Recent Submissions

  • Natkhov, Timur; Pyle, William (2022)
    BOFIT Discussion Papers 12/2022
    Decades of investment decisions by central planners left communist societies with structures of production ill-prepared for competitive markets. Their vulnerability to liberalization, however, varied across space. Similar to the effects identified in the “China shock” literature, we hypothesize that post-market-shock outcomes will reflect pre-market-shock structures of production. Tracking voting outcomes at the district level in Russia’s presidential elections, we document asymmetric reactions to the liberalization of markets in 1992. Electoral support for the pro-market incumbent declined most in areas with structural inheritances that made them most vulnerable to reforms. This finding sheds new light on an old debate about the importance of “initial conditions” (as opposed to policies) to the trajectories of post-communist societies.
  • Davydov, Denis; Garanina, Tatiana; Weill, Laurent (2022)
    BOFIT Discussion Papers 11/2022
    This paper examines the effect of executive board gender diversity on the relationship between economic policy uncertainty (EPU) and bank liquidity hoarding (LH). We focus on the Russian banking sector, which, relative to most of the world, has a high share of women on bank executive boards. Using the news-based EPU index developed by Baker, Bloom, and Davis (2016) and LH measures proposed by Berger, Guedhami, Kim, and Li (2022), we exploit a unique dataset from the Russian banking sector. While higher economic policy uncertainty tends to increase liquidity hoarding, we find this effect diminishes as gender diversity of the board increases. We attribute this finding to the moderating influence of gender diversity on stability and overreaction in decision-making. Additionally, we find that the channel through which board gender diversity affects the impact of economic policy uncertainty on liquidity hoarding takes place via the hoarding of liquid assets. Our findings are robust to the use of alternative measures for economic policy uncertainty and gender diversity. As women are still significantly under-represented on bank boards in most countries, these results argue for policies to promote gender diversity of bank boards as a means of limiting detrimental effects of economic policy uncertainty.
  • Tkachenko, Andrey (2022)
    BOFIT Discussion Papers 10/2022
    Firms' contractual relations with a state may give lenders a positive signal and facilitate access to debt. This paper studies the impact of public procurement contracts on firms' access to debt using an extensive survey of Russian manufacturing firms combined with accounting and procurement data. It shows that earnings from state-to-business contracts increase the short-term debt twice as much as revenue from private contracts. Long-term debt is not affected by public contracts differently compared to private contracts. The debt sensitivity to public contracts is four times larger for politically connected firms, although it is still positive and significant for non-connected and small firms. The paper concludes that political connection does not entirely suppress the beneficial access to debt that public contracts create.
  • Steiner, Nils; Berlinschi, Ruxanda; Farvaque, Etienne; Fidrmuc, Jan; Harms, Philipp; Mihailov, Alexander; Neugart, Michael; Stane, Piotr (2022)
    BOFIT Discussion Papers 9/2022
    This paper uses a survey among students at European universities to explore whether Russia’s invasion of Ukraine has affected attitudes toward European integration. Some respondents completed the survey just before Russia’s assault on February 24, 2022, and some did so just afterwards, thus delivering a quasi-experimental design situation, which we exploit. Our results suggest that the ominous news about the Russian attack increased the participants’ interest in EU politics, consolidated their attachment to the EU, and made them more mindful and appreciative of the benefits of deeper European integration. In effect, the war so close to the EU Eastern border provoked a rally around the supranational EU flag, with convergence of public opinion toward shared European values.
  • Cao, Jin; Dinger, Valeriya; Juelsrud, Ragnar E.; Liaudinskas, Karolis (2022)
    BOFIT Discussion Papers 8/2022
    In this paper, we examine how a trade conflict’s impact on the real economy can be amplified by financial intermediaries. After the Norwegian Nobel Peace Prize Committee awarded the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo, China in practice banned imports of Norwegian salmon. The ban was an unexpected trade shock to the Norwegian salmon industry. Using bank balance sheet and credit register data, we trace how this trade shock affected the lending behavior of banks highly exposed to the salmon industry when the shock occurred. We find that, in the years following the trade shock, highly exposed banks cut back lending to non-salmon firms and households by 3-6 percent more than other banks. Furthermore, we find that the reduction in lending was not driven by the erosion of bank capital, but rather by the shift in expectations about the performance of loans to salmon producers, which drove highly exposed banks to increase their loan loss provisions and reduce risk-taking.