Fiscal federalism and regional performance in Russia

Sound regional policies are essential for balanced and sustained economic growth. The interaction of federal and regional policies with cross-regional structural differences affects human and physical capital formation, the business climate, private investment, market depth, and competition. This paper summarizes the main elements of Russia’s fiscal federalism, describes the channels through which it operates, and assesses the effectiveness of regional transfers in reducing regional disparities. The results suggest that federal transfers to regions contributed to reducing disparities arising from heterogeneous regional tax bases and fiscal revenues. This allowed regions with initially lower per capita income to increase human and physical capital at higher rates. There is little evidence for transfers contributing to increased cross-regional growth synchronization. The results also suggest that federal transfers did not significantly improve regional fiscal sustainability, a conclusion that is supported by the lack of convergence in per capita real income across Russian regions in the last 15 years

Locomotion of the fish-like foil under own effort

Self-locomotion of the fish-like foil is simulated by the mesh-free method of viscous vortex domains (VVD). The foil consists of three rigid sections connected by the spring hinges. The forcing periodic moment is applied between first and second sections imitating the muscular effort of the fish. The hinge between the second and third sections is elastic and passive. The task is solved as coupled flow-structure interaction

Simulation of butterfly flapping with the method of dipole domains

A numerical mesh-free method of dipole domains [1,2] is used for simulation of a butterfly flapping model. This method is based on the representation of a vortex field by the set of dipole particles. The vector function D describes density of dipole moments in accordanse with Navier-Stokes or Euler equations [3]. The butterfly model consists of two flat plates with a common edge performing harmonic oscillations in two planes. New mechanism of the thrust performing is proposed

Using the dipole particles for simulation of 3d vortex flow of a viscous incompressible fluid

A fully lagrangian numerical method for simulation of 3D nonstationary flow of viscous and ideal incompressible fluid is developed in this work. This method is based on the representation of a vortex field as a set of dipole particles [1]. The introduced vector-function D describes density of dipole momentum. The equation for this function is in accordance with Navier-Stokes equations [2]. The vorticity is equal to curl of dipole momentum density. Thus vortex field is always solenoidal. The dipole particles are generated at a body surface and are moving interacting. The region where function D is essentially non-zero approximately coincides with the vortex region. Each dipole particle induces the velocity field which is equal to field of a point dipole at large distance from the particle. But near a particle the induced velocity field is another taking into account the particle volume and viscosity of the liquid. The method can be applied for simulation of an ideal and viscous flows

Capital Flight: What It Is, and How to Combat It

This article analyzes the problem of capital flight from Russia, and discusses the effectiveness of administrative methods to combat that outflow. In the author's opinion, the fight against capital outflows boils down to fighting against the reluctance of a country's inhabitants to invest in their own economy. As long as investments abroad are incomparably more attractive than investments at home, the small reductions in returns on foreign assets produced by administrative barriers to capital outflows cannot be expected to significantly slow these outflows. The key factors in limiting capital outflows are not administrative measures, but rather a sensible tax system and legislation, and balanced budget policies that stimulate rather than impede investment in the Russian economy. On the other hand, the author assumes that unless problems of nonpayment of taxes, money laundering, and stealing are addressed, the creation of an attractive investment climate is impossible.

Real appreciation and output: Russia 1993—1997

The paper shows that, in 1993-1997, larger month-to-month real appreciation in Russia was associated with larger month-to-month increase in the aggregate supply, supposedly because of a decrease in the prices of imported production inputs. At the same time, according to our estimations, short-term adjustments of the aggregate demand were not sensitive to month-to-month real appreciation. Thus, the cumulative effect of month-to-month real appreciation on the short-run changes in real GDP turned out to be positive. Our results imply that the sharp contraction of output soon after the crisis of August 17, 1998 was caused by the sharp real depreciation of the Russian rouble in August and September of the same year. Another hypothesis suggested by the paper is that the recovery of output after several months of contraction was due to the increase in real (deflated by the producer price index) money holdings We attribute this increase in real money demand to the collapse of GKO/OFZ market. However, an explanation of the post-crisis dynamics of real GDP would require a more thorough analysis.Russia, transition, real appreciation, real GDP, aggregate demand equation, aggregate supply equation

The Macroeconomic Implications of a Stronger Ruble

This article discusses the argument that a weaker national currency promotes economic growth. This argument is considered from the standpoints of economic theory and empirical studies on developing countries. Many theoretical and empirical studies have shown that, contrary to the predictions of classical textbooks, devaluations can reduce output rather than expand it. In the case of Russia, on the basis of the author's own statistical assessments, the author concludes that domestic demand for goods and services declines in a devaluation, rather than growing as is often assumed to be the case. This is because the income effect of a devaluation is stronger than the substitution effect resulting from the shift in demand away from imported to Russian goods. The article presents a theoretical model that can be used to analyze the effects of changes in various exogenous factors on the real equilibrium exchange rate and real GDP. Changes in various exogenous variables with the same impact on the real exchange rate can have diametrically opposed effects on GDP. This is apparent in the cases of terms of trade gains and price increases for the products of natural monopolies.

Fiscal federalism and regional performance in Russia

Sound regional policies are essential for balanced and sustained economic growth. The interaction of federal and regional policies with cross-regional structural differences affects human and physical capital formation, the business climate, private investment, market depth, and competition. This paper summarizes the main elements of Russia’s fiscal federalism, describes the channels through which it operates, and assesses the effectiveness of regional transfers in reducing regional disparities. The results suggest that federal transfers to regions contributed to reducing disparities arising from heterogeneous regional tax bases and fiscal revenues. This allowed regions with initially lower per capita income to increase human and physical capital at higher rates. There is little evidence for transfers contributing to increased cross-regional growth synchronization. The results also suggest that federal transfers did not significantly improve regional fiscal sustainability, a conclusion that is supported by the lack of convergence in per capita real income across Russian regions in the last 15 years