HSE Economic Journal , 2019 (1) http://ej.hse.ru en-us Copyright 2019 Thu, 14 Mar 2019 11:37:36 +0300 Parametric Immunization of Interest Rate Risk via Term Structure Models https://ej.hse.ru/en/2019-23-1/252575899.html 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. Constructing a Financial Stress Index for Russia: New Approaches https://ej.hse.ru/en/2019-23-1/252578004.html The paper introduces a new monthly index of financial stress for Russia for the March 2008 – March 2018 period. The index is based on 12 well-established and mostly publicly available standalone metrics of financial instability, including credit-to-GDP gap, debt-service-ratio and real estate price index, provided by the BIS. I seek an optimal method to aggregate the metrics to derive a composite index. Based on the local projections technique [Jordá, 2005, 2009] and Bayesian model averaging, I show that conventional aggregation methods such as principal component analysis (PCA) can be outperformed by the approaches, better capturing the nonlinear and non-Gaussian nature of the standalone indicators of financial instability. Namely, the dynamic factor model with a single factor fares best of all the considered methods.The composite index based on the dynamic factor model accurately captures the dynamcs of financial instability in the Russian financial sector, with the peaks occurring in the late 2008 and the late 2014 – early 2015. I also show that the financial stress index exerts an adverse effect on industrial production alongside the VIX index, explicitly accounting for oil prices, global and domestic indices of economic policy uncertainty as well as geopolitical risk. This negative effect of financial stress exhibits persistence in the medium run. Barriers of the EAEU Common Market for Foreign Activity of Enterprises https://ej.hse.ru/en/2019-23-1/252578827.html The article deals with the results of EAEU key manufacturing enterprises survey aimed at identifying barriers for trade and economic cooperation within EAEU common market elimination of which is one of the key tasks for further integration in EAEU. The study focuses on issues of general availability of EAEU markets and specific barriers and obstacles on the EAEU common market.The approach of the study differs from previous ones in the following ways. Firstly we considered both exporting and not exporting enterprises. Secondly the UNCTAD non-tariff barriers classification being employed for survey external barriers list was strongly modified to simplify the interpretation of barriers by enterprises. Besides two quasi-barriers of high competition and lack of information were added.The survey results showed high availability and the absence of any crucial barriers within the EAEU common market: from 70 to 90% of them considered EAEU common market to be generally available despite two thirds out of them have indicated some or another barriers on the common market.The key barriers of the common market are quasi-barriers of hard competition and lack of information along with such non-tariff barriers as restrictions of competition, technical barriers and barriers and obstacles related to finance regulation.Given the survey results some recommendations are proposed to reduce the identified obstacles for EAEU industrial enterprises on the EAEU common market.The results of the study will be helpful in developing measures for boosting foreign trade activities and cooperation of both industrial enterprises and the EAEU member states on the whole. Survival of the Fittest? Measuring the Strength of Market Selection on the Example of the Urals Federal District https://ej.hse.ru/en/2019-23-1/252584141.html It this article we analyze the strength of market selection for a wide range of industries in the Urals Federal District (UFD) and compare it with the results for several foreign countries. The empirical analysis is based on the Ruslana database provided by Bureau van Dijk (BvD) for the period from 2006 to 2015. For the first stage of the analysis, we resort to the well-discussed method of aggregated labor productivity decomposition at the industry level into two main processes, namely, the growth of productivity within the firm and the redistribution of market shares between firms on the market. The results obtained show that the industrial productivity growth is almost entirely explained by the increase in productivity at the level of the firms, while the role of market selection is negligible. However, due to a number of limitations of this approach, it would be incorrect to deny the significance of the competition as a whole. For this reason, at the second stage we consider the relationship between the growth of firms’ revenues and their productivity directly. Our results show that the role of market selection in explaining firm growth is small in Russia and is lower in comparison with developed countries. This result holds if instead of labour productivity one uses total factor productivity. The revealed weak interrelation indicates the need to improve industrial policy in the direction of increasing the efficiency of competition. Shareholders’ and Managers’ Interests: Collisions in Russian Corporations https://ej.hse.ru/en/2019-23-1/252585422.html The article deals with the problem of inconsistency in the interests of owners and hired managers of corporations, manifested in management decisions that can weaken the business model of a corporation and cause direct damage to its financial condition. As a tool to prevent agency conflicts, a new method is proposed for evaluating the quality of the financial management of a corporation, which is based on a systematic approach to evaluating corporation’s financial results.The analysis of Western financial management models showed that in the Russian economy, the separate use of EVA, TSR, SVA, CVA, MVA and other models based on a limited set of information doesn’t reflect the effectiveness of financial management and leaves the top managers the ability to manipulate these indicators. So a method is proposed that makes it possible to identify the weaknesses of the corporate business model caused by ineffective management and minimize the negative effects of agency conflicts in the future.The main difference of the proposed method from common models is a systematic approach to company’s financial activities, allowing to form an assessment that reflects the interests of owners in full. Besides the use of three information bases makes it impractical to manipulate separate indicators.The method was tested on five large oil and gas Russian companies. The results allow us to recommend it for use not only in the oil and gas industry, but also in other industries that have a high share of the presence of public corporations. Efficiency Modeling of Russian Universities https://ej.hse.ru/en/2019-23-1/252586396.html The paper analyses determinants of efficiency of Russian universities. The analysis is based on the data from annual monitoring of performance of higher education institutions conducted by the Ministry of Education and Science. Special attention is paid to the factors that are associated with public policy in the sphere of higher education. In order to explain the variation of the efficiency scores we implement one of the most modern techniques for analysis of efficiency’ determinants – Two-Stage Semi-parametric DEA. The high level of heterogeneity in Russian higher education sector is controlled for by considering two different specifications of DEA model: with the focus on educational activity and with the focus on scientific activity. The results show that relatively less efficient universities are more likely to be affected by the considered efficiency’ determinants compared to efficient ones. Universities that are governed by the Ministry of Education and Science and by regional governments appeared to be relatively more efficient compared to the universities that are governed by another federal authorities except for the Ministry of Education and Science (Ministry of agriculture, Ministry of Healthcare, Ministry of Culture, Ministry of Sport and so on). Governance by the Ministry of Education and Science has the strongest effect on efficiency level among considered factors. Governance by regional authorities has the weakest effect. The total square of buildings available for the university appeared to be positively and statistically significantly related to efficiency level. While the autonomous status has no any effect.