Bodnaruk Andriy: “Determinants of Sovereign Debt Term for Transition Countries”
This study develops several testable hypotheses for government debt term and test one of them, namely, investors’ expectations of inflating away debt by the government side. Empirical results show that in the situation when the government tries to borrow under the conditions which are not supported by the market investors signal about that with their feet – some of the auctions may not be carried out. In such a case of “market substitution” by the government money creating institution the effect of increasing debt to GDP ratio on incremental debt duration may be the opposite to what is predicted by the contracting cost theory.
Chaban Maxym: “Ukraine’S Currency Crisis in September – August 1998: Financing a Budget Deficit through Debt”
This thesis analyzes the currency crisis that Ukraine experienced in August-September 1998. It is shown that due to a budget deficit, a current account deficit and low level of reserves, Ukraine was highly vulnerable to a currency crisis and a fixed exchange rate regime was not sustainable in the long-run. Nevertheless, capital inflows, namely in the form of portfolio investment in Ukrainian Treasury bills, provided some artificial stability to the economy, while at the same time increased its vulnerability to a crisis. As capital inflows suddenly stopped in September 1997 any negative expectations became self-fulfilling and led to collapse of both stock and T-bill markets. Rough estimates show that the T-bills debt to foreign investors exceeded the foreign exchange reserves at that time. Ukraine certainly faced a problem of illiquidity, even though it was still considered by foreign investors as solvent. Although Ukraine borrowed extensively in the first half of 1998, it reached some binding constraints on international borrowing and was not able to reduce the T-bills debt-to-reserves ratio. Analysis suggests that both Asian and Russian crises, although they could have severe impact on Ukraine, in fact were of little importance. The currency crisis is the first manifestation of government’s attempts to follow a Ponzi scheme of financing: borrow more and more in order to repay previous debt.
Golodniuk Inna: “Instruments and Targets of Monetary Policy in Ukraine”
The paper aims at determining the optimal instrument of monetary policy in Ukraine. For this purpose the approach of disutility minimization is employed. Having estimated empirically the structure imposed on the domestic economy and the central bank’s reaction function, I am able to recover the explicit form of the function describing the disutility felt by the National Bank when the values of price level, exchange rate and the gap between the Russian and Ukrainian discount rates deviate from their target values. All the information mentioned was used to derive the criterion enabling comparison of the efficiency of the discount rate vs. statutory reserve requirements – the two instruments of NBU monetary policy.
Kudina Alina: "The Motives for Foreign Direct Investment in Ukraine"
This thesis reports data on foreign direct investment in Ukraine obtained from surveys of major foreign investors. Dunning's internalization theory was used to relate this empirical work to the mainstream literature in international business. The surveys found that the major motive for foreign direct investment in Ukraine is market-seeking with other motives insignificant. The surveys also identify key problems foreign investors face in Ukraine.
Kuzmyn Yuri: “Why Doesn’t the Bankruptcy System in Ukraine Work? Some Aspects of Institutional Development”
One of the reasons for slow development of the Ukrainian economy is inappropriate governmental regulation of the micro-economic activity. The vision of the scale of such regulation varies among different economic schools. One of the issues on which various economists agree is the need for the state enforcement of private contracts. Bankruptcy Code plays an important role in it. On the one hand, bankruptcy is a way of exit from the market and along with free entry is a basic assumption of the competitive market model. The more efficient is a bankruptcy procedure, the more we can rely on the results of the modeling, ceteris paribus. On the other hand, the efficient bankruptcy procedure is one of the institutions, which are necessary for the economic development since it vetoes unsuccessful activities and prevents (deters) the inefficient behavior. Ukrainian Parliament adopted the Bankruptcy Law in 1992 and since then lawmakers added to the 'bankruptcy law package' over 20 amendments and instructions to regulate the process. However, inability of the existing procedures to provide adequate measures has been the main reason for the small number of bankruptcy cases and the development of the arrears' crisis. This research is intended to disclose the problems of bankruptcy system in Ukraine. It opens the features, which should be covered by the bankruptcy law to make the procedure of exit more efficient.
Lugovskyy Volodymyr: "Institutional Approach to Transition: Investment Climate and Growth in Ukraine"
This paper is focused on the features of institutional environment (defined by me as investment climate) in transition economies (with emphasis on Ukraine), which are crucial for economic growth. Since equilibrium is a key point of neoclassical approach and transition economies are by definition in the process of transition, I did not use this approach despite the fact that issues of investments and growth are extensively researched by Neoclassicals.
Instead I choose institutional and transaction costs approaches for defining the criteria of favorableness [quality] of investment climate. These criteria are:
- Speed of innovation, which influences the quantity of investment trials and depends on transaction costs.
- Level of political and economic
decentralization, which influences the quality of investments by
determining whether the evolution is only “within” or also “among”
constraints and which also determines the structure of organizations.
- Because of different speed of development of formal and informal institutions, the Ukrainian society became polarized to such degree, that the dominant political group was not formed. On the macroeconomic level it led to the inefficient short-run macroeconomic management and to the undeveloped strategy for the long-run development. On the microeconomic level the polarization has resulted in wide spread and unsystematic corruption, which has increased the transaction costs and so reduced the speed of innovation.
- Due to the excessive regulatory power of
many autonomous government agencies, business property was converted to
the common property with open access for government agents. This
externality is being internalized only for the firms, which are able to
cover at least high fixed costs of internalization. Consequently, mostly
large companies are being internalized and a monopolistic structure of
economy and society is
Efficient allocation of goods and factors of production is a principle that should be addressed by all economies. Economic regulation creates preconditions for the existence of significant system distortions, misallocation of goods and of production factors and a tendency to their overuse. However, these allocative inefficiencies can be successfully corrected by an apropos conservation policy. This thesis is aimed at a policy analysis in the field of energy (electricity) conservation. Within its framework economic measures, such as price-induced and rationing (periodic disconnection from the line) policies of electricity conservation, are examined with respect to existing non-payments. Special attention is given to the applications of major theoretical developments for Ukrainian electricity market.
Novoseletsky Eduard: "The Shadow Economy in Ukraine"
This paper considers the problem of shadow economic activity in Ukraine. The shadow economy’s integration into the analysis of the whole economy sheds a different light on meanings of various macroeconomic indicators (national income, market performance, households patterns etc.). This paper presents the results of estimating a share of the shadow economy in Ukraine in 1995-1998. A method of comparing official incomes and actual expenditures of households is used for the shadow economy quantifying. For the covered period the impact of the taxation policy on the development of shadow economy was not well defined. It is shown that if the shadow economy were converted to officialdom the budget deficit of Ukraine would be totally eliminated in 1995-1998.
Pankiv Olha: "Protection of Automobile Production in Ukraine. Cost–Benefit Analysis"
Protection measures, imposed to protect Ukrainian automobile industry, bring not only deadweight losses, as is stressed by many researches. Arguments, dealing with dynamics must be included for a broader analysis. The problem of protection of automobile production in Ukraine is viewed in this paper as the tradeoff: from the one side, deadweight losses due to protection, arise, when statics is considered, but in dynamics they are accompanied by the firm` s movement along the decreasing average costs curve. Issues of “strategic” - industry argument used by government to justify protection of the industry, are considered in the analysis. Cost - benefit analysis of the protection is conducted, and evaluation of the possible government` s policy alternatives is presented.
Peredriy Serhiy: "Corruption at The Microlevel: Illegal Street Sellers"
This paper concerns the problem of illegal cigarette sellers in Kyiv. Reasons for appearance of such activity are discussed; comparative analysis of legal and illegal sellers is conducted. Proposed way to eliminate the corruption and to improve the efficiency of this branch of market - licensing - is discussed. A case study conducted on the Kyiv streets allowed estimation of the effects of corruption on consumers and sellers.
Piontkivsky Ruslan: "Exchange Rate Effects on the Current Account (Would the Devaluation Improve the Ukrainian Current Account)"
Devaluation is a theoretically conventional tool to improve trade balance and accordingly current account, which rests on the assumption that Marshall-Lerner condition holds. However, estimated aggregate export and import demand equations with quarterly data for 1994-1998 show that in Ukraine it would not work, at least during a one year period. The weighted sum of medium run (one year) export and import elasticities is less than unity implying the Marshall-Lerner condition does not hold. The demand equations' coefficients are more plausible and significant for ROW (rest of the world) region than for FSU (former Soviet Union). Elasticities of trade with ROW rise over time suggesting the J-curve pattern of trade balance response to devaluation as the theory predicts. The weighted sum equals 0.5 over half a year leading to worsening of trade balance. The estimated elasticities for FSU region are more variable across different specifications and imply inverse Jcurve response. The sum of trade with FSU' elasticities is greater than unity over 7 quarters period, implying that Marshall-Lerner may hold in trade with FSU. This result could be explained by higher degree of substitutability between Ukrainian and FSU goods, comparing to ROW goods.
Semikolenova Yadviga: "Taxation of Small and Medium Enterprises"
Small and medium enterprises (SME) play an important role in production sector of many developed countries. The higher is the share of small and medium businesses in the economy, the higher productivity can be potentially realized with the SME sector. Development of small and medium enterprises is heavily influenced by the level of taxation, its administration and compliance. Therefore, maintaining the ideal balance between tax rate, compliance costs, tax administration and economic development should be a main goal of every tax policy. In this paper, the impact of two current policies in Ukraine on SME taxation is analyzed: introduction of a fixed (lump -sum) tax intended to reduce welfare losses through «bringing entrepreneurs out of the shadow»; and imposing of a single tax which was supposed to simplify the accounting system and reduce compliance costs.
Suholov Pavlo: "Welfare Effects of Ukrainian Government Regulations of the Wheat Market"
In the paper it was conducted the analysis of welfare effects of government regulations in the Ukrainian wheat market in 1997-1998. New wheat market regulations in 1997 liberalized the market and made it possible for non-government traders to operate in the market. Nevertheless the government introduced new interventions instruments, which substantially distort the market and generate welfare losses. The instruments are administrative restriction of wheat trade until state purchases are completed coupled with a state monopoly for storage. Losses from the government policy are estimated to be substantial. Inconsistent policy pursued by the government is expected to increase welfare losses for Ukrainian society.
Sytnyk Tatiana: "Evaluating Efficiency of Local Public Expenditures in Ukraine"
This paper deals with applying Tiebout approach to evaluate efficiency of local public expenditures in Ukraine. It is shown that two main factors hinder efficiency of local public expenditures in Ukraine, restrictions on fiscally induced mobility of households and businesses, and centralization of budget decision making process. Immobility of households and uniformity of services suggested by local governments prevent consumers from satisfying their demand preferences. Concentration of budget decision making process at the central level induces lobbying for biased overexpansion of local public expenditures in Ukraine.
Vakhitov Volodymyr: "Internet Pricing Models: Application for Ukraine"
This work deals with pricing models of Internet services. The rapid growth of the Internet along with the development of new multimedia applications creates a problem of congestion that may threaten free transmission of the data worldwide. Although technical solutions of this problem are the most desirable, they are not always feasible. New area of Economics, namely, Internet Economics is called on to provide an economic response to the congestion problem to reallocate scarce network resources efficiently. Two basic pricing models of the Internet access are proposed, usage-sensitive pricing and flat-rate pricing. The first class of models is based on priority pricing or peak-load pricing. They are efficient in solving congestion in cases of small networks or intranets, but for larger networks they involve complicated billing mechanisms. The second class of models is easier to implement in practice. They allow to plan the users' expenditures on the Internet use, but their major drawback is insensitivity to congestion. The aim of the work is to show that currently flat rate pricing models are more appropriate for Ukraine due to the lack of the proper infrastructure, first of all in the field of the financial sector. Nonetheless usage-sensitive pricing is more efficient and will possibly become the long-run solution.
Vakhitova Hanna: "Price Discrimination in the Urban Household Electricity Market in Ukraine"
Price discrimination is a quite common phenomenon for the energy sector in a market economy. It is justified to avoid marginal cost pricing dilemma for energy providers who are considered to be natural monopolists. Ukraine has been implementing some elements of such discriminatory pricing for urban residents. Although economic theory requires that an efficient regulator follow the inverse elasticity rule, Ukraine practices direct discrimination. This paper analyzes reasons for such a distortion. The model to investigate how social constraints can affect price discrimination policy is developed. Though it does not imply the inverse elasticity rule to be violated its results are highly depended upon parameters of demand. In practice, cost approach prevails. The paper argues that there are no economic or social reasons for existing price differentials; they are simply a legacy from the past.
Veremiychuk Myroslava: "Balancing on the Edge: The Ukrainian Banking System under Stress"
The importance of the banking system in the economy can be compared with the blood system's importance in human life. Any disturbance can hurt substantially not only banks but also the whole economy. A number of factors, which are connected with such disturbances, result in banks' illiquidity and insolvency. First this thesis discusses these factors. Then, this thesis includes the research on the influence of the recent financial stress in Ukraine on banking system of this country, and some other problems which characterized the Ukrainian banks' activity. Overall this thesis demonstrates that the recent financial stress had a massive impact on the Ukrainian banking system. Finally the thesis reveals that for 1999 the Ukrainian banks do not have the possibility to improve the quality of their assets and liabilities. In other words, the Ukrainian banking system is very close to crisis.
Voloshyn Dmytro: "Reforming the Taxation System of Ukraine"
The reorganization of the current taxation system and implementation of the new Tax Code in Ukraine began in 1999. The different concepts of the global tax reform are under consideration in the Ukrainian Parliament (Verkhovna Rada) now. Therefore, taxation is one of the most pressing and important economic topics for Ukraine. This paper seeks to answer the following questions: what is the structure of Ukrainian taxation system and size of the tax rates in the transition period? Can the decrease in tax revenues, as it is now in Ukraine, be explained only by the deterioration of economic fundamentals or is it due to the internal inefficiency of taxation policy itself? Does the current taxation system create proper incentives for economic agents to legally maximize their profit and pay all the taxes? Which kind of restructuring does the Ukrainian taxation system need?
In this paper the author explores mainly the theory of shadow economy (in terms of tax evasion and tax avoidance). The obtained results show that Ukraine’s current taxation system needs to be urgently and deeply reformed so that it becomes simpler due to widened tax base and significant changes in tax structure. Unfortunately, recent evidence shows that, in all likelihood, the process will be difficult and long-term with economy strongly suffered from the process over all the period. In such environment, the establishing of gross sales tax (GST) may become rather efficient temporary measure.
Vornovytsky Stanislav: "Excessive Government Consumption in Ukraine: Spillover to Intergovernmental Fiscal Relations"
The thesis investigates the problem of excessive government consumption in Ukraine, pointed out to lie behind a great number of hardships that Ukraine has been facing with on its transition from an administrative to a market-based economic system. Public Choice Theory enables one to explain this phenomenon by peculiarities of Ukrainian politicians’ seeking of the self-interest in a “political marketplace”. Specifically, excessive government consumption results from the government’s failure to cope with fiscal imbalances at the outset of the transition, with this failure produced by that seeking. The arising mismatch between the government consumption expenditure and the government’s capability constitutes a particular concern of this research. A specific possibility to do away with this mismatch has been demonstrated to be given rise to by meeting the optimality criterion for intergovernmental fiscal relations.
Vyshnya Maria: "Soft Budget Constraints: Implementation to Nonpayments to the State and Local Budgets"
The aim of the paper is to trace the connection between rent-seeking and soft budget constraints. The capture theory extension of rent-seeking predicts that firms may use their profit to lobby government to provide them with more favorable economic conditions, or in other words, to soften budget constraints for them. The examination of the problem of nonpayment to the state and local budgets of Ukraine is a good example of this activity, since tax arrears can be interpreted as an implementation of soft budget constraints. Therefore, the main concept to be verified is whether the enlargement of tax arrears of domestic firms is caused by companies’ ability to lobby the government. The investigation covers the period of 1995-1998, when an increase in tax arrears of Ukrainian firms was enormous. Results of the research demonstrate that it is really possible to trace the connection between a growth of tax indebtedness of enterprises on the one hand and their profits generated in previous periods on the other hand. As a result, we may conclude that the acquisition of soft budget constraints can be explained by the rent -seeking activity of firms.
Zhosan Dmytro: "Welfare Effects of Sugar Market Controls in Ukraine"
The sugar industry is one of the most important industries in Ukraine, mostly an agrarian country. Seemingly privatized sugar processing plants still remain under heavy control from government bodies. Thus we could refer to this industry as to highly monopolized with all the consequences of such industry structure. The only difference from classical monopoly in Ukrainian sugar market is that sugar producers instead of earning high monopolistic profits are suffering losses due to high fixed costs of operating the sugar processing plants. The other reasons for loss making is the state controls over sugar prices. Ukrainian government imposes high barriers to imports in order to protect the inefficient industry. The absence of international competition removes the incentives for sugar producers to decrease their costs, thus keeping the welfare losses in sugar market very high. High production costs make it impossible for Ukrainian producers to export their sugar to countries other than former USSR. The ways to decrease the welfare losses are: removing state controls on domestic and international levels and creation of possibilities for raw cane sugar imports to Ukraine.
Продаж проблемних активів в Україні. Огляд поточної ситуації та пропозицій щодо вдосконалення дизайну аукціону