Debt Overhang and Monetary Policy in Czech Republic
We investigate the consequences of excessive international debt overhang as they relate to both debtor and creditor countries. In particular, we assess the impact of monetary policy on financial stability and how it can be used to smooth borrowers, as well as creditors, consumption over the business cycle. Based on [Goodhart, Peiris, Tsomocos, 2018], we establish that an independent countercyclical monetary policy, that contracts liquidity whenever debt grows whereas it expands it when default rises, reduces volatility of consumption. In effect, monetary policy provides an extra degree of freedom to the policymaker. We implement our approach to the Czech and Eurozone area economies during the 1990s.
In our model, we introduce endogenous default ά la [Shubik, Wilson, 1977], whereby debtors incur a welfare cost in renegotiating their contractual debt obligations that is commensurate to the level of default. However, this cost depends explicitly on the business cycle and it should be countercyclical. Hence, contractionary monetary policy reduces the volume of trade and efficiency, thus increasing default. This occurs as the default cost increases the associated default accelerator channel engenders higher default rates. On the other hand, lower interest rates increase trade efficiency and, consequently, reduce the amplitude of the business cycle and benefit financial stability.
In sum, the appropriate design of monetary policy complements financial stability policy. The modeling of endogenous default allows us to study the interaction of monetary and macroprudential policy.
Venture capital (VC) provides financial and managerial support for new innovative ideas at the initial stages of commercialization. It has helped to find the market for many radical innovations of 20th century, including personal computer, Internet and genetic engineering.
As a part of market economy venture business was not stable from the very beginning. The periods of rapid growth alternated with deep recessions. However each time VC revived anew as the Phoenix due to its very important function in modern knowledge-based economy.
This report presents an analysis of statistical data that prove the existence of several cycles in VC dynamics in the USA and the Great Britain. The main factors of these cycles formation are discussed. The author proposes two possible scenarios of development of VC market for the first 30 years of the new 21st century. A hypothesis is put forward about the relation between VC cycle's amplitude and a phase of Kondratieff's cycle.
In our research, we examine what macroeconomic factors determine and influence the credit cycle. In addition, our study contains four sections with theoretical and empirical parts, in which we describe how to measure credit cycles for developed and developing countries, and then introduce an important measure of the credit gap. Our results show a comparative analysis of credit cycles between different countries with different economic growth, and we have created an econometric model, which shows us the impact of macroeconomic factors according to the credit cycles for developing and developed economies.
Despite the impressive economic growth in Russia between 1999 and 2007, there is a fear that Russia may suffer the Dutch disease, which predicts that a country with large natural resource rents may experience a de-industrialisation and a lower long term economic growth. In this paper we study if there are any symptoms of the Dutch disease in Russia. Using a variety of Rosstat publications and the CHELEM database, we analyse the trends in production, wages and employment in the Russian manufacturing industries, and we study the behaviour of Russian imports and exports. We find that, while Russia exhibits some symptoms of the Dutch disease, e.g. the real appreciation of the rouble, the rise in real wages, the decrease in employment in manufacturing industries and the development of the services sector, the manufacturing production nonetheless increased, contradicting the theory of the Dutch disease. These trends can be explained by the gains in productivity and the recovery after the disorganisation in the 1990s, by new market opportunities for Russian products in the European Union and in CIS countries, by a growing Chinese demand for some products and by a booming internal market. Finally, investments in many manufacturing industries were largely encouraged, whereas those in the energy sector were strongly regulated, which contributed to the economic diversification.
The historical changes in Central and Eastern Europe demanded suitable paths for the transition from centrally planned to market based economies. The lack of relevant experience added to the challenge, giving rise to the incalculable risks of implementing untested policies. By focusing on monetary policy, trade, and convergence, this volume addresses some of the most urgent economic policy issues in the transition economies of Central and Eastern Europe and beyond.
The paper represents the review of contemporary approaches to the analysis of financial market imperfections and financial crises and their impact on fluctuations of the key macroeconomic variables during the business cycle as well as the transmission mechanism of financial shocks on the real economy in the framework of New Keynesian dynamic stochastic general equilibrium models. These models are widely used for the evaluation of monetary policy effects on macroeconomy and constitute the theoretical base for elaboration the optimal monetary policy not only during the crisis but for the further perspective. The construction of such models types for different economies including the Russian economy requires considering the institutional features and specific development and functioning characteristics of the of the national financial sector and economy as a whole.
The author traces the analysis evolution of the monetary shocks effects on the economy, exploring the key approaches to modeling of the monetary transmission mechanism. The article emphasizes the necessity of the monetary transmission mechanism modification in the conditions of current financial crisis: the active role reflection of the financial intermediaries, accounting of the development degrees of institutional capacity in the economy.
In this exploratory study, we examined several interethnic ideologies held by individuals (assimilation, colorblindness, multiculturalism, and polyculturalism) from a social ecological perspective. We examined moderation effects of neighborhood ethnic density (ED) on relationships between interethnic ideologies and intergroup bias towards various minority ethnic groups in the Russian context. Intergroup bias was assessed as a composite score of bias toward four ethnic groups who have different cultural distances from the Russian mainstream population: Chechens, Belarusians, Uzbeks, and Chinese. We obtained a gender balanced sample of ethnic Russians from the Central Federal District of Russia (N = 359) comprising of 47% women and 53% men. The measures were used in a Russian translation by an adaptation using the back-translation and cognitive interviews. Multiple regression analysis was used to test the relationships. The results showed that high perceived neighborhood non-Russian ED weakened negative relations between intergroup bias and ideologies that purportedly accept cultural diversity (multiculturalism and polyculturalism). On the other hand, for interethnic ideologies those purportedly reject cultural diversity, high perceived neighborhood non-Russian ED weakened the positive relations between intergroup bias and assimilation and strengthened the negative relations between intergroup bias and colorblindness. The pattern of results suggests that the relationship between attitudes and intergroup bias may change based on the perceived ethnic composition of the local area and frequency of contacts. Although our findings are relatively novel they support the emerging view that attitudes and intergroup relations need to be studied from a social ecological context.
The newsbreak for writing this article was a kind of jubilee: 25 years ago, in 1992, a conference in Rio de Janeiro adopted the United Nations Framework Convention on Climate Change. This event became the first in a series of follow-up conferences and documents aimed primarily at limiting carbon dioxide emissions into the atmosphere to counter global warming. The author is an active advocate of the concept of the anthropogenic impact on climate as a leading factor in climate change. He stresses the positive potential of international agreements in this field and a new energy-environmental paradigm, which implies the development of low-carbon industry and transition to renewable energy sources and the “green” economy.