The paper considers the parametric hedging of non-parallel shifts in the yield curve. In order to determine capital requirements and stress testing, Basel committee recommends taking into account the risk of non-parallel interest rate shifts. (Basel Committee on Banking Supervision, 2016). As of April 2017, only one Russian bank took this risk into account in calculating interest rate risk, and one was developing a methodology (Central bank of Russia, 2017). We use several term structure models for hedging non-parallel interest rate shifts. The study uses a 5-year span of Russian bond market data. We use VaR and MAE to assess the effectiveness of hedging approaches.
The novelty of the work lies in the application of different term structure models, most of which have not previously been used for parametric hedging. We also present an original methodology for assessing the effectiveness of hedging. For the first time a study is conducted on the Russian bond market.
Cross-validation shows that the Nelson-Siegel (and also its shortened version), Svensson and Cox-Ingersoll-Ross models within the parametric hedging problem give better results than the generally accepted Fisher-Weil duration model. The results of this work have practical significance for fixed income managers.
The welfare gain from the tariffs that reflect water resource scarcity is analyzed. The empirical results of the welfare gain from the efficient management of groundwater extraction relative to myopic policy are summarized. It is shown that efficiency gain increases when the backstop resource becomes more expensive but changes ambiguously with an increase in the groundwater stock or discount rate that make estimates for different aquifers hardly comparable. Numerical analysis demonstrates that differentiated tariffs that reflect differences in water consumption patterns may bring substantial welfare gain.
At first, we discuss whether the concept of economic cycles is at all applicable to the realities of the Russian economy. As for several subperiods during the last 35 years, it has been not only market but planned and transformed also, this issue is arguable. But in our opinion, all mid-term factors of total economic activity – positive as well as negative – may be divided into three groups: an exhaustion of old drivers for economic growth or an emergence of new ones; positive or negative external shocks; destructive or constructive decisions and actions made by monetary and non-monetary authorities. From this point on, mid-term fluctuations in the level of economic activity (and in the volume of output) may be described as a sequence of non-periodic expansions and contractions. In other words, as a phenomenon of cyclical economic movements with its peaks and troughs.
On these grounds, we established a reference chronology for the Russian economic cycle from the early 1980s to mid-2015. As there is no single monthly indicator available for the whole period, we used a set of indices. To be precise, six indices of industrial production and three indices of output by basic branches (official as well as non-official). We also tried two methods of seasonal adjustments (X-12-ARIMA and TRAMO/SEATS) and four methods for dating cyclical turning points (local min/max, Bry-Boschan, Harding-Pagan, and Markov-Switching model). As various combinations of initial data and various statistical methods usually led to different estimates of peaks and troughs, the final decision was made according to several additional qualitative criteria. The resulting set of turning points looks plausible and separates expansions and contractions in an explicable manner, but further investigations and discussions are needed to establish a consensus in the expert community.
Studies on job search in Russia regularly raise the problem of separating seekers from non-seekers and forming a sample for empirical analysis of job search. Different researchers provide different solutions to the problem, but there are two main approaches to constructing a sample. The first one is to use data only on registered unemployment, the second approach is to use data from surveys that include questions on whether a respondent is searching for job and is ready to start working after receiving an acceptable offer. This paper provides estimates of an empirical job search model that explains both decision whether to seek a job or not and a probability of a successful search. That decision is unobservable and may not coincide with answers that individuals give during the survey. The model is estimated using data from Russian Longitudinal Monitoring Survey (RLMS-HSE) for the 2000–2014 period. According to obtained estimates, most of the non-employed may be considered as job seekers. The results not only provide a new insight into economic activity of non-employed but also show a possibility to significantly enhance information base for empirical studies on job search.
The paper provides a theoretical model, which studies the influence of political institutions and economic inequality on barriers to entry on markets, a level of redistribution, technological progress and economic growth. The model combines two approaches of modern economic literature, endogenous growth models of creative destruction and the approach of the political economy of development, according to which political institutions determine a social choice of economic institutions, which influence long-term growth rates. On the first step of the game agents differing in their incomes, skills and political power, make a social decision about the level of redistribution and the level of barriers to entry on markets. On the second step agents make economic decisions on investment, production and consumption. Political regimes differ in the distribution of votes between agents. The model explains the empirical evidence, suggesting that the transition to democracy in short and middle term reduces inequality in incomes, but does not always lead to the formation of institutions, favoring the equality of opportunities. In the model the influence of political regimes on barriers to entry on markets depends on the initial level of inequality in incomes and skills, and also on the average level of skills. In a society with a high level of inequality in incomes and skills, the existence of a majority coalition, which support a high level of barriers to entry on markets is more probable. This coalition will include the richest agents and the least skilled agents. The results of the model explain different outcomes of democratization process in terms of its effect on barriers to entry on markets and economic growth. The paper also considers four examples of third-wave democratization, which illustrates the results of the model.
We study the consequences of opening trade between developed and developing countries. To this end, we develop a two-factor general equilibrium model of international trade with variable markups and two countries which differ in relative factor endowments. We show that the more developed country (a country with a higher relative capital endowment) is characterized by higher wages and lower capital price while total individual income is higher in this country than in the less developed one. Deeper asymmetries in relative factor endowment between countries lead to more intensive trade. We also show that opening trade between two countries similar in factor endowments results in welfare gains for consumers in both countries. Contrast to that, opening trade is detrimental for residents of developing country if countries have big enough differences in factors endowments while consumers in developed country still gain from trade. This result arises due to high income inequality between two countries’ residents. The additional source of welfare losses in the developing country is the high production cost of imported commodities, which reduces their purchasing power for imported goods. Thus, market equilibrium with free trade is optimal only in the case of identical individual incomes between countries. Additional export regulations in the developing country may reduce differences in purchasing power between countries. Therefore, appropriate regulatory measures could result in reduction in income inequality which lead to gains from trade for consumers in both countries.
International experience demonstrates that successful development of national economy is inseparably linked with the use of innovation potential of small business – the most dynamical and flexible sector of economic activity. However, in order to use the maximum extent possible and, consequently, increase the economic return it is necessary to have a profound array of realistic and operational information that includes numerous aspects and entrepreneurial behavior’s motivation. Within a post-crisis business environment its role in socioeconomic development of the country has significantly increased and pointed out the necessity and relevance of researches that study and analyze business climate. Available Russian statistical data collection reflecting the condition of small business primarily from a quantitative point of view is insufficient not only because of its coverage but also because of estimation methods, which reduces the possibilities of analysis of current changes. Unfortunately, modern studying and analyzing methods of considered subjects show an obvious informational gap in researches that are based on the regular environment surveys. Application of this tool is especially significant for the economy in the circumstances because of the limited opportunities to complete economic information by means of existing quantitative statistical practices. This paper presents a complex analysis of business climate in the manufacturing industries in 2013. The research is based on sample business environment surveys of more than 2.5 thousand small businesses in the field of industry (sections C, D, and E of the Russian Classification of Economic Activities) conducted by the Federal State Statistics Service for 2008-2013.
Using RLMS-HSE data set we analyze labor flows in the Russian labor market for 2000-2012. We document the high mobility rate and the transitive role played by non-participation. Division of all employed into three large groups (budgetary workers, workers in the corporate market sector, and employed in the non-corporate or informal sector) suggests that budgetary workers are low mobile compared to others, and informal workers and economically inactive individuals have higher probabilities to become unemployed than those who work formally. The paper exploits a few methodological approaches. First, we build transition matrices allowing estimate transition probabilities. Second, the Shorrocks indexes estimate intensity of mobility. Third, the dynamic multinomial logit model explores individual determinants of inter-status transitions and structural dependence from the previous labor market states. Fourth, we decompose the change in unemployment rate as the combination of incoming and outcoming flows. This procedure suggests that the decline in unemployment is explained by decrease in incoming flows while the outflows remain largely stable. Observed intensity and direction of flows fit the institutional configuration of the Russian labor market model.
This study presents new estimates for returns to tenure for the Russian labour market. It exploits the RLMS-HSE panel data set that covers the period 1994–2014 and it differs from previous studies in a few important aspects. First, we try to account for the specifics of the transition period dividing the total observed tenure into two parts, where one part is the old one acquired before 1992 and the other part is newly accumulated since 1992. Second, we estimate the returns to tenure for employees in the private and the state sectors separately.Third, we apply alternative instrumentation techniques suggested by Altonji-Shakotko and by Topel and are the first who do this for the Russian labour market. Our cross-section OLS estimates show that the return to tenure in the state sector has always been positive but in the private sector it has been positive since the mid – 2000s. In the private sector, the return to tenure is lower and the wage growth over the tenure stops earlier than in the state one. On average, the cumulative premium for 15 to 20 years of firm-specific experience makes about 20–25%, according to the OLS estimates. However, it disappears completely or even turns negative if endogeneity is addressed with use of the instruments. Our analysis suggests that existing knowledge of how tenure is valued in the Russian labour market needs to be revised.
The article is devoted to classical tracking data analysis conducted to obtain the role of consumer experience, advertising awareness of the brand and competitors', reputation and others in potential demand driving. One of the key research' outcomes is approach verification, which allows obtaining hierarchy effects chains for particular brand considering tracking data specific. The article includes tracking studies methodology detailed explanation and shows its role in marketing planning process. Applied brand health analysis methods rooted in hierarchy effects theory are discussed. Special focus is made on actionable recommendations providing, targeted to advertising efficiency increase.
In recent years, the role of stock markets as the source of capital to fund increased significantly. Using investment portfolio enables companies to achieve maximum efficiency in the stock market, thereby reducing the risk of their operations and increase their profitability. The article deals with the effective management of the investment portfolio , including various types of assets . Through an integrated approach, combining the selection of assets with the help of fuzzy clustering, the Markowitz classical model and rebalancing, this problem was reduced to the problem of maximizing the Sharpe ratio at a given level of risk . The main result of research is mathematical model, which provides a significant increase of effectiveness of portfolio management compared to conventional approaches. This paper proposes a modified algorithm for rebalancing over time, which allows to combine all the advantages of active management with a reduction in transaction costs. The choice of control method was carried out taking into account the investment horizon.
A comprehensive model for evaluating the effectiveness of management of the investment portfolio, having as target the function of profit maximization, and as constraints - the level of risk, and the constancy of the weighting factors increase the Sharpe ratio.
The most promising is the creation on the basis of algorithms developed special software that can be used by both private investors and managers of investment funds.
Freshwater challenge has become an integral part of international political agenda since the last decade of the XX century. Huge amount of people who suffer from different types of water stress (over 1,1 bln.) brought global community to include Improved access to water and sanitation as one of 4 major components of Sustainable environment Millennium Development Goal (MDGs) of United Nations. On July 28, 2010, UN General Assembly added a right for water in the list of basic human rights. Evolution of life standards in developed countries, rising concerns of poverty and inequality lead to rethinking of a wide range of global challenges, which were mostly ignored by world community before. Aggravation of water access problem, regional contradictions over water allocation and rising demand for higher life standards reflect both continuous escalation of water stress and higher ethics of global civil society towards lifestyle and inequality problems.
Before early 2000s, economic experts did not pay enough attention to water issues besides national water facilities, irrigation, hydro energy and urbanization problems. Beyond national frontiers water discourse resolved to draughts and deserts monitoring. All attention was concentrated on local measures aimed to prevent floods and droughts or manage sophisticated problems of allocation of scarce water resource in transboundary basins. As it seems today, water deficit has become a structural factor influencing world economic development. Access to clean water is in the focus of Sustainable development policy, water deficit becomes a constraint for economic growth in both developed and developing countries. At the same time world expenses for R&D in water management, investments in droughts and flood security are steadily growing. Energy efficiency in cities and especially megacities arises more heavily, state programs on modernization of irrigation systems multiply each year and arid regions in Asia, Europe and North America invest more and more in new desalination plants.