2017. vol. 21. No. 1

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.

This paper investigates the effect of inflation targeting adoption over foreign direct investments dynamics using a wide control group. We refer to the adoption of inflation targeting as a treatment, to the IT countries as a treated group and to the non-IT countries as a control group. There are several potential channels through which inflation targeting can stimulate the inflows of the foreign direct investments: reduction and stabilization of inflation level, enhancing the sustainability of the macroeconomic environment, increasing the transparency of the monetary policy, development of market economy institutions. Based on the panel date of more than 130 developing and developed countries over the period since 1980 to 2014, we directly evaluate the effect of inflation targeting by implementing a variety of propensity score matching methods. We find no evidence that the IT adoption enhances foreign direct investments inflows. Indeed, the average treatment effect is small and insufficient. This result is robust to the alternative definitions of the adoption dates and matching methods.

This paper has several important differences from previous works. Firstly, we use a wide control group, which can be result in less biased estimates (we can consider the role of unobserved factors more accurately). Secondly, we consider the period from 1980 to 2014, and evalua­tes trends associated with the global financial crisis.

One important policy recommendations based on the results of this paper is that monetary policy itself is not a good instrument for attracting foreign investors.

We study the market discipline by retail depositors of the foreign bank subsidiaries in Russia. We analyze the effect of the direct signal about the bank’s foreign origin – the bank’s title – to deposit growth (quantitative discipline) and interest rates (price discipline) sensitivity to the bank riskiness. We assume that the banks having direct indication of the fact that the owner is a foreign financial company in the banks’ titles, will enjoy greater confidence of retail depositors and therefore less intense market discipline, and this effect will remain unchanged in the crisis of 2008–2009. An alternative hypothesis originates from the consumer ethnocentrism approach, assuming that the signal of foreign ownership will provide an incentive for depositors to monitor the banks more attentively. We use data on 56 foreign banks for 2007–2015. The results suggest that if the bank’s title signals the foreign origin, the deposit growth is significantly more sensitive to a decrease in the capital adequacy ratio or in credit risk, which indicates the ethnocentrism effect, working for disciplining by both quantity and price. The effect for quantitative discipline persists during the crisis of 2008–2009, which is important due to the fact, that this period witnessed the significant inflow of deposits to state and foreign banks from national private ones. The one for price discipline, however, disappears: we witness a reduction in the intensity of price discipline during the crisis for both groups of foreign banks.

Sustainable reduction of investment in the Russian economy, observed since 2013, has become one of the most discussed issues. The aim of this work is to examine the contribution of several structural shocks to the dynamics of investment in 2003–2016. We want to consider the relationship between investment, GDP, domestic loans to non-financial corporations, the interest rate on these loans, external debt of Russian companies and the nominal exchange rate within the framework of sign restricted SVAR. In this work, four shocks are explored: terms of trade shock, shock of foreign funding (access to global capital markets), monetary policy shock and fiscal policy shock (public investment expenditures). The main results are as follows. External shocks dominate the dynamics of the Russian investment, and this applies not only to the terms of trade shock, but also to the shock of foreign funding availability. The sharp decline in access to it after the introduction of sanctions against Russia in 2014 had great negative impact on investments. In addition, the model estimates the role of monetary policy in 2015 as negative-neutral (thus offering an argument in favor of its easing), but at the same time rather insignificant. On the basis of our results we conclude that operational measures of economic policy are unlikely to crucially change the situation for the better. Removal of economic sanctions against Russia could promote investment, but only in the short-term period. In the long run reforms aimed at ridding the economy of such a high dependence on external factors are necessary.

The ageing of the population and the imbalance of public finances force governments to carry out pension reforms in order to insure the sustainability of pension systems. The reforming of social security systems is becoming even more urgent as the government ability to cover the deficit of pension funds with transfers from federal budgets is limited. The paper presents the modification of overlapping generations model developed by [Bettendorf, Heijdra, 2006]. The model was extended to account for the unbalanced pension system and endogenous interest rate, important in estimation of pension expenses. We consider an optimal combination of fiscal instruments depending on the retirement age, life expectancy and productivity of labour and compare social welfare in the case of balanced and unbalanced pension system. The welfare analysis shows that financing the pension fund deficit via income taxes is a part of optimal policy. It was also shown that when the deficit of the pension fund is covered by the government, income tax and social contributions are perfect substitutes when the interior solution is considered. Thus in case of balanced pension system optimal social contributions are positive and are used to finance pensions, while optimal income tax rate does not depend on the rate of population growth. In the case of unbalanced pension system, the maximization of welfare function points in favour of corner solution with zero social contributions and positive income tax, which depends on population growth, retirement age and labour productivity. While an unbal an­ced pension system with optimally chosen fiscal instruments allows to achieve higher social welfare due to higher level of capital per efficiency unit of labor and lower equilibrium level of public debt.

For a long time, the fertility rate in Russia has been below the replacement level. We study the problem of fertility in Russia using RLMS data for the period 1994–2014. We conclude that our country looks to European values insofar as jobs are important for women which, in turn, leads to the postponement of childbearing and reduces the total number of children in families. We also find the spread of unmarried cohabitations and the increase of births produced by single mothers. We find that demographic determinants have a fundamental impact on the birth rate. Fertility rates are higher for women with a partner, with no children or children of the same sex, living in rural area, living with other relatives. The economic characteristics of her partner (education, job, wage) have no significant effect on women’s fertility decisions. The analysis of the relationship between women education and employment and her fertility behavior suggests that working women with higher education do not have enough time to realize their reproductive plans. In this regard the government could boost fertility rate by creating more flexible work arrangements for women. The proper question for future research is to reveal a gap between women’s fertility intentions at early phases of her life and their realization by the end of her life-course, and to understand in which social strata this gap is highest.