Financial Journal Vol.13 No.1 2021
Valery V. Kizilov
Some Macroeconomic Consequences of COVID-19: Specifics of the 2020 World Economic Crisis, p. 9-27
In 2020, almost all large countries experienced a decline in GDP and other indicators of economic activity. This trend followed the news about the COVID-19 pandemic and had several features typical for cyclical economic crises. At the starting point, both demand and supply factors were negatively affected. This paper looks into data on GDP, retail sales and foreign trade dynamics in the first nine months of 2020, and analyzes the difference between developed and developing countries. Specific phenomena are observed: Germany and its small neighbors had relatively mild crises; developed countries had their trade balances deteriorating; the trade between the USA and China revived; and American deficit has been growing since April 2020. Some hypotheses to explain the above are offered. For instance, the German economy might have been able to adapt swiftly due to greater freedom of entrepreneurship than in France and Italy and due to the lowest debt ratios among G7 countries. The trade balances of developed countries deteriorated, possibly, because of a decline in production as a result of anti-COVID lockdowns, with consumption encouraged by stimulating policy measures.
Keywords: economic crisis, economic cycle, supply shock, foreign trade, public debt, investment climate, economic freedom, COVID-19
JEL: E32, E65, F14, F44
For citation: Kizilov V.V. Some Macroeconomic Consequences of COVID-19: Specifics of the 2020 World Economic Crisis. Financial Journal, 2021, vol. 13, no. 1, pp. 9–27 (In Russ.). DOI: 10.31107/2075-1990-2021-1-9-27.
Yelena I. Andreeva, Dmitry G. Bychkov, Olesya A. Feoktistova
COVID-19 and Anti-Crisis Social Support, p. 28-38
The authors analyze the response of the Russian government to the shrinking of household incomes during the 2020 economic crisis — the social support measures that were put in place to check the increase in poverty, and the social groups that were targeted by direct federal cash benefits. The anticrisis social support measures in Russia were, on the whole, comparable in composition and scope to what the governments in other countries were doing. A special feature of the Russian approach was that the new social benefits and the increased amounts of already existing benefits were addressed exclusively to families with children and were granted irrespective of household income levels. The authors estimate that the additional social support benefits, had they been implemented before the crisis, would have reduced the pre-crisis level of poverty by almost one third, although seven out of ten Russian households were left out of this additional support because they had no underage children. This leads to the conclusion that, in the future, social support policies must change to meet new challenges not only quickly, as they did during the last year’s crisis, but also in a more targeted manner.
Keywords: level of poverty, depth of poverty, monetary incomes of the population, social benefits, effectiveness of social support measures
JEL: I32, I38
For citation: Andreeva Ye.I., Bychkov D.G, Feoktistova O.A. COVID-19 and Anti-Crisis Social Support. Financial Journal, 2021, vol. 13, no. 1, pp. 28–38 (In Russ.). DOI: 10.31107/2075-1990-2021-1-28-38.
Anton V. Gorodnichev, Tatiana V. Kulakova, Maria A. Moiseeva
Dynamics of Russian Cities Budget Autonomy in the Transition to Multi-Level Governance, p. 39-57
Throughout the period after the municipal reform in 2003, the governing of Russian cities has been changing. A city as an object of governance is located at the intersection of interests of different levels of public authorities and is not limited only to local authorities This article investigates how budget autonomy of Russian cities has been changing for the last 16 years, and how exogenous economic shocks and large-scale federal initiatives such as the “May Decrees” have influenced the budget autonomy of Russian cities. The paper considers a hypothesis that there was a transition to multi-level governance of Russian cities in 2006–2019, which led to significant reduction of the budget autonomy. Budgets of the 35 largest cities of Russia (except for city-regions like Moscow and Saint Petersburg) were collected and analyzed in terms of their revenue and expenditure sections to test the proposed hypothesis. The relationship between the economic level of development and budget sufficiency was investigated with cluster analysis. The main result of this research is that Russian cities have become dependent on the financial grants from regional governments since there is no national policy of stimulating the economic development of cities. The national economic crisis of 2014 accelerated the process of governance centralization. In addition, the budget autonomy of municipalities was reduced due to the fact that achieving indicators of the May Decrees had become the primary objective for the public authorities. The share of the income tax in local budgets increased significantly although the share and diversity of other income sources decreased.
Keywords: urban economics, municipal budgets, urban governance, multi-level governance, budget autonomy, urban planning, the May Decrees
For citation: Gorodnichev A.V., Kulakova T.V., Moiseeva M.A. Dynamics of Russian Cities Budget Autonomy in the Transition to Multi-Level Governance. Financial Journal, 2021, vol. 13, no. 1, pp. 39–57 (In Russ.). DOI: 10.31107/2075-1990-2021-1-39-57.
Boris I. Alekhin
Oil and the Ruble: Collapse of Cointegration, p. 58-74
Oil still contributes around 30 % to Russia's commodity export earnings, therefore the impact of oil prices on Ruble's exchange rate is of current interest to Russian economists. Instruments of time series analysis were used to test a proposition that the Russian ruble’s exchange rate has become less dependent on Brent crude oil price in recent years. We obtained 1,095 weekly observations for years 2000 to 2020 were obtained from FINAM company website. Our empirical model is a linear regression of the ruble’s exchange rate on Brent crude oil price. The Bai-Perron test has identified three structural breaks in the data corresponding to four chronological regimes. The Engle-Granger cointegration test has found both the rate and the price to be non-stationary in all regimes while cointegration was found only in the third regime (September 12, 2011 – October 23, 2017). The main reasons for collapse of cointegration in the fourth regime (October 30, 2017 – December 28, 2020) are 1) successful efforts by oil-producing countries to curb oil production, 2) decline in Russian import of goods and services, 3) Bank of Russia’s contractionary monetary policy, 4) built-in exchange rate stabilizer activated by the budget rule, and 5) anti-Russian sanctions. Cointegration, as it turns out, comes and goes.
Keywords: oil, ruble, correlation, cointegration
JEL: E31, F31, F33
Acknowledgments: The author is grateful to the referee for constructive criticism of the manuscript.
For citation: Alekhin B.I. Oil and the Ruble: Collapse of Cointegration Financial Journal, 2021, vol. 13, no. 1, pp. 58–74 (In Russ.). DOI: 10.31107/2075-1990-2021-1-58-74.
Natalya A. Khutorova
Global Catastrophe Bond Market and the Prospects of Its Formation in the Russian Federation, p. 75-92
The article is devoted to the development of instruments for catastrophe risk financing. The state of the global market for disaster risk financing is analyzed in order to identify the main development trends and the possibilities of using conceptual approaches in the Russian practice of the financial market. It is proven that the development of the catastrophe bond market has prospects in conditions of permanent instability, since catastrophe bonds are unique and highly attractive due to the lack of correlation with macroeconomic events. It is suggested that the instruments of catastrophe risk financing can be considered in the context of the development of sustainable finance. The paper identifies the main problems slowing down the development of the Russian catastrophe bond market, and formulates proposals aimed at developing the market for insurance-linked securities (ILS) in the Russian Federation. Pilot CAT bonds emission prospectuses should be based on structured bonds, with elements of a subordinated bond. There is a need to introduce into the Russian legal field a term defining ILS as a category. It is proposed to register special purpose vehicles (SPVs) and catastrophe funds in Russian offshores. The Russian analogue of catastrophe funds should be a closed-end investment fund with high funding for qualified investors. It is proposed to update the formula for calculating the creation of and the procedure for using reserve funds, in particular with the use of catastrophe risk financing tools. A pilot issue of CAT bonds is proposed to be conducted on behalf of VEB.RF, as bonds sponsoring regions exposed to high natural risks. In the process of developing socially responsible investor practice and tools for socially responsible investments, it is suggested to establish a Russian “Green Index” and to create green ETFs in Russia. Due diligence (DD) approaches are recommended for decisions on issuing catastrophe bonds.
Keywords: CAT bonds, ILS, financial markets, catastrophe risk financing, risks
JEL: G10, G18
For citation: Khutorova N.A. Global Catastrophe Bond Market and the Prospects of Its Formation in the Russian Federation. Financial Journal, 2021, vol. 13, no. 1, pp. 75–92
(In Russ.). DOI: 10.31107/2075-1990-2021-1-75-92.
Elena V. Rozhentsova, Anastasiia D. Saltykova, Tatyana М. Devyatkova
Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads, p. 93-106
Due to economic instability there has been an increase in demand for unallocated metal accounts offered by Russian commercial banks since April 2020. Although opening unallocated metal accounts gives banks an opportunity to expand the range of their products, diversify income, attract new clients and retain old ones, most Russian banks do not provide such services. For those, it is important to understand the determinants of bid-ask spreads (the difference between the quoted metal bid and ask prices), since the demand for unallocated metal accounts and the bank’s income from this service depend on the bid-ask spread. The purpose of this paper is to investigate the main determinants
of quoted bid-ask spreads on unallocated metal accounts in commercial banks. Multiple regression models are applied for the period from October 2017 to May 2020. There are very few articles on the determinants of quoted bid-ask spreads on unallocated metal accounts; for this reason the paper is based on the results of studies of bid-ask spreads in other markets. Based on recent theoretical results, which indicate that bid-ask spreads depend on price volatility, we confirm this hypothesis on unallocated metal accounts. Moreover, we reveal that banks’ assets and the share of state participation influence bid-ask spreads on unallocated metal accounts in commercial banks. It is also proven that
bid-ask spreads for unallocated metal accounts in gold are, on average, lower than those for palladium, platinum and silver.
Keywords: unallocated metal account, bid-ask spread, price volatility, banking sector, gold market, precious metals market
JEL: G21, G12, G13
For citation: Rozhentsova E.V., Saltykova A.D., Devyatkova T.М. Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads. Financial Journal, 2021, vol. 13, no. 1, pp. 93–106 (In Russ.). DOI: 10.31107/2075-1990-2021-1-93-106.
Tatyana G. Arbatskaya
Accounting and Analysis of Cash Flows of Penal Entities, p. 107-124
The global economic crisis, exacerbated by the pandemic of the new coronavirus infection, has led to a significant deterioration in the financial state of most economic entities. This problem has also affected public sector entities receiving budget financing. Even if a given public sector entity is engaged in entrepreneurial activity, with a decrease in sales cash flow decreases, whereas accounts receivable and payable increase. To carry out their statutory activities, state entities of the penitentiary system in the Russian Federation use not only budgetary funds, but also funds received from the sale of products manufactured by convicts. Therefore, the interest of users in the cash flows of penitentiary institutions is steadily increasing. The above strengthens the information and analytical functions of cash flow statements. Unlike other forms of reporting, the cash flow statement should report cash flows during the period classified by operating and investing activities (financing activity is not typical for penitentiary entities). In addition, the statement of cash flows provides useful information not only for controlling the use of budget funds, but also for current and forecast analysis. The article investigates the theoretical principles of accounting of cash flows of public sector entities of the penitentiary system of the Russian Federation. Results of the study include a proposal to improve the form of the cash flow statement by including an analytical feature — the source of financing activities. The study also presents and tests a methodology for analyzing cash flows in the context of funding sources.
Keywords: cash flows, cash flow statement, presentation of a cash flow statement, financing, cash flow analysis
JEL: H61, H83
For citation: Arbatskaya T.G. Accounting and Analysis of Cash Flows of Penal Entities. Financial Journal, 2021, vol. 13, no. 1, pp. 107–124 (In Russ.). DOI: 10.31107/2075-1990-2021-1-107-124.
Kristina V. Shvandar, Anastasia A. Anisimova
Approaches to Reforming Pension Systems in the World and Recommendations for Russia, p. 125-135
Global trends in the pension sector show that a funded pension, in addition to a pay-as-you-go component, increases the reliability of pension protection for retired people and improves the stability of the pension system. The article analyzes the main directions of reforms of both distribution and funded components. The common features of the considered pension systems are the presence of several levels and their effective interaction as well as the expansion of the role of accumulative pension systems. Reforms related to increasing the population coverage with accumulative pension plans are among the most common ones in the framework of the analysis. The main directions for improving the Russian funded pension system are highlighted, among which the voluntary payment of contributions and the ability to set the desired amount of contributions are the main components of the proposed changes, based on the analysis of international experience in reforming pension systems.
Keywords: funded pension, mandatory funded pension plans, pension contributions, private pension funds, pension savings
JEL: H55, J26
For citation: Shvandar K.V., Anisimova A.A. Approaches to Reforming Pension Systems in the World and Recommendations for Russia. Financial Journal, 2021, vol. 13, no. 1, pp. 125–135 (In Russ.). DOI: 10.31107/2075-1990-2021-1-125-135.