Monetary policy, asset prices and consumption in China

This paper studies the wealth channel in China. Using the structural vector autoregression method, we find that a loosening of China’s monetary policy indeed leads to higher asset prices, which in turn are linked to household consumption. However, the importance of the wealth channel as a part of the monetary policy transmission mechanism in China is still limited.China; monetary policy; asset prices

Do efficient banking sectors accelerate economic growth in transition countries

The relationship between financial sector and economic growth in transition countries has been largely ignored in the earlier empirical literature. In this paper, we analyse the finance-growth nexus using a fixed-effects panel model and unbalanced panel data from 25 transition countries during the period 1993-2000. We measure the qualitative development in the banking sectors using the margin between lending and deposit interest rates. Our second variable for the level of financial sector development is the amount of bank credit allocated to the private sector as a share of GDP. According to our results, the interest rate margin is significantly and negatively related to economic growth. This outcome is in line with theoretical models and has important policy implications. On the other hand, a rise in the amount of credit does not seem to accelerate economic growth. The main reasons behind this result could be the numerous banking crises the transition countries have experienced and the soft budget constraints that are still prevalent in many transition countries. Due to these specific characteristics the growth in credit has not always been sustainable and in some cases it may have led to a decline in growth rates.financial sector; transition economies; economic growth; panel data

Do efficient banking sectors accelerate economic growth in transition countries?

The relationship between financial sector and economic growth in transition countries has been largely ignored in the earlier empirical literature. In this paper, we analyse the finance-growth nexus using a fixed-effects panel model and unbalanced panel data from 25 transition countries during the period 1993-2000. We measure the qualitative development in the banking sectors using the margin between lending and deposit interest rates. Our second variable for the level of financial sector development is the amount of bank credit allocated to the private sector as a share of GDP. According to our results, the interest rate margin is significantly and negatively related to economic growth. This outcome is in line with theoretical models and has important policy implications. On the other hand, a rise in the amount of credit does not seem to accelerate economic growth. The main reasons behind this result could be the numerous banking crises the transition countries have experienced and the soft budget constraints that are still prevalent in many transition countries. Due to these specific characteristics the growth in credit has not always been sustainable and in some cases it may have led to a decline in growth rates.financial sector, transition economies, economic growth, panel data

Spin polarization versus lifetime effects at point contacts between superconducting niobium and normal metals

Point-contact Andreev reflection spectroscopy is used to measure the spin polarization of metals but analysis of the spectra has encountered a number of serious challenges, one of which is the difficulty to distinguish the effects of spin polarization from those of the finite lifetime of Cooper pairs. We have recently confirmed the polarization-lifetime ambiguity for Nb-Co and Nb-Cu contacts and suggested to use Fermi surface mismatch, the normal reflection due to the difference of Fermi wave vectors of the two electrodes, to solve this dilemma. Here we present further experiments on contacts between superconducting Nb and the ferromagnets Fe and Ni as well as the noble metals Ag and Pt that support our previous results. Our data indicate that the Nb - normal metal interfaces have a transparency of up to about 80 per cent and a small, if not negligible, spin polarization.Comment: 7 pages, 2 figures, submitted to Proceedings of the 26th Conference on Low Temperature Physic

Lobbying at the local level: Social assets in Russian firms

IIn the planned economy firms were made responsible for providing their workers with so-cial services, such as housing, day care and medical care. In the transforming Russia of the 1990s, social assets were to be transferred from industrial enterprises to the public sector. The law on divestment provided little more than general principles. Thus, for a period of several years, property rights concerning a major part of social assets, most notably hous-ing, were not properly defined, as transfer decisions were largely left to the local level players. Strikingly, the time when assets were divested varied considerably across firms. In this paper we utilize recent survey data from 404 medium and large industrial enterprises in 40 Russian regions and apply survival data analysis to explore the determinants of dives-titure timing. Our results show that in municipalities with higher shares of own revenues in their budget and thus weaker fiscal incentives, firms used their social assets as leverage to extract budget assistance and other forms of preferential treatment from local authorities. We also find evidence that less competitive firms were using social assets to cushion them-selves from product market competition. At the same time, we do not find any role for lo-cal labor market conditions in the divestment process.housing divestment; lobbying; firms; muncipalities; Russia

Non-wage benefits, costs of turnover, and labor attachment: Evidence from Russian firms

Just as in established market economies, many Russian firms provide non-wage benefits such as housing, medical care or day care to their employees. Interpreting this as a strategic choice of firms in an imperfect labor market, this paper examines unique survey data for 404 large and medium-size industrial establishments from 40 Russian regions. We find strong evidence that Russian industrial firms use social services to reduce the costs of labor turnover in the face of tight labor markets. The strongest effect is observed for blue-collar workers. We also find that the share of non-monetary compensation decreases with improved access to local social services.non-wage benefits; labor turnover; labor attachment; Russia

To Divest or not to Divest? Social Assets in Russian Firms

In the planned economy firms were made responsible for providing their workers with social services, such as housing, day care and medical care. In the transforming Russia of the 1990s, social assets were to be transferred from industrial enterprises to the public sector. A law on divestment was put into force but it provided mostly general principles. Thus, for a period of several years, property rights over a major part of social assets, most notably housing, were not properly defined as the transfer decisions were largely left for the local level players to make. Strikingly, the time when assets were divested varied considerably across firms. In this paper we take a political economy approach and utilize recent survey data from 404 medium and large industrial enterprises in 40 Russian regions to study the effects different forms of bargaining between the firm and the municipality may have on the timing decisions. In particular, we apply survival data analysis to explore the determinants of the divestiture timing. Our results show that the firms which divested assets later receive more benefits from the local authorities, especially in places where there are more benefits to extract (i.e. the local budget is richer). Further, we find evidence that the firms which transferred assets later performed relatively worse in 2002 in terms of profitability, productivity and investments. Finally, the data shows that poorly defined property rights have an adverse effect on the incentives to invest in social assets, and hence on the quality of public service provision.

Financial Systems in Transition: Could Small Actually Be Beautiful?

CEEC; Russia

Monitoring regional differences in Northwest Russia

The paper presents the idea and results of a joint Finnish-Russian project on economic monitoring of Northwest Russia financed by the Finnish Ministry for Foreign Affairs. The regions monitored include the Murmansk region, the Karelian Republic, the Leningrad region, St.Petersburg, the Kaliningrad and the Novgorod regions. First, in the paper, the aims and operation of the monitoring project are presented. The aim is to provide regular, comprehensive and comparable information on production and demand indicators, on foreign relations, and on public sector and social developments in the regions. The bi-annual publication is the first of its kind at this detailed level. The statistical, analytical and qualitative insights are targeted at a wide international audience. Second, the development trends in the monitored regions are reviewed. It is demonstrated that the regions are gradually and slowly recovering from the economic shock caused by the breakdown of the socialist system. Also, the regions have gone through a painful and thorough restructuring, with drastic drops in production and the share of the service sector increasing. Regional differences in restructuring are pointed out. St Petersburg and the surrounding Leningrad region have become a center of food production, with the help of strong domestic demand and relatively high foreign investment flows. The development in other industries such as electronics is promising as well. Karelia and Murmansk, in turn, have been vulnerable to the world market development of their main export products, which has reflected to the general economic development of the regions. Kaliningrad region’s special status shows in the importance of foreign trade and investment. Third, the paper raises the issue of uneven regional development. Northwest Russia is characterized by a rather clear North-South divide, with the Southernmost regions winning the Northern ones by virtually all indicators. In addition to economic growth and development, this difference is seen in, for example, unemployment levels and demographic trends. The paper concludes with discussing the need for qualitative research topics to highlight the actual social processes underlying the socio-economic restructuring in Northwest Russia. Also, comprehensive micro-level quantitative analysis would greatly add to the understanding of the economic processes, as to date it has mostly based on macro-level indicators.