Browsing by Author "Vetlov, Igor"

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  • Vetlov, Igor (2001)
    BOFIT Discussion Papers 1/2001
    The paper analyses the factors driving dollarization in Lithuania during the period from December 1992 to August 2000.Starting with a brief overview of the major economic and political developments in Lithuania, the study attempts to model the process of dollarization by applying rigorous time series analysis.In particular, it investigates the long- and short-run properties of the relationship between the dollarization ratio and interest rates paid on domestic and foreign currency deposits.The study identifies a relatively stable cointegrating relationship between variables, whereby the dollarization ratio is negatively related to the interest rate spread.In the constructed vector error correction model, the deviations from the long-run relationship are found be significant for the dynamics of all three variables. Overall, the model explains the development of dollarization rather well.Simple specification of the model is possible when interest rates reflect the major economic and political events relevant to the process of dollarization. Key words: dollarization, transition economy, currency board, unit roots, cointegration, vector error-correction
  • Vetlov, Igor (2004)
    BOFIT Discussion Papers 13/2004
    This paper presents preliminary results of modelling the Lithuanian block of the ESCB Multi-Country Model, LT_MCM.The theoretical structure of the LT_MCM is in line with most current mainstream macro models, i.e. supply factors determine the long-run equilibrium, while output is demand determined in the short run. Starting with a brief overview of the common features and main building blocks of a typical MCM country model block, we report the preliminary results of estimation of the Lithuanian MCM block.To illustrate the main characteristics of the estimated model, some standard shocks are introduced in the model and the responses studied.Compared to other MCM country blocks, we find that the Lithuanian macro model is characterised by relatively large and rapid response to shocks.Model simulation reveals that, compared to domestic prices, GDP is more responsive to shocks in the short run, while investment on average is more volatile than private consumption.The latter findings are similar to those reported for other EU country macro models. JEL classification: E10, E13, C5 Keywords: Macro Model, Lithuania