Publications in 2012
Bi-currency versus Single-currency Targeting: Lessons from the Russian Experience
Author: Sokolov V.
This paper examines how the 2005 shift in Russian exchange rate policy from US dollar (USD) single-currency to USD–EUR (euro) bi-currency targeting has impacted domestic interest rates. The finding show that this policy shift has disconnected Russian interest rates from US dollar-denominated interest rates, while instead linking them to a synthetic interest rate composed of USD and EUR rates at the same proportion as that of these two currencies in the currency basket against which the ruble's exchange rate is set. The Russian experience shows that while the adoption of bi-currency targeting may help ensure that domestic interest rates are less dependent on the monetary cycle of a single country, these rates are instead likely to reflect financial developments in all countries whose currencies are included in the currency basket. This insight is likely to be relevant for other countries that pursue basket-targeting policies.
Corporate Governance Russia:Of First-order Importance
Author: Sprenger C.
Journal of the New Economic Association (in Russian) 2012, pp.154-157
The impact of Central Bank Liquidity Infusions on Banks with High level of Foreign Borrowing during the Crisis
Author: Sokolov V.
Journal of the New Economic Association (in Russian) 2012, pp.51-78
Using data on foreign borrowing, I identify Russian banks that were affected by the sudden stop of external financing caused by the Lehman Brothers’ collapse. Applying the difference-in-difference method, I compare these «affected» banks to «unaffected» ones and find that the Russian Central Bank’s (CBR) anti-crisis financial assistance primarily went to the former group. Tracing the impact of the CBR’s liquidity infusions on banks’ portfolio allocation decisions, I find that banks used CBR funds not only to pay out foreign debt, but also to accumulate cash deposits in non-resident banks. I also find that affected banks increased their holdings of market securities significantly more than unaffected ones, which suggests that the CBR’s bailout policies impacted their risk-taking strategies. While there was no significant difference in corporate lending growth between the two groups after the sudden stop, lending to borrowers with weaker banking relationships (individuals and entrepreneurs) decreased more among affected banks.
Keywords: foreign borrowing; bailout, banks, crisis.
JEL classification: G21, E58
Informed Trading and Portfolio Returns
Autohor: Boulatov A., Hendershott T., Livdan D.
Review of economic studies 2012, Vol. 80, Issue 1, pp. 35-72
We solve a multi-period model of strategic trading with long-lived information in multiple assets with correlated innovations in fundamental values. Market makers in each asset can only condition their price functions on trading in that asset (but not on trading in the other asset). Using daily non-public data from the New York Stock Exchange we test the model's predictions on the conditional and unconditional lead-lag relations of institutional order flows and returns within portfolios. We find support for the model prediction of positive autocorrelations in portfolio returns as well as the predictions for how informed order flow positively predicts future returns and future informed order flow. As the model predicts we find these relations strengthen for portfolios formed from assets with higher correlation of fundamental values.
Keywords: informed trading, portfolio autocorrelations, adverse selection
Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers
Author: Betschinger M.-A., Bertrand O.
Journal of comparative economics 2012, 40 (3), pp. 413-437
This paper investigates the long-term impact of domestic and international acquisitions, initiated by Russian firms, on their operating performance. In general, acquisitions can be associated with synergy gains, internalization advantages, and higher market power. Acquisitions, however, may also give rise to agency problems as well as new integration and organizational costs, leading to an ambiguous overall impact on the performance of acquirers. Based on a sample of more than 600 acquirers we show that both domestic and international acquisitions tend to reduce the performance of acquirers compared to non-acquiring firms. Examining how different deal, firm and industry level characteristics moderate the value destroying effects of acquisitions, our results suggest that Russian acquirers suffer from the inability to leverage value due to low M&A experience and capability, especially when making international acquisitions.
Keywords: M&A, Restructuring, FDI, Emerging Countries, Russia
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