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Of all publications in the section: 19
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Working paper
Peresetsky A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2010. No. 1.
The Kazakhstan banking system is increasingly viewed as more advanced than the Russian system. Kazakhstan adopted the International Accounting System (IAS) in 2003 and the Basel II norms in 2005, while Russia has yet to fully adopt either IAS or Basel II. In this paper, bank data for 2002-2006 are used to estimate models of bank cost efficiency. In contrast to most previous papers, no significance difference is found for the average cost efficiency scores of banks for the two countries during 2002-2006. How banks are ranked for efficiency depends upon the chosen model (input and output sets). An interesting insight is the finding that most banks in both countries are below optimal size.
Added: Jun 15, 2013
Working paper
Mikhail Mamonov, Vernikov A. V. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2015. No. 22/2015.
This paper considers the comparative efficiency of public, private, and foreign banks in Russia, a transition economy with several unusual features. We perform stochastic frontier analysis (SFA) of Russian bank-level quarterly data over the period 2005–2013. The method of computation of comparative cost efficiency is amended to control for the effect of revaluation of foreign currency items in bank balance sheets. Public banks are split into core and other state-controlled banks. Employing the generalized method of moments, we estimate a set of distance functions that measure the observed differences in SFA scores of banks and bank clusters (heterogeneity in risk preference and asset structure) to explain changes in bank efficiency rankings. Our results for comparative Russian bank efficiency show higher efficiency scores, less volatility, and narrower spreads between the scores of different bank types than in previous studies. Foreign banks appear to be the least cost-efficient market participants, while core state banks on average are nearly as efficient as private domestic banks. We suggest that foreign banks gain cost-efficiency when they increase their loans-to-assets ratios above the sample median level. Core state banks, conversely, lead in terms of cost efficiency when their loans-to-assets ratio falls below the sample median level. The presented approach is potentially applicable to analysis of bank efficiency in other dollarized emerging markets.
Added: Aug 11, 2015
Working paper
Belousova V., Karminsky A. M., Kozyr I. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2018. No. 5.
The paper examines how type of ownership affects the profit efficiency of Russian banks. Using bank-quarter data for selected banks in the period 2004–2015, we combine stochastic frontier analysis (SFA) methodology with an intermediary approach to assess profit efficiency. Our key findings show that foreign-owned banks are the most efficient, followed by state-owned banks and private domestic banks. We also find that the profit efficiency of foreign-owned banks was higher than that of other banks during the economically stable periods of 2004Q1 to 2008Q2 and 2014Q1 to 2015Q3, and that state-owned banks were more efficient than others in the period of financial turmoil from 2008Q3 to 2013Q4 thanks to state support. These results are robust when we consider these banks in terms of branch network diversity, risk preferences, and specialization.
Added: Feb 22, 2018
Working paper
Korhonen I., Goel R. K., Belousova V. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2011. No. 31.

This paper examines determinants of corruption across Russian regions. Key contributions include: (i) a formal study of economic corruption determinants across Russian regions; (ii) comparisons of determinants of perceived corruption versus those of actual corruption; and (iii) studying the influence of market competition and other factors on corruption. The re-sults show that economic prosperity, population, market competition and urbanization are significant determinants of Russian corruption. The use of alternative corruption measures reveals that economic prosperity and population have a largely similar impact on corrup-tion perceptions and corruption incidence. However, there are significant differences in the effects of competition and urbanization.

Added: Oct 24, 2012
Working paper
Schoors K., Semenova M., Зубанов А. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2017. No. 1/2017.
We analyze whether a depositor’s familiarity with a bank affects depositor behavior during a financial crisis. Familiarity is measured by the presence of regional or local cues in the bank’s name, while depositor behavior is considered in terms of depositor sensitivity to observable bank risk (market discipline exerted by depositors). Using the 2001–2010 bank-level and region-level data for Russia, we show the evidence that depositors use quantity-based discipline on all banks in the sample. The evidence of a price-based discipline mechanism, however, is virtually absent. We find that depositors of familiar banks were less sensitive to bank risk after a financial crisis than depositors at unfamiliar banks. To assure the results are driven by familiarity bias and not implicit support of regional governments to banks with regional cues in their names, we interact the variables with measures of trust in local governments and regional affinity. We find a “flight to familiarity” effect strongly present in regions with strong regional affinity, while the effect is rejected in regions with greater trust in regional and local governments. This suggests that the results are driven by familiarity rather than implicit protection from trusted regional or local governments.
Added: Feb 4, 2017
Working paper
Mironov V., Petronevich A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2015
This paper examines the problem of Dutch disease in Russia during the oil boom of the 2000s, from both the theoretical and empirical points of view. Our analysis is based on the classical model of Dutch disease by Corden and Neary (1982). We examine the relationship between changes in the real effective exchange rate of the ruble and the evolution of the Russian economic structure during the period 2002 - 2013.  We empirically test the main effects of Dutch Disease, controlling for specific features of the Russian economy, namely the large role of state-owned organizations. We estimate the resource movement and spending effects as determined by the theoretical model and find the presence of several signs of Dutch Disease: the negative impact of the real effective exchange rate on growth in the manufacturing sector, the growth of total income of workers, and the positive link between the real effective exchange rate and returns on capital in all three sectors. Although also predicted by the model and clearly observable, the shift of labor from manufacturing to services cannot be explained by ruble appreciation alone.
Added: Jan 29, 2015
Working paper
Ponomarenko A., Derugina E., Krupkina A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2014. No. 11/2014.
In the spirit of Borio et al. (2014) we present a model that incorporates information con-tained in diverse variables when estimating sustainable output growth. For this purpose, we specify a state-space model representing a multivariate HP-filter that links cyclical fluctua-tion of GDP with several indicators of macroeconomic imbalance. We obtain the parame-terization of the model by estimating it over a cross-section of emerging market econo-mies. We show that trend output growth rates estimated using this model are more stable than those obtained with a univariate version of the filter and thus are more consistent with the notion of sustainable output.
Added: Apr 12, 2014
Working paper
Korhonen I., Peresetsky A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2013. No. 15.
We use a Kalman filter type model of financial markets to extract a global stochastic trend from the discrete non-synchronous data on daily stock market index returns of different stock exchanges. The model is tested for robustness. In addition, we derive “most  important” hours of world financial market and estimate the relative importance of local versus global news for different stock markets. The model generates results that are consistent with intuition.
Added: Jul 21, 2013
Working paper
Marques II I. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2018. No. 7/2018.
When does business support the expansion of social policy in the developing world? Existing work on managers’ preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. Such firms will support social policy even where institutions are poor. I test this argument using a survey of 666 firms in 10 Russian regions.
Added: Mar 13, 2018
Working paper
Voskoboynikov I., Timmer M. P. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2013. No. 19.
GDP per capita growth rates in Russia have been among the highest in the world since the mid-1990s. Previous growth accounting research suggests that this was mainly driven by multi-factor productivity (MFP) growth. In this paper we analyse for the first time the drivers of Russian growth for thirty-four industries over the period 1995 to 2008. We pay in particular attention to the construction of a proper measure of capital services, to use in place of the stock measures employed in previous research. Based on these new measures, we find that aggregate GDP growth is driven as much by capital input as by MFP growth. Mining and Retailing account for an increasing share of the inputs, but are weak in terms of MFP performance. In contrast, MFP growth was rapid in goods-producing industries, but the sector’s GDP share declined. The major drivers of MFP growth were in the high-skilled services industries that were particularly underdeveloped in the Russian economy in the 1990s.
Added: Sep 4, 2013
Working paper
Peresetsky A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2008. No. 14/2008 .
Added: Jun 15, 2013
Working paper
Irina Andrievskaya, Semenova M. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2013. No. 29/2013.
The interbank market plays an important role in the overall function of the financial system. The efficiency of the interbank market, in turn, depends largely on its inherent disciplining mechanisms. This paper investigates the discipline mechanisms of Russia’s interbank market, testing the hypothesis that market discipline in Russia was strong enough to constrain excessive risk-taking by participating banks before, during, and after the 2008–2009 financial crisis. The existence of quantity-based market discipline is investigated using Heckman’s sample selection model and the efficiency of market discipline is studied with a panel data model. Our approach detects market discipline only during the financial crisis, not before or after. Even during the crisis, its efficiency in curbing bank risk-taking was rather low.
Added: Nov 17, 2013
Working paper
Andrievskaya I. K. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2012. No. 12/2012.
The 2007-2009 global financial crisis demonstrated the need for effective systemic risk measurement and regulation. This paper proposes a straightforward approach for estimating the systemic funding liquidity risk in a banking system and identifying systemically critical banks. Focusing on the surplus of highly liquid assets above due payments, we find systemic funding liquidity risk can be expressed as the distance of the aggregate liquidity surplus from its current level to its critical value. Calculations are performed using simulated distribution of the aggregate liquidity surplus determined using Independent Component Analysis. The systemic importance of banks is then assessed based on their contribution to variation of the liquidity surplus in the system. We apply this methodology to the case of Russia, an emerging economy, to identify the current level of systemic funding liquidity risk and rank banks based on their systemic relevance.
Added: Mar 18, 2014
Working paper
Peresetsky A., Karminsky A. M. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2008. No. 17/2008.
Added: Jun 15, 2013
Working paper
Vernikov A. V. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2009. No. DP 24/2009.

The purpose of this paper is to carefully assess the size of public sector within the Russian banking industry. We identify and classify at least 78 state-influenced banks. For the state-owned banks, we distinguish between those that are majority-owned by federal executive authorities or Central Bank of Russia, by sub-federal (regional and municipal) authorities, by state-owned enterprises and banks, and by "state corporations". We estimate their combined market share to have reached 56% of total assets by July 1, 2009. Banks indirectly owned by public capital are the fastest-growing group. Concentration is increasing within the public sector of the industry, with the top five state-controlled banking groups in possession of over 49% of assets. We observe a crowding out and erosion of domestic private capital, whose market share is shrinking from year to year. Several of the largest state-owned banks now constitute a de facto intermediate tier at the core of the banking system. We argue that the direction of ownership change in Russian banking is different from that in CEE countries.

Added: Sep 3, 2012
Working paper
Vernikov A. V. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2007. No. DP 5/2007.

We review the transition of the Russian banking sector focusing on the interplay between ownership change and institutional change. We find that the state's withdrawal from commercial banking has been inconsistent and limited in scope. To this day, core banks have yet to be privatized and the state has made a comeback as owner of the dominant market participants. We also look at the new institutions imported into Russia to regulate banking and finance, including rule of law, competition, deposit insurance, confidentiality, bankruptcy, and corporate governance. The unfortunate combination of this new institutional overlay and traditional local norms of behavior have brought Russia to an impasse - the banking sector's ownership structure hinders further advancement of market institutions. Indeed, we may now be witnessing is a retreat from the original market-based goals of transition.

Added: Sep 3, 2012
Working paper
Semenova M. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2011. No. 28.

This paper examines what influences Russian households‟ decisions to save and borrow. We use the 2008 data from the 17th round of the Russia Longitudinal Monitoring Survey (RLMS-HSE). Our results show that the determinants of saving and borrowing are not only those suggested by economic theory but also include psychological and sociological considerations: smarter respondents, who are satisfied with their lives and inclined to help other people, are more likely to save. Those who enjoy stable or improving financial conditions and/or are satisfied with them are more likely to save and less likely to borrow. Financial literacy, a factor cited by institutional theory as positive for both saving and borrowing from banks, lost its significance at the onset of the financial crisis. Household income, suggested by economic theory as a basis for choosing a financial strategy, was found to have much less influence on savings and to have a positive influence on borrowing, confirming the rationing theory rather than intertemporal choice theory. Surprisingly, the fear of job loss does not make people save more, contrary to the precautionary motive.

Added: Sep 9, 2012
Working paper
Voskoboynikov I. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2017. No. 18.
Intensive growth, structural change and expanding informality has characterized many developing and emerging economies in recent decades. Yet most empirical investigations into the relationship between structural change and productivity growth overlook informality. This paper includes the informal sector in an analysis of the effects of structural changes in the Russian economy on aggre-gate labour productivity growth. Using a newly developed dataset for 34 industries covering the period 1995–2012 and applying three alternative approaches, aggregate labour productivity growth is decomposed into intra-industry and inter-industry contributions. All three approaches show that the overall contribution of structural change is growth-enhancing, significant and attenuating over time. Labour reallocation from the formal sector to the informal sector tends to reduce growth through the extension of informal activities with low productivity levels. Sectoral labour realloca-tion effects are found to be highly sensitive to the methods applied.
Added: Nov 30, 2017
Working paper
Korhonen I., Peresetsky A. BOFIT Discussion Papers. DP. Bank of Finland Institute for Economies in Transition, 2013. No. 4.
We empirically test the dependence of the Russian stock market on the world stock market and world oil prices in the period 1997:10–2012:02. We also consider three Eastern Euro-pean stock markets (Poland, the Czech Republic, and Hungary), as well as two markets outside Europe (Turkey and South Africa). We apply a rolling regression to identify periods when oil prices or stock indices in the US and Japan were important. Surprisingly, oil prices are not significant for the Russian stock market after 2006. A TGARCH-BEKK model is employed to assess the degree of correlation be-tween markets, taking into account the global market stochastic trend. We find that correlation between markets increased between 2000 and 2012. Growth was especially high in Eastern European markets during 2004–2006, which is likely connected with the EU accession of these countries in 2004.
Added: Mar 18, 2013