MA Theses 2011

Nadzeya Abramava: “Impact Of The WTO Accession On The Composition Of Exports And Imports: Panel Study”


While the majority of the countries of the world has already joined the WTO or aspires to do so in the near future, there is still no conclusive prediction about the impact of the WTO accession on the stability and the volume of trade of the new member country. Much less is known about the effect of the accession has on the composition of trade, which can be both positive (e.g. benefits to consumers through a more varied composition of imports) and negative (e.g. lack of export diversification). The current study attempts to quantify the impact of the WTO on the composition of exports and imports for agricultural, textile, metallurgical and electronics sectors on the panel of world countries for the period 1993-2006 employing the gravity model. The main focus is on the poor countries, which primary exports are agriculture and textiles, and those that have acceded more recently and are expected to be more liberalized than the original WTO members. As the result of Poisson PML estimation it can be seen that the change in the composition of trade in these sectors is tremendous, though more pronounced for exports. For instance, in total least developed countries and recent members increase their shares of these sectors in the total exports by roughly 40 percent, which indicates that these countries are more prone to shocks, which affect their primary exports, after they join the WTO.


Volodymyr Baranovskyi: “Mixed Oligopolies And The Provision Of Durable Goods”


This paper studies models in which socially concerned firm is present on the durable goods market and competes with a private or another socially concerned firm. We compare results of these models with investigated earlier pure duopoly case, when only private firms are present on the market. The previous results for the pure duopoly case show the presence of Prisoners’ Dilemma. In such situation every firm prefers selling to renting, but (renting, renting) outcome gives more profit for each firm than (selling, selling) one. We consider 2 models: in the first one socially concerned firm competes with private firm and in the second one 2 socially concerned firms are competing. We received that in both cases Prisoners’ Dilemma still determines behavior of market participants. Therefore the attitude of the firm towards social welfare is not crucial in making renting/selling decisions.


Natalia Bodrug: “Estimating Exchange Rate Pass-Through In The Republic Of Moldova”


This thesis investigates the exchange rate pass-through mechanism in the Republic of Moldova and compares it to that observed in other groups of countries (mainly focusing on developing countries). The main goal of this investigation is to evaluate the extent and the speed of the pass-through effect, which implication is important for designing macroeconomic policy by the National Bank of the Republic of Moldova. For these purposes VAR methodology with post-estimation techniques such as Impulse-Response Functions, Variance Decompositon, as well as Granger causality procedure are incorporated. The obtained results reveal weak exchange rate channel of monetary transmission mechanism. Moreover, the exchange rate pass-through is higher for goods, mostly incorporated in export and import operations. There is also observed bi-lateral causal relationship: especially, high reverse causation is typical for foodstuff products and goods of first priority.


Serhiy Fozekosh: “Modeling The Term Structure Of Interest Rates In Ukraine And Its Application To Risk-Management In Banking”


This work on the term structure of interest rates employs the Vasicek model (1977) to cover three important aspects. The first concerns the fitting of Ukrainian data to this model to see how good it approximates movements in the Ukrainian bond market. The second relates to the forecasting of future yield curve using the estimated parameters of the model. The third involves the use of Vasicek model to calculate two commonly accepted market risk measures for a portfolio of fixed income securities, value at risk and expected shortfall, using Monte Carlo simulation. Data sample for this paper consists of Treasury bills and government bonds prices and yields to maturity for the period August 2010 to January 2011 collected from Ukrainian organized exchanges and over-the-counter market participants, downloaded from Bloomberg.


Vitaliy Gorobets: “Give and it will be given to you. Economic Approach”


Each of us heard the statement “Give and it will be given to you”. But we do not really understand what does it mean, what we should give, and what will be given to us. The existing economic literature on the important evolutionary paradox – altruism, provides wide evidence of emotional, social, and reputational return to altruistic and prosocial behavior among individuals, and economic pay off among sellers with altruistic concern. Taking this into account, in our work, we investigate the existence of economic pay off, in the form of enhancement in personal earnings, due to altruistic and prosocial actions. We model this relationship with the help of signaling function, which reveals positive personal characteristics to society, what can be beneficial not only in terms of social or emotional reward, but also in terms of economic gain.


Iuliia Grytsiv: “Performance of Health Care System: Does Structure of Government Spending Matter?”


This paper considers impact of government spending structure on the performance of health care system. Data used in this research comes from publicly available sources and covers sample of 20 OECD countries during the period of 1991-2007. Pooled OLS methodology is applied to the health production function with avoidable mortality as a measure of health care system performance. Government expenditures on education, environment protection, health, along with private health expenditures, GDP, schooling, alcohol consumption, emissions and unemployment are considered to be major “inputs’ of the health production process and are employed as regressors in the model. Findings indicate significant impact of government expenditures on environmental protection in the improvement of health care system performance. Expenditures on education reveal their effect through the number of years of schooling while public expenditures on health are found to be insignificant. Meanwhile private health expenditures substantially decrease avoidable mortality.


Pavlo Iavorskyi: “Distribution Of Crime Across Ukraine: Panel And Spatial Analysis”


This study investigates the nature of pattern of crime distribution in Ukraine as well as whether a spatial dependence is present in crime distribution. As an instrument to answer these questions, panel analysis and spatial lag model are estimated for total crime and four specific types of crime. The results show that crime distribution is sensitive to socio-demographic characteristics such as morality, urbanization and education. Moreover, police efficiency and poverty level are important crime incentives. Spatial analysis shows the significance of spatial spillovers.


Olga Kharchenko: “Financial Literacy In Ukraine: Determinants And Implications For Saving Behavior”


This paper explores the determinants of financial literacy and its implications for the saving behavior in Ukraine. In this study we use data from the national survey Financial Literacy and Awareness in Ukraine, conducted by Financial Sector Development Project (FINREP) and USAID in 2010. The empirical results on determinants reveal that the major factors influencing financial literacy in Ukraine are gender, level of education, occupation, region and wealth. Age and area of residence have not been found significant in explaining financial literacy. With regard to the implications of financial literacy for saving behavior our results suggest that literacy does not have a direct impact on savings when controlling for wealth. However, given the fact that financial literacy and wealth are mutually determined and are correlated over the life of consumer, we argue that financial literacy may have an indirect impact on saving by influencing wealth.


Oleksii Khvastunov: “The Impact Of Sponsorship On Stock Value”


This thesis investigates the impact of sponsorship agreements with English Premier League and German Bundesliga football clubs on the stock price of sponsoring firm. A half of income from jersey sponsorship in Europe belongs to these leagues. The main finding of the study is that the market does not react on the news of sponsorship announcement for most the cases. GARCH-type event study methodology was used for this investigation. GARCH model was applied to check whether football club results can affect the stock price of sponsoring firm through investors’ sentiments. The impact of football club performance was found to be insignificant.


Sergiy Kosenchuk: “The Role Of “Noise Trading” In Modeling Of Stock Market Returns”


Fisher Black in his paper “Noise” (1986) introduces the concept of “noise traders” who trade on stock market based on the restricted information. Such traders take some observable indicator as a reference point in decision-making process. Timo Terasvirta (1993, 1996, 2004) uses smooth transition regression (STR) modeling to explain the processes when the players’ behavior changes due to changes in indicator (so-called transition) variable. Based on the papers of Black and Terasvirta, David MacMillan in his paper “Non-Linear Predictability of UK Stock Market Returns” (2003) estimates changes in UK stock market return due to existence of “noise trading”. The idea of my thesis is to check for the existence of “noise trading” on the Ukrainian stock market (PFTS). First, I use the STAR model of MacMillan (2003). Secondly, I use a more general specification of STR where any explanatory variable can be the transition variable. The STAR model shows an insignificant influence of macroeconomic variables on stock returns. The test for non-linearity supports the STAR specification of the model but I have not found evidence of “noise trading” on the Ukrainian stock market.


Dmytro Lebedyev: “Determinants Of Trust In Banks”


This work considers individuals’ characteristics, which influence their trust in banks. Evidence on these in related literature is scarce and controversial. In our analysis we use data from FINREP 2010 survey, which includes data on respondents’ personal characteristics and their trust in different institutions. Two ordered probit models are employed to analyze trust in privately owned banks and state-owned banks. A multinomial logit model is used to analyze those respondents who simultaneously trust in both types of banks and those, who trust only in one type. The results indicate that place of residence as well as awareness and availability of information on financial markets affect trust in banks. Gender, age, education and income variables only marginally affect trust in privately owned banks. Trust in deposit insurance fund is found to be positively related to trust in banks. Thus, promotion of activities of Personal Deposit Insurance Fund will help to increase public trust in banks.


Evgeniya Lubas: “Trade Potential Of The Republic Of Belarus: Gravity Model Approach”


This study incorporates recent amendments and modifications to the gravity model of trade to assess the gap between the actual volume of exports trade flows and the volumes predicted by the model for the Republic of Belarus. The prediction is calculated by using out-of-sample prediction, applying the methodology developed by Helpman, Melitz, Rubenstein (2008). Two stages of estimation are performed to predict extensive and intensive margins of trade. The results demonstrate that the Republic of Belarus tends to concentrate its trade in the CIS region, while underperforming in trade with European Union and other developed countries.


Mariia Ostapchuk: “Elasticity Of Demand For Food And Climate Change”

Medical literature provides evidence that changes in air temperature lead to changes in human body and could lead to a different diet and nutrition. This study examines the hypotheses that an increase in air temperature leads to a decrease in aggregate consumption of fats and proteins, and to a rise in carbohydrates consumption. Three food groups are selected for the analysis as representative of natural substance listed above: animal fats (fat), meat (proteins) and vegetables (carbohydrates). Non-parametric estimation helps to define functional form of the relationship between food consumption and mean seasons temperatures; it turned out to be linear one. The hypothesis is examined with model based on log-linearization version of Almost Ideal Demand System. Results of separate estimation of the selected food groups consumption support the hypotheses about carbohydrate and fats consumption. The elasticity estimates of demand for food to changes in temperature allow to project change in the demand that is associated with the most plausible climate change scenario. It is expected that by 2050, on average, demand for vegetables will increase by 12, 83 % per person per day and demand for fats will decrease by 16, 18 % per person per day.


Grygorii Ovsiannykov: “Multi-Period Stock Market Volatility Forecasting: Evidence From Emerging Markets”


This study compares the relative performance of direct, indirect and MIDAS volatility forecasting approaches to the widely used scaling approach based on the out-of-sample Mean Squared Forecasting Errors. Particularly, it investigates a robustness of MIDAS methodology on more volatile markets. Given lack of theoretical justification, the study carries out using empirical data for Poland, Ukraine and Russia stock indexes from 2002 to 2011. Based on GARCH(1,1) and linear MIDAS methodology quite unexpected conclusion that scaling method outperforms other more sophisticated models for weekly, bi-weekly and monthly horizon in terms of higher volatility predictive ability can be drawn. Finally, there is evidence that linear MIDAS perform better than direct and indirect methods for less volatile environment.


Kira Pruglo: “Are Small Firms More Innovative in Modern Industries?”


In this study we test the hypothesis that small firm are more likely to invest in R&D in modern industries in Ukraine and other transition countries. We define modern industries group based on OECD 2009 Scoreboard Technology Classification of industries according to R&D intensity adjusting for differences for Ukraine. Two definitions of small firm as the those having less than fifty and less than one hundred employees are applied for robustness check. We use two datasets for Ukraine and one for other transition countries to compare the results across countries. The empirical results did not provide strong evidence of the positive effect of small firm size in modern industries group neither on the probability to invest in R&D nor the amount of R&D investment in Ukraine. Mixed results were obtained for other twenty six transition countries. Small firms operating in modern industry are found to be more likely to invest in R&D in Russia, Poland, Armenia, Czech Republic and Estonia. For the majority of other countries the effect was insignificant but still has an expected positive sign.


Olga Soloviova: “Do Targets Gain From M&A: Ukraine”


The objective of this paper is to estimate the overall post M&A effect on target companies in Ukraine. I concentrate on company specific characteristics to estimate the change in profitability and productivity in the target companies. Dataset include deals in the real business sector in Ukraine between 2003 and 2007. Total factor productivity is predicted using Olley-Pakes Methodology. Further, I follow propensity score matching methodology of the recent empirical literature to deal with the selection problem. Indeed, target companies usually have bigger size, higher values of assets, labor and material costs, higher net sales. In addition, the effect of M&A on profitability and productivity changes is estimated for 1-4 years long perspective. As a result of the study, I found no evidence of either short or long term effect of M&A on the mentioned measures. However, I found positive effect of majority share bought on the productivity changes through 2-4 year after the deals. Cross-border characteristic has negative effect in the third year after the transaction.


Oleg Tkhoryk: “School Size As A Determinant Of Educational Performance In Transition Countries”


Education nowadays is considered as one of the basic determinants of economic growth. Given that, reforms in education can have a direct influence on a country’s prosperity and well-being in the long run. This paper examines influence of the school size on educational performance of students of 4th and 8th grade by building educational production functions for 12 transition countries. This enables us to contribute to the policy discussion on the size of the school. We find that there exists an optimal (number of students in the school, which maximizes student performance) school size for Czech and Slovak Republic with 660 and 840 students respectively. Additionally, for Armenia and Georgia there exists a non-optimal (number of students in the school, which minimizes student performance) size of the school with 1060 and 940 students respectively. The results for Ukraine show that there is no clear relation between the school size and student performance.


Kateryna Vialykh: “Does The Prosperity Of Your Region Depend On Your Elected Representative”


The main aim of this research is to analyze how regional representation, measured as the number of parliamentary deputies associated with a certain region of Ukraine, affects the development of this region, measured by real gross regional product per capita and grants to regions from the Ukrainian State Budget per capita. Using data for 25 Ukrainian regions (oblasts) for the period 2002-2008, two estimation procedures were performed: fixed effect and Hausman-Taylor estimations. Empirical analysis suggests that the composition of region’s delegates in the Verkhovna Rada has no implications on the variation in real gross regional product per capita, however, it has negative effect on the state budget allocation.


Tatsiana Zharnikava: “Does Ownership Stucture Matter For Energy Efficiency: A Non-Parametric Study Of The Determinants Of Energy Efficiency Performance In Countries In Transition”

Present study is an attempt to answer the question about the impact of ownership structure on energy efficiency of an industrial firm, as well as to determine other driving forces for improvement of energy efficiency in transition countries. A non-parametric approach (DEA) is applied at the first stage to estimate energy efficiency scores measured by input-oriented Shephard-type efficiency, as well as by energy-oriented (sub-vector) efficiency. Truncated regression with smooth homogeneous bootstrap is used as the estimation technique at the second stage of the analysis to identify key drivers of energy efficiency. The obtained results for ownership structure are mostly robust for both overall and sub-vector energy efficiency and show that in general there is negative relationship between size of state ownership in the company and energy efficiency level. The findings imply that foreign ownership, on average, has weak negative impact on estimated efficiency. Such factors as labor quality and involvement into innovation processes are found to have significant positive effect on energy efficiency performance in both efficiency interpretations. Finally, the study provides possible course for further research in the field.