MA Theses 2010

Alina Aleksyeyenko: “Individual and bank characteristics that impact an individual’s demand for services”

Investigation of factors that may impact a customers’ choice of bank shows that such factors vary from service to service. Besides, factors that influence a choice of a bank can be insignificant for a choice of a bank service and vice versa. This study utilizes data from GfK Survey that combines customers’ preferences concerning bank services in 2005 and 2006. Overall, results indicate that choice of a service depends mostly on such socio-demographic variables as age, income and education level and place of living. Bank characteristics affecting the choice of services vary for different services. Thus, banks aiming to promote certain service should pursue more precise targeting of particular groups.

Anton Artamonov: “The effect of financial inflows on macroeconomic growth in transition economies from 1993 to 2007”

The current study explores the effect of financial inflows on macroeconomic growth in transition economies. Econometric models applied are Arellano-Bond dynamic panel GMM estimator and linear model with random effects. The obtained results do not fully support the hypothesis of positive impact of financial inflows on economic growth, in that only FDI and other investments have a positive effect on growth. The obtained results reflect the value of the research which lies in highlighting the importance of policy on FDI attraction and financial sector reforms.

Pavlo Bandura: “A study of exchange rate pass-through in Ukraine”

This thesis investigates the effect of exchange rate fluctuations on domestic prices, exchange rate pass-through effect. An Error Correction model is estimated accounting for endogeneity of the money supply and the price level, long-run relationship between the exchange rate, money supply and the price level, and their deviations from it. The results show a smaller level of the passthrough in Ukraine than in the other developing countries.

Ievgen Bobykin: “Ukrainian bank failure prediction using efficiency measures”

The development of financial sector is necessary for the country growth thus the prediction and prevention of banking failures is essential for effective government regulation. This paper develops several models predicting banking failures based on multiperiod logit and survival estimation procedures using elements of CAMELS system as determinants of failures. As management quality is the only characteristics which cannot be quantified I concentrated on testing whether efficiency measures can be proxy for management quality and help in predicting failures. The efficiency measures are evaluated using Data Envelopment Analysis and the bias of estimates is corrected using bootstrap procedure. The results show quite good predictive power (about 90%) of both models based on CAMELS system estimated using data for 2006-2009. The banks with low capital and liquidity and bad asset quality tend to fail. Also this paper contributes to aggregation of hyperbolic efficiency measure which is used to calculate group efficiency of foreign banks versus domestic. Thus banks with foreign capital appeared to be more efficient on average and had lower probability to fail. The efficiency estimates are not significant in predicting failures due to absence of good estimates of outputs especially such bad output as bad loans. Nevertheless the efficiency estimates show lower average and group efficiency of banks during financial crisis 2009.

Igor Buinyi: “Organizational form and investment in Ukrainian food processing”

The average treatment effects of the organizational forms on the ratio of investment over fixed assets are estimated according to the accelerator-cash flow model for the data from 2001-2007 on enterprises in the Ukrainian food processing industry. Several estimation procedures, including the nearest neighbor matching to deal with the endogeneity issue, present robust evidence on the fact the limited liability companies (LLCs) invested higher percentage of their fixed assets than public corporations and close corporations, the estimates for the latter two being statistically indistinguishable. Our estimates can be explained by higher borrowing power of corporations, more efficient planning and operation of LLCs, or higher risk for corporations due to illegal corporate raidering. Since the latter factor is very likely to be an important determinant of investment decisions, the results present an argument in support of stronger property rights and more effective corporate legislation in Ukraine. The results can be a benchmark for the analysis of other industries as well as future studies to reveal the impact of the new Law on Joint Stock Companies in Ukraine, which was became partly effective since 2009.

Iryna Demko: “Nexus of natural gas consumption and regional economic growth in Ukraine. Policy implication”

This paper considers the nexus of natural gas consumption and regional economic growth in Ukraine. The main question to answer is the type of causality between natural gas consumption and regional economic growth, which is important to know, when country makes choice on appropriate energy conservation policy. Panel data for 25 Ukrainian regions and the city of Kyiv is used. The analyzed period covers nine years: 2000-2008. With natural gas consumption and real gross regional product two more variable are added into the model: real gross fixed capital formation and labor force. Then panel integration, panel cointegration and panel causality analysis follow. With Arellano- Bond (2001) estimator for dynamic panel positive impact of natural gas consumption on regional economic growth in Ukraine is found. Policy implications of results are discussed.

Mykhailo Dopira: “Social values transformation, entrepreneurship and economic growth: cross-country analysis”

The paper investigates interconnection of economic performance and social values of the country. It is hypothesized that evolution towards greater spread of values inherent to entrepreneurship in the society is connected to higher rates of economic growth ceteris paribus. Based on previous research internal locus of control, achievement motivation and calculated risk taking represent the specific values inherent to entrepreneurs, and they are believed to be connected with higher rates of growth. Spread of these values was measured in 51 countries across the globe during the period of 1981-2008 employing dataset of the World Values Survey, and it was determined that prevalence of entrepreneurship values cannot predict subsequent economic growth. Still, evolution towards domination of internal locus of control in the society is found to be a significant predictor of higher economic growth on country level. So, the paper suggests that a social program targeted on bringing up internal locus of control is likely to lead to better economic performance of the country.

Maryna Dzhumyga: “Inventory investment and loan supply shocks: evidence from Ukraine”

This study analyses the sensitivity of the inventory investment to loan supply shocks. The research uses the annual data for big manufacturing firms in Ukraine over the period 2000-2008. The estimated model is based on the productionsmoothing model augmented by proxy for loan supply shocks. Results suggest that finished goods inventories are sensitive to loan supply shocks, while material inventories are not. The impact of loan supply shocks on finished goods inventories is shown to be positive. Therefore, monetary policy may influence the level of country’s inventories. Finished goods inventory investment may be treated as a part of monetary transmission mechanism in Ukraine.

Sergiy Golovko: “Optimal renting /selling strategies in oligopoly durable goods markets”

This paper studies a simultaneous-move three-period model in which firms choose the durability of their goods, whether rent or sell and how much to produce. We show that a firm’s profitability tends to improve if it lowers durability of its output. Then we show that the previously known results regarding commitment to the selling strategy are robust with respect to time if the firms make their renting/selling decisions at the beginning of each period. However, if the firms make their renting/selling decisions at the pre-play stage of the game, they are less likely to commit to the selling strategy, choosing instead some mix of renting/selling strategies. If the firms are infinitely lived, they should be more patient to sustain trigger strategies when the good is less durable. Moreover, analyzing the model under different specifications of cooperation, we show that the firms should be more patient when they cooperate both in choosing renting/selling strategies and in choosing quantities than when they cooperate only in choosing renting/selling strategies.

Maryna Ivus: “Do intellectual property rights matter for the intensive and extensive margins of trade: empirical investigation”

Economic theory does not have unambiguous prediction about the effects of strengthening intellectual property rights (IPRs) on international trade. In this paper, the empirical evidence is provide on the trade impact of IPRs. The gravity model is adopted, where the extensive margin and the intensive margin of U.S. exports are the outcome variables of interest. The results suggest that the strength of IPRs in an importing country matters for the margins of U.S. exports.

Vera Kankalovich: “The effect of finance system on export performance of firms”

Financial system assists in accumulating funds and supports them for commercial activity. Financial constraints as a characteristic of financial development level pertain to the profitability and therefore, can be an important determinant of firm\’s export performance. The paper provides the investigation about effects of the country\’s financial system development on firm\’s percent of export sales with respect to the industry\’s financial vulnerability. Using firm level survey covered 49 developing countries it detects the pronounced effect of the financial sector development taking into account the different levels of collateralizable assets across industries. The results are distinct for countries from different income groups.

Volodymyr Korsun: “Wage determination in Ukraine: does religiosity matter?”

Previous studies have demonstrated an effect of religious affiliation and religiosity on economic outcomes at both country and individual level. Such an effect is significant, but different across various countries. However, there is no work investigating such relationship in Ukraine. This paper estimates the effect of religiosity on individual earnings of Ukrainians while solving the issue of endogeneity of the former. The major finding is that the wage penalty for being religious is significant for males and turns out to be even higher when accounting for omitted variable bias: Ukrainian men, who pray about once a month, earn on average 24% lower wage than their atheistic colleagues. Meanwhile, the relationship between religiosity and earnings of Ukrainian females appears to be insignificant.

Volodymyr Kurnosov: “Patterns of trade specialization and economic growth in transition economies”

In this paper, it is argued that the structure of a country\’s foreign trade may give understanding of its economic performance. Specifically a relation between considered in the literature determinants of economic growth and volumes of sophisticated commodities trade in 18 transition economies is studied. Using the standard growth regression framework, it is found that these volumes increase along with GDP per capita, indicating that there is a shift in trade to more high skilled products. On the basis of these results, the conclusion can be made that transition economies move to the rich countries, producing and trading all kinds of commodities. The analysis has important policy implication: the government should take care of these processes by creating favorable environment for manufacturing and high technologies development.

Daniil Lagoshniak: “Volatility asymmetry in the currency market: case of Ukraine”

Inna Orlovska: “International trade complexity and productivity of a firmL the case of Ukrainian manufacturing”

The present research is devoted to investigation of the effect of international trade complexity on the performance of a firm. To approximate the predictor an index of inverse diversification along product and geographic markets is constructed, performance is measured as total factor productivity retrieved as a residual from a production function. A dataset on Ukrainian manufacturing firms throughout the period of 2001-2007 is employed. The estimation results for exporters show that sticking to the traditional product mix and gradual geographic diversification is associated with higher productivity level. As for the importers, no significant relationship was found, and the reason might be rooted in the problems with the data. The value of the work is in explanation of the trade-productivity patterns, which may be useful for trade policy implications (issues of trade liberalization, its pace and scope, international trade cooperation and so on).

Viktoriia Shum: “Does incentive compensation to supervisory boards affect CEO turnover?”

The goal of this paper is to examine both the effects of different forms of incentive compensations to supervisory board and the impact of SB composition on chief executive officers turnover. The logit estimation is applied to the panel dataset collected from State Commission on Securities and Stock Market for Ukrainian joint stock companies. Compensation to SB based on firm performance is found as the effective remuneration for improving companies’ corporate governance whereas fixed and absent of compensation have no effect on CEO turnover. Compensation is not systematically structured to mitigate agency conflicts and to encourage effective monitoring, since SB directors earn remuneration based on firm performance in more rare cases than other forms of compensation or do not receive it at all. Therefore, the paper indicates poor corporate governance performance in Ukraine during 2003-2006.

Vadym Trembovetskyi: “Testing for competition in banking sector: evidence from Ukraine”

This paper investigates the market structure of Ukrainian banking system during 2005:1 – 2009:1 and evaluates the degree of competition with the help H-statistics developed by Panzar and Rosse (1987). The estimated value of H-statistics varies from 0.11 to 0.62 and robust to inclusion of other variables in regression equations. In addition, the F test for perfect competition as well as pure monopolistic competition is rejected for all specifications. Thus, Ukrainian banks earn their profits in the market where monopolistic competition dominates.

Oleksandr Tsapin: “Bank risk and lending: the impact of ownership”

Using data on all Ukrainian banks for the period 2003 – 2006 study exemines the effect of ownership on bank risk and lending. The assumprion about the endogeneity of bank lending and bank risk is rejected, while risk-taking and ownership concentration are jointly determined. I find that ownerhsip concentration and business group participation are able to induce bank risk. My findings are in line with Zeitun and Tian (2007) who argue that banks with concentrated ownership take higher risk if large shareholders pursue their own financial interests.

Oleg Zaytsev: “The impact of oil price changes on the macroeconomic performance of Ukraine”

In this research we investigate the impact of oil price changes on Ukrainian economy. Following existing literature the focus is on six macroeconomic variables: nominal foreign exchange rate, CPI, real GDP, interest rate, monetary aggregate M1 and average world price of oil. Adhering to Cologni and Manera (2008) we allow for interconnection between the variables to exist and adopt SVAR/VECM approach for this purpose. In particular, we choose between the two closely related model types based on cointegration properties of the data. We succeed in detecting long-run equilibria, estimate VECM and further perform innovation accounting. We find that oil price increases tend to deteriorate real economic activity in the short run (though with one month lag) as opposed to the long run. The reaction goes through indirect effect, namely downward demand effect, which is characterized by contraction of aggregate demand in response to adverse oil supply shock. Based on the results of IRF we further numerically confirm the validity of this channel. Finally, we check if the asymmetry effect between oil price changes and real GDP response as discovered by Mork (1989) is present in Ukrainian data. We find sustaining evidence in favor of symmetric response of real GDP to oil price increases/decreases in the short run.