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.
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.
I argue that the rather unfavorable conclusions of the three papers in the session on "Coordination and Tradeoffs" might not be as bad as they seem. In particular, I dwell on challenges facing the central bank using an interest rate that is different from the risk-free rate in its Taylor rule, and show that proper redefinition of the intercept and the slope of the rule allows avoidance of inflationary bias and preserves the stability of equilibrium.
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.
The collection of papers includes the articles, which examine some of the most actual problems of the modern Chinese studies. Among these problems are the connections between our two contries in the period, when the Chinese Communist Party came to power, and on the modern stage, the problems of formation and development of Chinese "global cities", the development of the law in the PRC, the history of the Guomindang, history and modern condition of the Chinese armed forces.
The purpose of this article is to explain the reasons for the low involvement of non-governmental organizations in Russia in the provision of social services by the state order. This entails in uncovering ways to overcome barriers to the expansion of the share of the non- governmental providers. The main challenges of the reform are considered from different sides: (1) through comparison of the expectations from the reform with the results that it gave in the developed countries over the 30 years of the reform of the welfare state, (2) from the point of view of the interests of the for-profit and non-profit organizations, (3) through the identification of the discrepancy between the emerging heterogeneity of service providers and the prevailing nature of the public governance in Russia.
It is shown that the main barrier to the expansion of the share of non-state organizations in the provision of social services is the low capacity of the social service market, which makes the market entry risky. This applies to both the charitable and the competitive market for social services. If they were more developed they could serve as a source of market maneuver and a reliable alternative to state contracts in case of failure to obtain them. For the reform to succeed, the state must be prepared to finance not only the contracts themselves, but also the development of competition and alternative markets, including quasi-market mechanisms to increase the effective demand of the population. In addition, the pluralism of state regulation should comply with the plurality of vendors and terms of service.