed in 1996 by Kyiv International Institute of Sociology, and Survey performed in 2002 by Institute of Sociology of the National Academy of Sciences. The estimated gender wage differential is 17,92% and 30,17% based on analysis of 1996 and 2002 data sets respectively; the 44% (58%) of the gap can not be explained by differences in human capital level of individuals. The intra-occupational differential dominates inter-occupational in the case of both data sets. Moreover, the finding of the paper is that the fact that men and women are allocated differently across occupations tends to raise the female earnings ceteris paribus.


Demchuk Oleksandr: “Nonlinear Impact Of External Debt On Economic Growth: The Case Of Post-soviet Countries”


In our study we investigate the impact of external debt on economic growth in transitional countries. Recent economic literature, both theoretical and empirical, has devoted great attention to this question. Empirical studies on developing countries have not come to a definite conclusion on this issue. Even though different hypotheses about the role of external debt were tested with the data on developing countries, there was not any relevant empirical research on transition countries so far. A quick accumulation of external debt from the very beginning of the transitional phase explains the importance of establishing research on this question. We use panel data on the 21 transition economies for period of 1994—1999. Our results indicate that the influence of external debt on economic growth in transitional countries exhibits inverted U-shaped curve. We identified the range for indicator of debt to GDP ratio at which, ceteris paribus, economic growth can be maximized. In addition, we found that investments and size of the government positively affect the economic growth in transitional countries.


Dmytrotsa Ivanna: “Evaluating Efficiency Of Active Labor Market Policy Implementation In Ukraine”


This paper aims at the analysis and evaluation of the efficacy and the efficiency of implementation of active labor market policy in Ukraine. For this purpose the notions of matching function is amalgamated with the efficiency estimation techniques. The estimation is based on the aggregated data obtained from the local employment centers for the period spanning from 1996 to 2002. The results of the investigation show that policies, implemented by the employment offices have positive impact on the outflow from the unemployment. Research also shows the dispersion of the efficiency of the centers and points as a caveat that technology employed by the centers worsens with time.


Dubohryz Yevhen: “Industrial Policy Under Transition Economy: The Case Of Ukrainian Ferrous Metal Industry”


This study seeks to reveal the true role of the Ukrainian government in promoting the recent development of Ukrainian ferrous metal industry. The paper investigates the effect of the implementation of the industrial policy called “The Economic Experiment in Metallurgy and Mining Industries” on the ferrous metal industry performance. The paper conducts econometric analysis of supply and demand functions for Ukrainian steel products and of different measures of enterprise performance. The obtained results suggest that the Economic Experiment had positive effect on enterprise profits, revenues and technologies and no considerable effect on overall steel production in Ukraine, indicating the general fulfillment of the primary targets of the Economic Experiment. On the basis of these results the author argues that an industrial policy can indeed play an important role in promoting the industry growth.


Faychuk Vita: “Political Budget Cycles In Transition Economies: Evidence From FSU Countries”


In this thesis I use a panel data set on 15 former Soviet Union countries to examine the relation between elections and change in the composition of government budget expenditures in these countries. Results show that election-year government expenditures shift towards more visible current consumption and/or away from government investment goods. The magnitude of such distortions depends heavily on the existing state of democracy in the specific country: the more democratic is society the less opportunity an incumbent has to manipulate the budget with impunity in order to maximize the number of votes and to be reelected. Interestingly, in the least democratic countries (e.g. Tajikistan) the incumbents have concentrated such a vast political and economic power (that flows into a complete control over the elections institutions, if those exist at all) that makes it virtually impossible for non-incumbent parties/candidates to win the office. Thus, for the least democratic countries we can observe only negligible changes in budget expenditures composition due to elections. The extent of manipulations depends also on the incumbent’s popularity before elections: incumbents manipulate only in proportion to the value of buying a few marginal votes.


Galushko Viktoriya: “Has Spatial Market Integration Increased Over Time: The Evidence From Ukrainian Food Markets?”


The question of how a specific market performs has long interested economists. One way to assess the performance of the market is to look at how it interacts with other markets. Competitive conditions in the market and, consequently, arbitrage activities imply that prices for a homogeneous product in two different locations will not drift apart and differ by transaction costs. This paper addresses the question of integration of regional Ukrainian Food markets and its improvement over time. In my work I analyse the performance of only three major markets: bread, sugar and sunflower oil. These markets present three interesting cases and the analysis can be used to infer about the performance of (i)markets that are under local authorities control, (ii) markets that are under temporal centralized control, and (iii) markets with imperfect competition. In this paper I estimate long-run equilibrium parameters as well as an immediate response and adjustment parameters employing the two-step Engle and Granger procedure. The hypotheses of full price transmission and short-run integration are tested The overall conclusion is that Ukrainian Food markets are integrated only to a limited extent and there is no overwhelming evidence of improvements in these markets over 2000—2002 period compared to 1997—1999. Even though there exists a long-run stable relationship between markets, that is arbitrage does work, the adjustment process to price shocks is rather slow and for about 70% of markets it takes more than 6 months to completely absorb the price shock.


Garbuza Yuriy: “The Transmission Mechanism Of Monetary Policy: Investigating The Exchange Rate Channel For Central And Eastern European Countries (Case Of Poland)”


The analysis in this thesis is devoted to the study of exchange rate channel of monetary transmission mechanism in transition economies of Central and Eastern European region with a special emphasis on the investigation of the response of external sector variables to monetary policy shocks. Using Poland as a case study, I specify and estimate vector-autoregressive model in VEC form to study the responses of real effective exchange rate, money market interest rate, nominal trade balance, volumes of exports and imports, consumer and export and import prices to monetary policy shocks. The obtained dynamic responses of the named variables to monetary policy shocks are in many cases in contrast to what one usually observes for developed market economies. I argue that discrepancies in the responses of economic variables to monetary policy shocks in transition and developed economies may be explained by such factors as insufficient development of banking sector and weak financial intermediation, low level of external economic integration and currency substitution, which are common for transition economies but not present in developed ones.


Gazizullin Ildar: “Benchmark Regulation In Ukraine’s Energy Sector—Back To The USSR?”


The focus of this paper is the usefulness of applying benchmarking methods of regulation to Ukrainian electricity distribution sector. It will be argued that despite serious limitations on its way, benchmark methods in Ukrainian regulation can be highly useful at reaching a number of important goals. Most important, the company benchmarking will aid the national regulator in assessing the company efficiency and will increase transparency in the sector. This may considerably improve implementation of the existing methods of regulation and increase efficiency of the regulated companies. A benchmarking study of Ukrainian electricity distributors was conducted to explore several methodologies that can be applied in practice. The results on the company efficiency and trends in the sector are provided. Finally, some comments are made with regard to the observed efficiency differences for the existing company ownership groups.


Gubachov Andriy: “Modelling The Influence Of Property Rights Protection On The Gross Domectic Product In Ukraine”


Hryniuk Uladzimir: “What Are The Main Determinants Of The Fdi Inflows Into Belarus?”


The topic of FDI inflow into economy in transition is of primary importance because of its crucial role in the building of new market economies. The investigation of factors that determined the FDI inflow into Belarus remains germane, because authors still fail to provide any empirical pieces of research for this country. To examine this issue the gravity equation model is applied to Belarus. The study is motivated in the context of the OLI paradigm and the most recent FDI literature. There was revealed that FDI flow of higher level comes from the countries with larger GDP. It has also been found that geographical proximity plays important role for the foreign investors. Besides, it was not discovered any evidence that difference in hourly compensation between source and recipient country had impact on FDI inflow in Belarus during 1993-2001. For other variables, the level of freedom and GDP in Belarus, the results are not so certain. In addition, during the investigation a proper functional from for the model was discussed. As a result this paper provides an empirical support to the theoretical models in the case of Belarus. Thus, this piece of research fills the gap in the empirical studies devoted to the determinants of FDI inflow into Belarus.


Kastioukevitch Nikolai: “Language Effects On Labor Market Outcomes In A Bilingual Economy: The Case Of Ukraine”


This research is concerned with identifying language effects on labor market outcomes in the bilingual economy of Ukraine. A unique data set is examined by calculating descriptive statistics and estimating conventional earnings equations, to see whether at present returns to different combinations of Ukrainian and Russian languages skills are symmetric. Both descriptive statistics and initial models calculated by OLS suggest negative rewards for better knowledge of Ukrainian. More parsimonious specifications provide a better fit to the data, and the inclusion of the mother tongue and ethnic identity variables remove negative income bias of the Ukrainian language knowledge per se. The returns to the Ukrainian mother tongue are negative and strongly significant. The models calculated for local labor markets provide similar results. The rewards for bilingual skills are highly asymmetric and strongly dependent on the initial linguistic endowment. The Heckman procedure is used to show the absence of selection bias in the OLS models. The mother tongue identity is interpreted to capture the long-run dependence of labor market outcomes on the initial linguistic endowment, constituting “historically-driven” labor market segmentation. We thus conclude that returns to the language skills used to be significantly asymmetric. However, at present the marginal agent is indifferent between better knowledge in either of the languages. This gives grounds to a claim of successful “ukrainization” policy (reinforced by the increased national awareness of the Ukrainians), which has reached its intermediate goal of equating the remunerations for the Russian and Ukrainian languages knowledge.


Khomenko Rostislav: “Advertising Decisions In An Oligopolistically Competitive Industry: Case Of Ukrainian Cigarette Producers”


This paper examines advertising decisions of Ukrainian cigarette producers using the framework developed by Roberts and Samuelson (1988). Besides the obvious importance of the advertising efficiency to the firms, the problem is also important to the government: it is still unclear whether smoking prevention policy measures such as advertising bans are effective. The results indicate that cigarette advertising has a “public good” nature (i.e. it increases the total sales of cigarettes, but has no effect on the advertiser’s market share). The estimates of the behavioral parameters of the firms suggest that firms take into account the future rival free-riding in their advertising decisions. The non-cooperative equilibrium results in advertising efforts that are lower compared to those under a cooperative equilibrium. Results of the analysis suggest that collusion among the cigarette producers would increase the market demand and the profits of the firms. The results give support for the cigarette advertising bans as a way to decrease smoking rates and suggest collusion preventing policies as another measure of smoking prevention.


Konchenko Iryna: “The Effects Of Foreign Direct Investment On The Efficiency Of Ukrainian Milk Enterprises”


Foreign direct investment (FDI) is supposed to contribute greatly to the restructuring and development of transition economies. Various studies show that FDI plays an important role in the enhancement of the quality of the capital stock, international technology transfer, and stimulation of competition. However, the exact nature and magnitude of the FDI effects are still poorly understood. In addition, the evidence suggests that FDI impact crucially depends on industry characteristics, which implies the necessity of doing research at the industry level. The paper uses recently developed DEA techniques to analyze the different patterns of labor productivity changes in a sample of Ukrainian milk enterprises with FDI and without FDI. We decompose the change of labor productivity into 3 components: technological change, efficiency improvement, and capital deepening. The results suggest that the effect of FDI on the performance of Ukrainian milk enterprises is significantly positive. Firms with FDI perform better than firms without FDI because of higher (managerial, organizational, etc.) efficiency and capital accumulation.


Koretsky Stanislav: “The Regional Unemployment Dispariries In Ukraine”


Koziarivska Larysa: “Evaluation Of Monetary Policy Efficiency In Transition Economies: The Case Of Ukraine”


The purpose of this thesis is to investigate the main impact of monetary policy on the economy in Ukraine, and to assess efficiency of the current strategy of monetary policy in terms of attaining the specified macroeconomic goals. To provide the analysis of policy efficiency, there were estimated the relationships between key macroeconomic variables representing monetary instruments and policy goals. The research was made in the framework of the vector error correction model. This is a restricted model, formulated on the basis of a reduced-form VAR model. The main findings of the research are the following: effect of monetary policy on the economy is its influence rather on nominal variables and inflation than on real output; a little deviation in money supply can have very distorting effect on the exchange rate, inflation; and output. Possible reasons for policy inefficiency are: the value of the monetary aggregate is mainly determined by other considerations than economic; the monetary authorities have a little control over the monetary aggregates. Thus, the monetary aggregates should not be considered as the optimal monetary instruments and monetary aggregate targeting is not efficient policy strategy.


Kumechko Yaroslav: “Food Aid: Help Or Hindrance? The Case Of Eastern Europe And New Independent States”


Lately the international community is increasingly worrying about the impacts of the food aid on the agriculture development of the recipient. At the same time, 90’s were characterized by increasing food aid flows to the transition economies. This research aims to investigate the impact of the food aid in this region. Food aid represents an income transfer and increases food supply. However, food has elasticity of demand less than one, thus increase in the consumers income generated less than one-to-one increase in demand. Thus, when food aid is delivered, the magnitude of the supply increase is greater than that of the demand. This results in the downward pressure on the prices and creates price disincentive for agriculture producers. Additionality is defined as a situation, when food aid does not drive out usual supplies. This research empirically testes additionality of the food aid. Regarding endogeneity of the food aid flows, the identified (restricted) panel VAR model with innovation accounting was estimated. The results show that 1 kg per capita of food aid displaces 0.7 kg per capita of commercial food imports and 0.2 kg of food production. Impulse response function implies that displacement dies out at around 6th year. The additionality can be guaranteed by proper targeting and design of the food aid.


Kylymnyuk Dmytro: “A Small Open Economy In Transition: Blessing Or Curse?”


Marchak Volodymyr: “Determinants Of Vertical Integration In Oil Industry: Case Of Transition Economies”


This study develops several testable hypotheses for vertical integration in oil industries and tests them, namely, demand variability, market imperfections and transaction cost approaches. Findings of empirical research supports Coase’s preposition that firms decide to integrate vertically to substitute partly price mechanism of free markets due to large cost of such coordination through market operations. Empirical results show that oil companies decides to move in oil refinery sector in order to decrease uncertainty connected to oil prices and consequently profits fluctuations, and to diminish transaction costs of open market operations. In case of oil industry these transaction cost is partly associated with asset specificity problem i.e. location of each production stage. I found that firms with more distant refinery stage have higher level of vertical integration. I failed to prove empirically that monopolistic considerations induce firm to integrate vertically though these question require more detailed research.


Mishchenko Nataliya: “Influence Of Protectionism And Trade Liberalization On Returns To Factors Of Production In Ukraine”


The Stolper-Samuelson Theorem predicts that more open foreign trade will increase product prices and returns to factors which are intensively used in the production of these goods. Therefore, it implies distributional effects when trade is liberalized. Applying the long-run “zero-profit” conditions to the data for the manufacturing industries, I investigate whether the predictions of the Stolper-Samuelson Theorem hold in Ukraine and try to anticipate possible implications of Ukraine’s accession into the WTO. As a result, I find that non-tariff barriers have a positive effect on product prices and lead to an increase of returns to capital and a decrease in wages, suggesting that capital is a scarce factor and labor is an abundant factor. In this case it is possible that the income of workers will rise if trade is liberalized. In addition, the small magnitudes of the estimated factor price changes suggest that the distributional effects of non-tariff protection are small, suggesting that current protectionist policies do not have large impact on income distribution. The results of the analysis of non-tariff protection are confirmed by further results that higher trade openness leads to the decrease in returns to capital and to the increase in wages. Again, while the distributional effects are statistically significant, they are not expected to be large.


Movchan Oleksandr: “The Risk-Return Relation In Contex Of The Camp. Case Of Ukraine”


Naumets Ihor: “Fiscal Decentralization And Local Public Sector Efficiency”


This paper investigates several aspects of the efficiency of local public finance organization in Ukraine. Using data for years 1996—2001, I am looking for what fiscal decentralization can contribute to the economic growth of Ukraine, in the first place. Second, I estimate the efficiency of local public sector from both sides of revenue and expenditure assignments. In particular, on the revenue side I investigate the strength of fiscal incentives of local governments to extend their tax base. From the expenditure side, I investigate the question of the optimal size of population to be served by one local government on the micro-government level. The obtained results indicate the negative impact of the fiscal decentralization on the economic growth in Ukraine. However, these results are not robust to the sensitivity analysis. The estimation of fiscal incentives of local governments to mobilize revenues suggests that disincentives are not that large as it was expected, although they still exist. The investigation of the character of public expenditures on the micro-government level reveals the necessity of restructuring lowest-tier governments towards amalgamation of the smallest village local governments in Ukraine for the purpose of more efficiency in public expenditures in the sense of minimization of operative costs.


Nesterenko Anna: “The Determinants Of Firms’ Export Behavior”


This study of export performance at the micro level investigates firm-specific characteristics that are endemic to exporters, as well as incorporates incentive-related measures that are introduced on a broader, regional scale. The research uses a large sample of Ukrainian manufacturing firms and covers the period 1996—2001. The findings of this research are in line with the results of previous work in this area as regards productivity-related measures. Namely, the empirical evidence shows that exporting firms are indeed “superior” in generally accepted economic terms, relative to other firms in their industry, i.e. they are more productive, pay higher wages and are also larger. The results of the constructed benchmark model of firms’ export decisions prove to be robust to alternative specifications. Furthermore, this study supports the presence of pre-selection among Ukrainian producers into the foreign market based on their characteristics. Additionally, this research studies the influence of such external factor as government policy and finds a positive effect of the special economic zones on the exporting activities of the firms.


Nikolsko-Rzhevskyy Oleksandr: “Bank Bankruptcy In Ukraine: What Are The Determinants And Can Bank Failure Be Forecasted?”


The paper examines the causes of bank failures in Ukraine during 1998—2003 using micro-level data. Two basic models are used and their performance compared. The first model is the Giant Logit model, which models the probability of bank failure. The second model focuses on estimating time-to-failure, and uses an Accelerated Failure Time framework with time-varying covariates. In addition to standard financial ratios suggested by the C.A.M.E.L. scheme, I concentrate especially on the role of managerial quality, reflected by DEA efficiency. In this paper, DEA efficiency is preliminarily tested and adjusted for environmental differences. Finally, a bank ranking is built and the forecast for potential failures in July 2003 is made. The results show that inefficient banks tend to fail; so do banks, which over-invest in securities, and hold significant value of demand deposits; bank’s size has the opposite effect. Further, an analysis of hazard function shows that for an average bank the probability of bankruptcy increases until the bank reaches the age of approximately 2.5 years, then steadily declines.


Obrizan Maksym: “Purchasing Power Parity: Evidence From Ukraine”


This study analyses the validity of the purchasing power parity condition in Ukraine. For a long time researchers have been investigating the validity of PPP by testing whether the real exchange rates are stationary (or in extreme cases constant). In a univariate framework, PPP is very often rejected as an exact economic law. Nevertheless, investigation of half-lives (that is the time taken for a time series sequence to adjust halfway back to its initial level after a shock) could provide useful economic information and establish grounds for cross-currencies comparisons. For a country with relatively high inflation like Ukraine one might expect more evidence in support of PPP if the latter works through monetary channels. On the other hand, Ukraine has an evident disadvantage for empirical work of an extremely short sample period. To overcome this problem I use a specification based on the Im-Pesaran-Shin panel unit root test developed recently. Thus, this paper is an attempt to test whether the real exchange rates in Ukraine adjust to some long-run level, or whether the purchasing power concept is completely inapplicable in the transition country case. The results of univariate and multivariate tests are then compared with the case when USD is used as a numeraire currency over the same sample, and with other results reported in the literature. On the basis of the empirical investigation conclusions are reached concerning the validity of PPP in Ukraine.


Oliinyk Andrii: “Applying General To Specific Methodology For Panel Studies Of Sources Of Economic Growth In Transition Economies”


This thesis is a contribution to economic growth research. Its purpose is to use a mechanized variant of general-to-specific specification searching to the question of what variables to include in the analysis of growth in transition economies. The analysis is conducted on longitudinal data for 27 transition economies for the period of ten years. Out of more than 70 candidate variables are physical and human capital investment; governance quality; international aid flow; population growth; and growth of exports share in GDP clamed to have significantly influenced economic growth in the CEU, Baltic and FSU countries. The research ends up in the fixed effects regression equation, pointing most rewarding reforms direction.


Piskounov Kirill: “Estimation Of The Behavioral Equilibrium Exchange Rate”


The exchange rate is one of the major economic categories that link the country with the rest of the world. The predictability of the exchange rate is of great importance for economic development. The recent approaches suggest that PPP theory in general does not hold and assert that economic fundamentals influence the equilibrium exchange rate. One of these approaches, namely BEER, relies heavily on the multivariate cointegration techniques between the variables. This study attempts to reveal the major determinants of the real equilibrium exchange rate of Ukrainian hryvna using the BEER model. It concludes that the productivity differentials and the net foreign assets influence the equilibrium value of real exchange rate, whereas the interest rate is insignificant.


Pryymachenko Iryna: “Stock Price Volatility And Its Determinants On The Emerging Financial Market Of Ukraine”


The paper investigates the issue of stock price volatility in a Ukrainian stock market as one of emerging financial markets. Data on the daily PFTS returns is utilized for an application of the threshold GARCH model with AR and MA components to estimate the stock price volatility. The model allows accounting for the impact the changes in conditional variance have on the expected stock returns. Consistent with findings for emerging financial markets, Ukrainian stock market is characterized by a high long-term volatility. Fundamental factors, as well as non-fundamental ones could be considered as possible sources of a high volatility. To examine the relationship between the stock returns volatility and a set of macro economic indicators a threshold GARCH model with macro components in the variance equation is applied to the respective monthly data. Model indicates a significant impact of the GDP growth and an openness of the market on the volatility of stock returns in the Ukrainian financial market. Among the non-fundamental factors so-called rational bubbles and fads could be named. Other very promising areas to be considered as the sources of volatility are the irrationality of agents, incomplete information, and learning effects.


Rabtsun Kateryna: “Evaluating The Performance Of Commercial Banks In Ukraine: Frontier Efficiency Approach”


This paper evaluates the current situation in the banking sector of Ukraine. We aim at finding evidence in support of the hypothesis of high competitiveness in the banking industry. The necessary condition for competitiveness in the industry is that firms operating in the market are at least technically efficient otherwise they will be compelled to exit the market. The technical and scale efficiency scores are obtained from the nonparametric frontier technique known as data envelopment analysis. It is found that most banks disregarding of the size, ownership, or region where the head office is located have efficiency scores which are quite high comparing to studies done for other countries, which satisfies the necessary condition and supports the hypothesis that banking sector in Ukraine is highly competitive.


Rarytska Olena: “The Dynamic Effects of Fiscal Policy in Ukraine: a Structural Var Approach”


The Keynesian theory predicts that fiscal expansion has a positive effect on output. However, recently evidence was found in support of the opposite effect (e.g. Giavazzi, Jappelli, Pagano (1998)). Aslund (2002) and Fischer and Sahay (2000) argue that in the transition economies, due to specificity of the fiscal environment, these effects may prevail. In my thesis, I use the structural VAR model to test these conjecture, employing the data for Ukrainian economy. The identification is achieved using institutional information on Ukrainian fiscal system. I analyze the dynamic response of macroeconomic aggregates – output, consumption, and investment. I find no evidence for the existence of the negative effect of government expenditures on output. Several tendencies that can also be observed from the Ukrainian data are as follows: First, consumption is following output patterns in its movements, while investment is influenced negatively, no matter which instrument of fiscal policy is used, government expenditures or government revenues. Second, sub-sample evolution of responses suggests that the economy becomes more responsive to fiscal shocks. Finally, analysis also shows that fiscal expansion has a positive effect on output when financed by borrowing, and the opposite effect is found when fiscal expansion is tax-financed.


Shcherbakova Tetyana: “Efficiency Of Mixed-Owned Enterprises”


Shevchuk (Korzhyk) Iryna: “What Are Marginal Costs To AbatePollutions In Ukraine? Evidence From Power Generating Sector”


Shulga Tetyana: “Measuring The Cost Of Protection In Ukrainian Sunflower Seed Industry”


Shynkevich Andrei: “Link Between Stock Returns And Economic Fluctuations: Does It Matter In Ukraine?”


The paper investigates the existence of a relationship between stock market behaviour and macroeconomic indicators. The theoretical framework of the Arbitrage Pricing Theory is used to test whether there are state variables that might have a significant impact on Ukrainian stock market path. Kalman filter methodology is chosen to generate unanticipated components of the observed macro indicators. The iterative non-linear seemingly unrelated regression estimation technique is utilized in order to examine the exposures of the cross-section of returns to macroeconomic and financial risks. The estimation results show that the Ukrainian stock market is heavily influenced by systematic risk forces, though they can not be captured appropriately by the constructed model, and conclude that the nature of the systematic risk is mostly exogenous. However, the uncaptured variation in stock returns diminishes over time partly due to the followed macroeconomic stabilization and national economy expansion.


Stepanchuk Serhiy: “Labor Market Segmentation: The Case Of Ukraine And Russia”


This paper explores the issue of labor market segmentation in the transitional economies of Ukraine and Russia. It utilizes the switching regression analysis to test for the existence of two separate wage-setting mechanisms in these two labor markets, as predicted by the dual labor market hypothesis. The estimated results suggest that Ukrainian labor market is better explained in the terms of dual labor market model. At the same time, the results for Russia are more ambiguous, since the difference between the two segments is less pronounced. Recognizing that the switching regression results are equivalent to assuming some peculiar heteroscedastic distribution of the error term, the model is subjected to the goodness of fit test, and is compared to a single-equation specification which assumes complex heteroscedastic nature of the errors along the lines of predicting the actual wage distribution. Furthermore, the results are subjected to a sensitivity analysis, which suggests that they are robust to variations in model specification.


Stepovyk Ruslan: “Welfare Effect Of The Minimum Wage Law Implementation In Ukraine”


This paper investigates the influence of the minimum wage on social welfare in Ukraine. For this purpose, quarterly time series data with a sample size of 29 was used. Atkinson index was employed as a proxy for social welfare. A range of Atkinson indexes for different degrees of inequality aversion in society was constructed. Empirical study, which is based on the latest data (1995—2002), confirms the expectations about the positive effect of the minimum wage on social welfare, i.e. it decreases income inequality. Moreover, the contribution of the minimum wage to social welfare increases with increasing degrees of aversion to inequality in society.


Stetsenko Serhiy: “On The Duration And The Determinants Of Ukrainian Registered Unemployment. A Case Study Of Kyiv”


In our work we assess the factors affecting the duration of registered unemployment and the transition from the state of registered unemployment to alternative states using micro data collected by the Kyiv Public Employment Center during 2001—2003 years. Our study reveals significant heterogeneity across socio-demographic groups of individuals and significant positive effect of the amount of unemployment benefits on the duration of registered unemployment. The results of the multinomial logit analysis show that educated individuals, displaced workers, professional workers and females have difficulties in obtaining a job within a week after registration at the Public Employment Center. These findings have important implications for policymakers, for example, indicating the target groups for policy tools. For the empirical modelling of duration we employ the Kaplan-Meier product limit estimator and two competing risks models, one based on the Cox proportional hazard model and one based on the piece-wise constant exponential model.


Sysuyev Roman: “The Optimal Foreign Trade Policy For Russian Cars In The Ukrainian Market”


The thesis develops a new model of international oligopoly to fit the specifics of the Ukrainian automobile market. To provide the model with empirical content, the demand system for Ukrainian and Russian cars is estimated. On the basis of the theoretical model and the estimated demand system, the study provides a welfare assessment of the tariff in 2002 and recommends an optimal trade policy to be pursued in the automobile market.


Uvarov Oleksandr: “Financial Development And Growth In Developing And Transition Economies”


In this paper I study the empirical link between financial development and growth in transitional and developing economies. The GLS and TSLS estimation techniques are used to find out the impact of financial development on GDP growth and its channels. The data used is a panel data for 82 developing and 20 transitional economies for the years 1994—2000. The estimated cross-sectional and pooled regressions show that financial development does spur growth in developing and transitional economies via higher investment and lower intermediation costs, while financial development does not have a definite impact on saving rates. The final finding is that financial development does not have a direct casual influence on efficiency, although some long-run association does exist.


Vashchuk Olga: “The Law Of One Price And Regional Price Convergence In Ukraine”


The study of 30 nominal retail prices for 26 regions in Ukraine for the period 1997:01—2002:12 shows that the law of one price holds for relative prices to the average Ukrainian level when transaction costs are taken into account in estimation procedure. Even though, panel unit root tests are unable to reject the null hypothesis of nonstationarity in relative prices, Band-TAR model estimation results suggest that regional prices do converge to the average Ukrainian level. Food goods have higher speed of convergence and lower threshold levels than nonfood commodities and services with half-lives ranging from 1 to 2 months and threshold levels from 3% to 15%. In accordance with other studies, speed of convergence for services is three time slower than convergence for food group.


Vavryshchuk Vitaliy: “Small Business In Ukraine: Macroeconomic Determinants”


Using economic data from 1998 to 2001 I study macroeconomic determinants of small business in Ukraine. My research follows the Carree’s (2002) approach to the analysis of the supply side of small business. The empirical evidence suggests that important factors contributing to increased presence of small businesses in the economy in 1998-2001 were value added per person, human capital measured as a share of students in the population, and urbanization rate. As value added per person increases people become more engaged in entrepreneurial activities by launching registered firms or doing business on their own account. The marginal influence of value added is decreasing, however. The effect of human capital is positive and economically significant. More urbanized regions provide better economic environment for small business. Unemployment was not found among the factors that influence the dynamic of small business formation process. The index of reforms which approximates the change in the overall macroeconomic conditions is not significant suggesting that small business formation process is beyond the influence of traditional economic tools. Thus, the role of government in stimulating entrepreneurship is limited.


Yablonovskyy Dmytro: “The Hysteresis Of Dollar Asset Substitution In Ukraine After The Introduction Of The Cash Euro”


This paper explores the possibilities of hysteresis of dollar asset substitution in the Ukrainian money market after introduction of cash euro. The euro may be considered as an alternative asset substitute; however, it is hard to predict if it supersedes the dollar entirely, partially or not at all, implying dollar hysteresis. The paper uses an experimental approach to test the presence of such hysteresis. The experimental approach is used because macro data panels are still too short for econometric analysis on the one hand and are unreliable on the other. Among the advantages of an experimental approach is the possibility of observing separately the asset substitution qualities of the dollar, whereas in real economy it also partially fulfills functions of unit of account and medium of exchange. Experimental evidence rejects the hypothesis of the presence of hysteresis of the dollar as an asset when alternative is introduced.


Yankovskyy Yevhen: “Is Corruption Harmful To Economic Growth? Evidence From Ukrainian Firms”


Exploiting unique and reliable data on bribes paid by the Ukrainian firms and controlling for endogeneity between the key variables, this thesis researches an effect of corruption on development of the economy. The research results in the conclusion that corruption is detrimental and should be restricted by tax liberalization and deregulation of the economy. Bribery damages competition because the younger and smaller firms tend to pay more sizable and frequent bribes. A one-year increase in the age of an enterprise corresponds to decrease in a bribe by 0.84—0.88%, whereas a one-employee increase relates to 0.04% decrease in the probability to bribe. Corruption impedes trade, as engaging in intermediary activity dramatically increases the probability of bribing. Bribery is involved with a stealing of the tax revenues, as it promotes tax avoidance. A one-percentage point increase in the bribe rate corresponds to decrease in the overall tax rate by 5.74—10.91%. Moreover, corruption distorts incentives and promotes inefficient usage of the resources of the society. Bribing an official, a businessman can extract high net profit (15.13—17.32%) that is comparable to the profit gained from increase in sales (13.24-24.66%).


Yepishov Vadym: “Foreign Direct Investment And Intellectual Property Rights: The Case Of Transitional Economies”


Zabolotnyuk Yuriy: “Fiscal Policy And Private Sector Behavior: Evidence From Transition Economies”


Zaderey Natalia: “Monetary Transmission In Ukraine: Is There A Broad Credit Channel?”


This thesis investigates the mechanism by which monetary policy affects the real sector in Ukraine. Theoretical underpinnings of monetary transmission mechanism are provided to justify the plausibility of the broad credit channel as the one augmenting the traditional liquidity effect. Then, the results and methodologies of previous empirical studies of the broad credit channel for developed and transition countries are analyzed. Analysis of monetary environment and financial intermediation development finds some prerequisites for the broad credit channel operation in Ukraine. This conclusion is at least partly supported by empirical investigation of monetary policy impact on firms’ balance sheets. The application of two-step nonlinear estimation allowed to find positive albeit weak link between monetary shocks and financial constraints of firms with high agency costs, which means that even if broad credit channel is operative in Ukraine, it is rather weak.


Zheka Vitaliy: “Corporate Governance, Ownership Structure And Corporate Efficiency: The Case Of Ukraine”


The goal of the paper is to examine the effects of different ownership structures and of the quality of corporate governance on the Farrell measure of efficiency. Data Envelopment Analysis and Limited Dependent Variable Estimations are applied to the set of Ukrainian joint-stock companies listed on the First Securities Trading System. The domestic organization ownership is found to enhance efficiency the most, while managerial ownership has a detrimental effect on efficiency. Foreign owned firms are relatively inefficient; however foreign ownership is found to have a positive and significant effect on corporate governance quality. State ownership and concentrated ownership rights improve efficiency. The quality of corporate governance is found to have a positive impact on efficiency of domestically owned firms.


Zinovyev Yevgen: “The Money Demand Equation And Macroeconomic Forecasting In Ukraine”


The goal of the thesis is to study the stability of the money demand equation for Ukraine and create a parsimonious forecasting model for macroeconomic forecasting. These two aspects lie on the basis of predictable monetary policy. The stability of the money demand equation is investigated using two independent approaches (the standard cointegration analysis based on unit root tests and long-memory cointegration analysis) that allow me to increase significantly the reliability of inferences. The hypothesis of stability the money demand equation confirmed by both methods.