Aliaksandr Abrashkevich: “Belarusian Banking in the Context of Frontier Efficiency”
This paper has analysed the development of Belarusian banking sector in 2002-2004 from the intermediation efficiency perspective. We applied two-stage semi-parametric bootstrap procedure of estimation and inference proposed by Simar and Wilson (2003) in order to explore the differences in inefficiency between sub-groups of banks characterized by different ownership structure. When compared to foreign banks, banks tightly controlled by the state are more efficient, while ordinary private banks less. The former might be seen as a consequence of government’s efforts to force related banks to be engaged in intermediation as actively as possible paying little attention to risks. The latter combined with such characteristics as transparency and branching is explained by low correlation of optimisation programs of banks with hypothesized ‘pocket’ status with achievement of relative intermediation efficiency. The introduction of free economic zone banks looks like a success story so far. More importantly, the overall tendency to higher efficiency among private banks was observed.
Oksana Alfavitska: “Bank Lending Channel in Ukraine: the Effect of Capital”
The paper studies a specific channel of monetary transmission mechanism – bank lending channel. The emphasis is made onto bank capital as a source of heterogeneous lending behaviour among banks due to monetary policy actions. The underlying idea is the extent of bank risk aversion as a function of its capital. Capital is defined to be independent factor of bank credit portfolio at the same time affecting lending response to exogenous policy. The study investigates viability of bank lending channel under both directions of central bank policy: expansionary and contractionary. It looks on comparative levels of risk aversion among three groups of banks ranged by capitalization. The results suggest that risk aversion decreases with the bank capital and this causes the latter to affect bank lending channel. Larger banks do thus instantaneously suffer more from capital requirements enlargement, but have better chances to build capital up further on than smaller banks do. The channel itself has been found to work only when transmitting restraining impulses of monetary authority to the real economy. This could be attributed to the powerful economic growth driving lending activity.
Oleksandr Antonenko: “International Cross-Listing and Order Flow Migration: Evidence from Ukraine”
This paper examines the international cross-listing effect on the Ukrainian stock market based on the market information linkages. It has been found that introducing shares abroad within the sample under investigation (22.01.1997 – 01.11.2004) improves market characteristics: base-level volatility tends to decrease and market liquidity tends to increase. According to the methodology developed by Domowitz et al (1998) we can infer that Ukrainian market is integrated with abroad market. Precise attention was paid to the analysis of the structure of Ukrainian stock market. We composed the overview of legislation acts, highlighted major market institutions, and indicated the dynamics of trading volume with respect to the Regulated and OTC market. Several reasons that explain the predominance of the OTC trading over Regulated market are presented. Peculiarities of the Depositary Receipts issues for shares of Ukrainian enterprises are also discussed in the thesis.
This research is devoted to development of the procedures of demand and its elasticities’ estimation for chocolate tablets market in Ukraine on macro and micro-levels. To estimate the demand for chocolate tablet as an aggregate product of different brands, ECM (Error Correction Mechanism) and GMM procedure with instrumental variables were applied. Also, following Eagle and Ambler (2002) there were estimated the determinants market growth rate. We found that seasonality has the most significant influence on chocolate consumption. Demand appeared to be price elastic: -1.99% and income inelastic: 0.12 % with quit low significance, however advertising clearly adds explanatory power to the model, but its elasticity is low too: 0.04%. The price, income and advertising growth by 1 unit will lead the growth of market to change by -1.38%, 0.054% and 0.003% respectively. But necessary to be cautious with the results which concern the growth of market size as they were obtained from the model with some drawbacks in order to have commensurability with results of Eagle & Ambler (2002). VARX model was constructed in order to estimate the elasticities of demand for one particular brand (luxury one). Impulse Response Functions were used to find dynamic elasticities with respect to endogenous variables: own price elasticity, and two cross-price elasticities are 0.4%, 0.4%, 0.25% respectively. The effect of permanent change in own price on demand was determined about 3.3% with the help of forecasting and simulation from the obtained model.
In this thesis we investigate the behaviour of the shadow economy and its impact on the total economic performance at the country. The study is new in considering the financial constraints as the main costs faced to hidden enterprises due to semi-formal character of their shadow activity. For the purpose of research, the model with possibility of unofficial business and financial constraint was developed in the context of neoclassical growth framework. Solving this model analytically and examining its implications, we have found that it adequately reflects the main empirical findings on the topic available up to now. Besides, the model provides us with finding that under certain conditions shadow sector does not depress the total performance at the country but even stimulate economic growth. On the evidence of Ukraine we have shown that such conditions are associated with the period of transition from command type of the economy to the market one.
This research studies the determinants of the privatization prices. The focus is on the factors which affect the Ukrainian privatization. Internal political (much controversy), geo-political (Ukraine is in the middle of attention of the European Union, USA and Russia), the investment attractiveness of Ukrainian enterprises and other reasons make the Ukrainian privatization sample, interesting to analyze. This research is the first to analyze the determinants of privatization prices in Ukraine. We use a cross-industry sample of 173 large and medium privatization cases, which took place during the period 1998-2004. A log-linear model is applied. Explanatory factors are grouped in the following categories: company specific characteristics, labor factors and dummy variables such as time dummies, industry dummies, geographical appurtenance of the buyer dummies and cash flow and voting rights dummies. Investors are found to care much about the power over the entity they buy. Fixed Assets and Net Sales increase the privatization price, and the Short Term Liabilities decrease them. Moreover we conclude that the privatization prices depend non-linearly on the company specific factors. The Number of Workers factor has a small positive effect on the price.
Volha Dashkevich: “Business Environment and Entrepreneurial Activity”
Entrepreneurial activity is one of the main sources for economic growth, innovation and job creation. This thesis provides the analysis of the influence of government regulations on the entrepreneurial activity across countries around the world. The entrepreneurial activity is defined as the number of small and medium-sized enterprises across 31 countries and as the share of private sector in GDP across 24 transition countries. The impact of government regulations on the business activity is evaluated using indicators concerning the business registration process and the contract enforcement procedure. This work also investigates the entrepreneurial activity in the informal sector of the economy. The results of the study indicate that government regulations negatively influence on the development of small and medium-sized business. Stricter regulation of entry is led to higher level of corruption and a greater size of the informal economy.
In the paper Ukraine’s World Trade Organization (WTO) accession impact on Ukrainian sunflower oil industry is analysed through the mechanism of sunflower seed export duty decrease as a precondition of the country WTO membership. The expected relationship is as follows: due to lower seed export duty export and production of sunflower oil should decrease. The thesis gives us qualitative and quantitative confirmation of the prediction. Data used in the research cover period from October, 1998 to September, 2004. Because of endogenous variables in the right-hand side of equations appearance estimations are done using Simultaneous-Equation Model. The results indicate on not too harmful influence of the sunflower seed export duty decrease on domestic sunflower oil producers and exporters. Furthermore, such measure is needed not only WTO accession precondition, but also as competition and higher efficiency stimuli for sunflower oil market.
Victor Dobrikov: “Boeing VS Airbus: an Empirical Examination”
This study considers the choice of an aircraft for different routes by airlines, in light of recent realization of different strategies of main players in aircraft production industry. Based on large sample of transatlantic flights from the US to European countries by different airlines, results show positive relation between probability of airlines choosing Airbus and average capacity of flights on that route, European origin of an airline and departures frequency; negative relation was found for the probability of choosing Airbus and distance of the route, destination country GDP per capita and, most interestingly, flights from/to hub airports and routes connecting two large airports. From the results of the study we conclude that development of new products by aircraft producing companies is based not on the future forecasts only but also on existing specifics of their products exploitation.
Natalya Dushkevych: “Multicriteria Stability of the Monetary Unit”
This study carries out the research on the stability of the monetary unit. We use three indicators to estimate the stabilty: exchange rate, interest rate and inflation rate relying on the (G)ARCH models. We impose maximum and average criteria to measure stability and make it comparable across time and under different policies. We also adress the stabilization question and, thus, evaluate the response of the three indicators used in stability analysis to the one period shocks by estimating the Structural VAR.. Extended New Keynesian model proposed by Leu (2004) served as theoretical background for SVAR.. We used Ukrainian data for the period of January 1996 – March 2005 for estimation. Our findings show that stability of hryvnya increased over time with the clear pattern of increasing starting from 2000. We also show that previous period shocks influence the future stability with dying out effect. Response of the indicator variables to the one period shocks meet the theory predictions.
Current thesis considers the sample of 125 cross-border mergers and acquisitions announcements in order to assess their influence on valuation of securities of the acquiring companies via event study methodology. Market model is built in order to determine normal return for the securities, and market rate of return is proxied by market indices like S&P500 and FTSE100. Results show that these announcements lead to -9% average cumulative abnormal returns (CAR) significant at 1% to shareholders of the acquiring companies over 61 day event window period, and -7.93% CAR significant at 5% already in 41 day event window period. Nonzero pre-announcement CAR reflects possible information leakage, insiders’ trading or market anticipation of the transaction. Empirical results show that M&A deals in transition countries do not create wealth to shareholders of the acquiring companies, but instead are focused on maximizing growth of sales and assets, generally constituting strong negative market signal due to riskiness of investments in the region.
In this thesis the cross-influence of government’s decision and private economic agents’ choices at R&D field is analysed. The situation is modelled as a four-stage extensive game which is solved using backward induction to obtain subgame perfect equilibria. The model is based on three-stage extensive game analysed by Atallah (2003) which is treated as “no intervention” state. We examine the pattern of change in private R&D expenditures and change in cooperative decisions of private firms for two forms of government intervention: direct financing of R&D and tax reliefs to enhance private firms’ cooperation. We also determine the choice of government between two mentioned forms of intervention. Private R&D expenditures are found to be dependent on relation of an actual information leakage level to the critical thresholds for both strategies available to the government. Tax reliefs strategy of the government leads to a lower distortion of cooperative decisions that direct financing strategy. The government’s choice is determined with actual information leakage level. The thesis is ended with a set of implications for private economic agents.
Olena Kramarska: “Analysis of Life Satisfaction in Ukraine”
In my work, I studied determinants of reported life satisfaction in Ukraine. For this purpose I used panel data from Ukrainian Longitudinal Monitoring Survey encompassing 2 consecutive years 2003 and 2004. I was interested in finding out whether results obtained for other countries hold for Ukraine too, in particular that income does not have large effect on reported life satisfaction and that being unemployed has a large negative effect on reported well-being. My expectations fully realized. Income indeed proved to be far not the largest determinant of reported life satisfaction, although statistically significant and unemployment turned out to be one of the main depressants of life satisfaction.
This thesis studies the impact of change in income tax rate on the economic activity and, more precisely, the effect of recent decrease income tax from 20% to 13% at Ukraine. With this aim, the indivisible labor model was used in the context of shadow economy and tax evasion. As a result, the research has come with some interesting theoretical and empirical findings. First, it was shown that the behavior of an individual in the derived model is the same as in divisible labor model. Next, using Ukrainian data I simulated the transition dynamic and has found that probability to work officially increases from 15% under 20% tax rate to 24% under 13% rate. The transition of consumption and capital is the same under 20% and 13% rate. Nevertheless, the change in tax rate does not influence their steady-state values. Besides, life-time utility of individuals decreases with the considered change in tax rate because decrease in relative utility of social guarantees, which introduced in individual’s utility function.
Yevgeniy Malyar: “Modelling Volatility of Returns on Foreign Currency Holdings Using GARCH”
This thesis investigates the behaviour of stock markets in transition economies. The analysis is carried out in the context of Shiller-Sentana-Wadhwani framework with two kinds of traders in the market, rational (smart-money) ones and technical (feedback traders) ones. We model the conditional volatility using EGARCH and TGARCH models. Our findings provide strong evidence of positive feedback trading in the stock markets of Hungary, Lithuania, Estonia, Slovenia, Bulgaria, Romania, Poland, and Russia. We don’t find sufficient evidence for the presence of such traders in Latvia, Czech Republic, Slovakia, and Ukraine, and we argue that this absence of feedback traders can be explained by relative small size of stock markets and low liquidity of assets.
Antonina Mavrodiy: “Factor Analysis of Real Estate Prices”
The thesis analyzes the main determinants of real estate prices. Investigation of Kiev real estate market confirms the influence of different macro and micro factors on real estate market. In the study the effect of changes in GDP, income level, population in interest rate is examined. The analysis inferred the direct relationship between GDP, income level, population and housing prices. While changes in interest rate negatively affect price level. Estimation results also provide the evidence of the relationship between micro factors and housing prices. Location and qualitative attributes appear to have significant effect on real estate prices.
Andrew Medvedev: “Education and Growth in Transition Countries”
In this study we quantify the relationship between economic growth and the level of schooling in transition countries using Solow’s aggregate production function augmented with human capital. We find that the relationship is negative and statistically significant and that 1% change in the level of schooling is associated with –0.67% change in GDP per worker. Explanations, such as signaling theory (Spence 1997), the hypothesis of rent seeking and low level of adoption of innovative technologies, are offered. To account for the level of adoption of new technologies we estimate the model, which includes FDI as a proxy for the former. The result obtained is both the level of schooling and FDI being statistically insignificant and we argue that the level of adoption of new technologies is not high enough to allow schooling to pay off in terms of economic growth.
The intent of the paper is to construct the model of costly international trade in differentiated products and perform the welfare analysis in its framework to investigate whether Ukraine will gain at all stages of a reduction in trade barriers, or are there potential problems along this way. It was shown that a two-way trade barriers results in continuous welfare improvement even for the country with higher cost industry such as Ukraine even though owners of the firms operating in the monopolistically competitive sector of the less efficient country suffer losses from trade liberalization.
This paper considers Ukrainian exchange rate volatility with help of GARCH modeling. The focus is on two theories of volatility determining. In accordance to Heat Wave hypothesis UAH/USD volatility is determined only by own previous fluctuations in the exchange rate. Under Meteor Shower hypothesis Ukrainian volatility is determined not only by own previous changes in exchange rate but is also influenced by European Union’s exchange rate changes. The investigated dataset consists of daily interbank exchange rates of Ukrainian hryvna, Euro and Polish zloty all expressed in US dollar during period from 01.01.2000 to 31.12.2004. Based on the results of estimation, it was found that both Heat Wave and Meteor Shower effects are statistically significant. Ukrainian exchange rate volatility is determined not only by own previous volatility but is also influenced by EU exchange rate changes. Heat Wave effect is substantially more powerful comparing to Meteor Shower. Meteor Shower effect is economically insignificant in determining of Ukrainian exchange rate volatility since volatility remains almost the same despite different values of EU shocks.
The paper investigates the existence of a relationship between economic and non-economic news and behaviour of the Ukrainian stock market. For this purpose the two-stage ordinary least squares methodology is used. At the first stage VAR/VEC methodology is chosen to isolate economic news components of the observed macro indicators. At the second stage dummies for the main political events are added to the analysis. The estimation results show that economic and political news does influence the Ukrainian stock market returns. It is also revealed that stock returns respond more to non-monetary news while the responses to monetary news are weaker and insignificant. Though political events influence the behaviour of the Ukrainian stock market return, only “good” political news has significant influence on it.
This paper empirically examines the extent to which a country’s economic growth is influenced by the economies of its trading partners. The analysis incorporates transition economies case. Panel estimation results for more than 100 countries, including 25 transition economies, show that trading partners’ growth has a strong positive effect on domestic growth. Trading partners’ relative income levels are negatively correlated with growth, suggesting that trading with less developed country is beneficial for growth. No difference in either of the effects is found for transition economies. A general implication of the results is that countries benefit from trading with fast-growing and relatively less developed economies.
This paper examines the effects of economic globalization on the human capital development in the transition countries using recent data from the Business Environment and Enterprise Performance Survey II which contains an up-to-date and extensive set of variables. Concentrating on the activities of multinational corporations as one of the central phenomena of globalization process, the paper evaluates the effect of foreign ownership on the probability of personnel training separating the effect for five categories of employees. The analysis is performed in the context of the model of enterprise training employing a conventional set of variables as the determinants of training. A binomial probit is used to estimate the model. Obtained results are consistent both with economic intuition and findings of earlier studies and generally support theorized correlations. The model is able to capture the effects of such factors as competition, firm performance and innovativeness, and labor force characteristics, which are shown to be important determinants of training. The main finding of the paper is that the foreign-owned firms are indeed more likely to provide training to their personnel facilitating human capital accumulation in the recipient countries.
The paper examines how country risk of Ukraine and international credit conditions (“risk free” real interest rates) affect the volatility of Ukrainian aggregate output. Volatility of real interest rates explains about 7% of volatility of Ukrainian GDP, while volatility of the country risk about 40% of GDP volatility. The findings confirm the results obtained by Neumeyer and Perry (2004) for Argentina’s economy. In this paper, a vector Autoregression Model was estimated using three key macroeconomic variables. The difference between the interest rates on credits in USD of Ukrainian banks and the real interest rates was used as a proxy for country risk. Based on the estimated model, Impulse Response functions were constructed and Error Forecast Variance Decomposition was done. Monthly data for the period 1998:1 – 2004:3 for those three variables were used to estimate the model. The model shows the average degree of the interrelation between the key macroeconomic variables. The results highlight the causality running from country risk and real interest rates towards aggregate output of Ukraine. The policy implications of this result are that Ukraine had high country risk during the period under study. Thus Ukrainian government should implement the policies aiming to increase the confidence of the economy, increase its credit rating, achieve the status of market economy and avoid introduction of any shocks from its side.
This paper aims to determine in-store marketing strategies that are most efficient in terms of sales pay-off. The focus of the research is on such in-store presentation indicators as promotions (bundling and buy-and-get promotion), displays, out-of-stocks, price of the product and its competitor, presentation on the shelf in terms of its layout and occupied space. The estimated results suggest that in-store marketing techniques differ in their ability to bring additional sales. The most positively significant factors are promotions and additional displays and the most negatively significant factor is out-of-stocks. Relative insignificance presentation on the shelf gives evidence that Ukrainian consumers are more sensitive to stimuli that arouse smart-shopper feelings, like monetary gain or free gifts, than to visual stimulation.
Dzianis Shauruk: “On the Investigation of Residential Housing Price Bubbles in Minsk”
The present research is devoted to the inspection of the existing techniques of detection of bubbles. These techniques are grouped into statistic and econometric ones and applied to a specific data set of the specially weighted offer prices and rents for residential property in Minsk. The underlying idea behind the research is to attempt to reveal the relevance of the techniques in their ability to identify rational bubbles at the ideal case or identify explosiveness of the series at the moderate case.
The paper focuses on the impact of institutional framework of antidumping investigation structure on the pricing decision of the firm in the presence of antidumping policy. Distortional effect of antidumping investigation on both internal and external markets pricing is investigated. The model empirically explores particular dumping margin evolution with respect to different stages of antidumping investigation. Main findings of the paper are confined with importance of scheduling of institutional events with respect to particular stages of antidumping investigation and existence of behavioral pricing deviations inherent to both internal and external markets during antidumping investigations.
Kateryna Shyrkova: “The Optimal Location of a Retail Store”
The most important issue in the investment decision for the retail market is location, which draws a considerable attention to the problem of optimal location both for the scientists and businessman. One of the models here is the maximum capture model, which is a model that offers a technique of the location choice based solely on the distance. This paper presents the application to the Ukrainian market of the new methodology for deciding which store attributes should be included into the maximum capture model, when it is applied to the retail market. The methodology represents designing of a survey with its further examination by the factor analysis and regression methods.
Victor Sydorov: “Poverty Effects of Ukraine’s WTO Accession”
Poverty is one of the heaviest problems the Ukrainian society faces last decade. Accession into the WTO may be beneficial in terms of reducing poverty. In this paper I tried to analyze the impact the trade liberalization on households’ income. A CGE microsimulation model was developed for Ukraine using recent (2002) micro- and macro level data. The simulation of 10% reduction in tariffs was conducted and new household income values were calculated using GAMS/MPSGE software. By calculating and comparing poverty measures before and after simulation, I found that import tariff reduction decreases the overall poverty. The conclusion of this work is that Ukraine’s WTO accession is beneficial for Ukraine.
The paper investigates impact of banking capital concentration on intermediation efficiency of Ukrainian banking sector. The study is conducted on both micro- and macrolevels in order to have a composite and comprehensive view of the problem. On the macrolevel intermediation efficiency is measured by interest spread, the difference between average rates on loans and deposits, and by interest margin on the microlevel. Theoretically relation between concentration and intermediation efficiency is ambiguous: on the one hand, in more concentrated markets each bank on average has stronger market power, being able to set higher margins. On the other hand, economy of scale improves efficiency due to decreasing marginal costs. We test the impact of concentration on intermediation efficiency empirically. We found that large banks tend to set lower margin and have lower fraction of overhead costs in total costs, operating more efficiently. On the other hand, macro study reveals positive relation between concentration and spread, however the result is not reliable taking into account small number of observations and very low fraction of spread explained by dynamic of concentration.
Kateryna Turchynska: “Bank Mergers and Acquisitions in Ukraine: Efficiency Effects and Implications”
In the thesis we try to evaluate the efficiency effects of mergers and acquisitions for Ukrainian banks. We use DEA estimator to estimate efficiency of banks and compare efficiency of banks that took part in the consolidation before and after the merger occurs. We also use the truncated regression with bootstrap to estimate relationship between the efficiency of bank and different factors such as size, risk, specialization, involvement into the merger, ownership. Our findings show that there is a negative dependence between the fact of the merger and efficiency of the bank; we also conclude that merger can indirectly affect bank efficiency through changes in its size, ownership and specialization.
This thesis is devoted to risk-management in Ukrainian banks. Value-at-Risk methodology, which is widely used in developed countries, is not popular among Ukrainian risk-managers. The main stone on the road was the transition conditions inside the country, which disturbs market mechanisms. Today the situation is changed! On the example of one of Ukrainian commercial banks “Kredyt-Bank (Ukraine)” I applied VaR to calculating exchange rate risk and interest rate risk. In calculating exchange rate risk I used untraditional approach. Simulations in VaR for both kinds of risk were made by standard (variance-covariance) and historical simulations methods. Results, which I got, are very useful for planning the stable, profitable and prosperous future of the bank. By Basel Committee (2004), banks that want to cooperate on the open financial market and to be a strong competitor to developed banks must use in its risk-management VaR methodology. It is the time to be on the same level with leading countries!
The paper addresses the efficiency of the futures market in the deregulated electricity industry. It studies a sample of European countries to find which factors improve market efficiency and contribute to an increase of a social welfare. Based on research the paper works out recommendations and policy implications for Ukraine to prepare the optimal environment for launching its own futures market as a part of deregulation process conducted in the electricity industry.
In this research we consider retail gasoline market in Ukraine focusing our attention on the quality efficiency performance of the industry in 2003 and 2004 periods. The following split is made due to the price-cap regulation – government regulation of the ceiling prices on gasoline at retail – that was established with Memorandum at the beginning of 2004. Specifically, we examine the gasoline quality change in 2004 (comparing to 2003) after price-cap regulation applying advance efficiency analysis methods including non-parametric Data Envelopment Analysis and Smooth Bootstrap. Based on data with gasoline quality factor it was found that we can not discard the possibility of a degradation in quality efficiency performance of retail gasoline industry under price-cap regulation after 2004. We also investigate efficiencies of the sub-group 2003 and sub-group 2004 of the period 2003-2004, and it turns out that conclusions do not change: we detect higher aggregate quality efficiency for 2003 than for 2004. So, I argue that the price-cap regulation in the beginning of 2004 was the political step that led to quality degradation of gasoline in Ukraine. Nowadays, the new government of Victor Yuschenko understands possible negative effects of the non-market regulation on the economy, and tries to avoid price-cap regulation dealing with unfavorable current situation on the retail gasoline market in Ukraine.