Abstract

Why are banking systems unstable in so many countries — but not in others? The United States
has had twelve systemic banking crises since 1840, while Canada has had none. The banking
systems of Mexico and Brazil have not only been crisis prone but have provided miniscule
amounts of credit to business enterprises and households. Analyzing the political and banking
history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several
centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are
not accidents. Calomiris and Haber combine political history and economics to examine how
coalitions of politicians, bankers, and other interest groups form, why they endure, and how they
generate policies that determine who gets to be a banker, who has access to credit, and who pays
for bank bailouts and rescues.

Key words: banking crises, credit crunch.

JEL: D72, E44, G01, G21, N20, O16, O17.

Charles W. Calomiris, professor, Columbia Business School and Columbia’s School of International and Public
Affairs.

Stephen H. Haber, professor of political science and senior fellow, Hoover Institution at Stanford University.

Abstract

The failure of uncovered interest rate parity (UIP) is a well-known phenomenon in last thirty
years. The failure of UIP is more prominent in advanced economies rather than in emerging
market economies. Usually UIP estimation for an advanced economy gives negative coefficient,
meaning that higher interest rate in the advanced economy A will result in the appreciation of
the economy A’s exchange rate. In case of emerging market economies, higher interest rate
usually corresponds to future depreciation, although this depreciation is not sufficient for UIP
to hold. This paper shows that UIP holds in Russia even better than on average in other emerging
market economies, if the UIP equation includes constant risk premium. Consequently, there is
no forward premium puzzle in Russian data of 2001–2014. To show the results on Russia and compare them with the results on other countries, we estimate UIP, first, for Russia, and then
for the advanced and emerging market economies, using seemingly unrelated regressions and
panel data analysis. By comparing profitability of static and dynamic carry trade strategies, we
also confirm that in the emerging market economies risk premium is often constant, whereas in
the advanced economies risk premium is almost always volatile. This feature may explain why
UIP holds better for emerging market economies. It also enables us to formulate the hypothesis
saying that macroeconomic policy of the emerging market economies, such as the accumulation
of large foreign exchange reserves, stabilize risk premium.

Key words: interest parity, forward premium puzzle, carry trade, risk premium, foreign exchange
reserves.

JEL: F31, F32, G15.

Dmitry Yu. Vasilyev, National Research University Higher School of Economics
(26, Shabolovka ul., Moscow, 119049, Russian Federation).                                                                                                   E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Vladimir P. Busygin, Cand. Sci. (Phys. and Math.), professor, National Research University Higher School of Economics (26, Shabolovka ul., Moscow, 119049, Russian Federation).                                                                        E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Sergei V. Busygin, Novosibirsk State University (2, Pirogova ul., Novosibirsk, 630090, Russian Federation)              E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract
In this paper, we investigate the influence of internal and external shocks on macroeconomic
indicators of Russian economy using Bayesian vector autoregression (BVAR) model. We develop
conditional medium-term forecasts (scenarios, up to 2017) and then compare the forecasting
outcomes achieved in BVAR under these scenarios with respective official forecasts of the Ministry
of Economic Development (MED) of the Russian Federation. Our results indicate that within
the similar scenario conditions our proposed BVAR predicts (1) a deeper and (2) more prolonged
recession on the medium-term forecasting horizon as compared to the MED’s forecasts. Our comparative analysis allowed us to reveal the bottlenecks in the forecasting methodologies applied
both in the MED’s model and in our BVAR model, which seriously worsen the quality of forecasts.

Key words: Bayesian vector autoregression, internal and external shocks, conditional (scenario)
forecasts.

JEL: E43, E44, E52, E58.

Anna A. Pestova, Cand. Sci. (Econ.), Center for macroeconomic analysis and short-term forecasting (CMASF) at the Institute for Economic Forecasting of the Russian Academy of Sciences (47, Nakhimovsky prosp., 117418, Moscow, Russian Federation)                                                                                                                                                                       E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Mikhail E. Mamonov, Cand. Sci. (Econ.), National Research University “Higher School of Economics” (20, Myasnitskaya ul., 101000, Moscow, Russian Federation).                                                                                                            E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Abstract
During the last 20 years, many attempts have been made in Russia to develop fiscal federalism
system that can enable sustainable fulfillment of the financial obligations at all levels of government
and creates economic incentives for various actors. The evidence of these attempts is the adoption
of numerous government programs in the field of public financial management throughout these
years. The goal of the present article is to identify whether the implementation of the government
programs is conducive or detrimental to the development of fiscal federalism in Russia. The
subject of the article is the correspondence between the formally declared goals and objectives of
the government programs and the real situation in Russian fiscal federalism. The methodology
is based on the descriptive statistical analysis of the major indicators of the budget system and
the comparative analysis of the problems, challenges and achievements stated in the government
programs. The article collects and analyzes major trends in the development of fiscal federalism
in Russia — degenerating structure of the federal budget revenues, increasing dependence of
regions on federal fiscal transfers, and imbalances between revenue and expenditure assignments
at the regional and local levels. Critical features and contradictions of these documents are
also identified. The analysis of the performance indicators present in the latest State Program
(2014) allows identifying potential problems in formulating and measuring these indicators and propose alternative indicators as well as other recommendations on the improvement of program
documents. The practical significance of the article lies in the development of proposals to adjust
indicators for efficient public financial management.

Key words: fiscal federalism, budget system, government programs, target indicators.

JEL: H61, H70, H77.

Nina Yu. Oding, Cand. Sci. (Econ.), International Centre for Social and Economic Research “Leontief Centre”
(25, 7th Krasnoarmeyskaya ul., St. Petersburg 190005, Russian Federation)                                                                   E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Lev I. Savulkin, Cand. Sci. (Geogr.), International Centre for Social and Economic Research “Leontief Centre”
(25, 7th Krasnoarmeyskaya ul., St. Petersburg 190005, Russian Federation)     
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Andrey O. Yushkov, International Centre for Social and Economic Research “Leontief Centre”
(25, 7th Krasnoarmeyskaya ul., St. Petersburg 190005, Russian Federation)     
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract
The gradual increase of excise duties on beer provided under the Law on indexation of excise rates
in the years 2015–2017 aims to reduce beer consumption by population and to contribute to the
growth of related tax revenues for regional budgets. However, the issue of increasing excises on
beer’ rates is not so clear. On the one hand, with the decline in consumer activity of the population
during the crisis period, the brewing industry will be under attack with the evident consequence
of reducing tax revenues to the regional budget. On the other hand, the “grey” schemes of beer
import from the EAEU are beginning to appear in Russia, as well as the switching of low-income
groups to poor-quality alcohol, including surrogates. In addition, the desire to withdraw the
administration of excise taxes on beer from the regional level to the federal one does not meet the
objectives of sustainable development of regions, especially St. Petersburg as the largest metropolis
in North-West of Russia. The article discusses the following issues: the role of excise taxes on beer
for the regional budget revenues formation in Russia, the impact of excise taxes on beer increasing
on their collection rates in the current conditions, as well as the increase in the consumption of
other types of alcohol; and the prospects of a partial transfer of administration of the excise taxes
on beer from regional budgets to the federal one.

Key words: excises, beer excise tax, tax policy, taxation, tax administration, regional budget, regional
economic development.

JEL: H25, H71, H73, H77.

Alexander I. Pogorletsky, St.Petersburg State University (7/9 Universitetskaya nab., St.Petersburg, 199034, Russian
Federation)                                                                                                                                                                                       E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract
Fiscal policy in a resource-rich and thus exposed to external factors country has to pay special
attention to balancing the budget system. To analyze expenditures of the consolidated budget of
the Komi Republic some theoretical approaches were applied, namely productive expenditures
conception, some balance between current and capital expenditures and requirements of
independence and a clear division of authority in multi-level budgetary systems. It is shown
that from 2012 there grows the deficit of the republican budget of the Komi Republic while expenditure rate of growth is falling. It is accompanied by the centralization of budget funds and
decrease of independence of local budgets. The current expenditures are steadily growing and
capital expenditures falling. The rise of productive expenditures is due to increased education
spending, but it is unlikely to cause sustainable economic growth because of centralization,
descending infrastructure spending and capital expenditures, rise of deficit and debt, decrease
of independence.

Key words: consolidated budget, Komi Republic, expenditures, productive expenditures.

JEL: H72, H77.

Evgeny Timushev, Laboratory of financial and economic problems, Institute for Socio-Economic and Power
Problems of the North, Komi Scientific Center, Ural Branch of the Russian Academy of Sciences
(26, Kommunisticheskaya ul., Syktyvkar, the Komi Republic, 167982, Russian Federation)                                                E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract
Thomas Piketty has wrote a serious empirical work on economic history. The central thesis of the
work is that the force of interest on inherited wealth causes inequality of the income earned from
the wealth to increase in inevitable and stable manner. The author has collected and presented
a huge bulk of empirical data. But despite all its advantages the book contains many serious
flaws. In fact its own data suggest that the inequality of income has increased much only in
a few countries and only recently. Moreover, all the way a steady share of rich people constantly
have been dropping out of riches or coming into them, in evolutionary fashion. Piketty does not
see the key role of entry of new entrepreneurs into the markets and their exit from them while
this is the key to understanding of the process of market-tested betterment that has made the
poor rich. Piketty’s definition of wealth does not include human capital, owned by the workers.
The fundamental ethical problem in the book, is that Piketty has not reflected on the ethical
relevance of equality as such and in comparison with raising of the poor. It is the latter notion
that is ethically relevant from the point of view of their human dignity. If income is correctly
measured the real income of the poor has risen in sustained way from 1800 because of rising
productivity, and consumption of basic necessities is very much more equally enjoyed nowadays.

Key words: Thomas Piketty, capital, inequality, income redistribution, long-term economic growth,
innovation driven growth.

JEL: B51, D35, N30, O43.

Deirdre Nansen McCloskey, Distinguished Professor of Economics and of History,
University of Illinois at Chicago, 2014 Fellow, IASS Institute for Advanced Sustainability Studies, Potsdam, Germany   E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract
The evolution and outcomes of conflicts in Europe, including the current one in Ukraine, have
been influenced by the dynamics of economic, technological and military balances, which in
turn are affected by the economic warfare and sanctions that have been used to alter them. This article reviews defence economic concepts of relevance to the Ukraine conflict and then draws out
lessons for the present concerning power balances, military capabilities, conventional deterrence,
economic warfare and counter-measures against sanctions from experiences in Europe in the
20th century. An evaluation is made of the impacts of economic sanctions on Russia and Ukraine
in 2014–2016.

Key words: economic power, military capabilities, technology, economic warfare and sanctions,
Russia, Ukraine.

JEL: F51, N4.

Christopher Mark Davis, Department of Economics and School of Interdisciplinary Area Studies, University of Oxford,
Oxford, UK                                                                                                                                                                                           E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it