Abstract

The article discusses the rules and restrictions for subnational budgets in Russia and some federative countries, as well as the current level of debt burden of the respective public authority. According to the authors, in the world practice, modern budget rules for the regions are characterized by flexible built-in mechanisms that allow them to adapt quickly to external and internal shocks without making changes in their basic design. This ensures not only fiscal sustainability of public finances at the regional level, but also stability of budget legislation and its law enforcement practice. The authors analyze the arguments pro and contra the application of conditional budget rules, that is, the features of binding certain restrictions of budget parameters (volume of expenditures, regional budget deficit, public debt) to such criteria as the level of transfer dependence, the amount of accumulated debt level, the dynamics of GRP growth rates etc. The analysis of international and Russian practice has led to the conclusion that budgetary rules should not be differentiated based on the level of transfer dependence, that there is a need for tighter restrictions for regions with high debt burden, and that budget rules should be given sufficient flexibility. In order to ensure effective application of new budget rules, the authors propose limiting the practice of making decisions at the federal level that directly affect the expenditure obligations of the regions, and introducing a system of built-in mechanisms to increase fiscal discipline, including encouraging regions that implement responsible fiscal policies and applying sanctions for violating budget rules.

Keywords: budget rules, budget balance, regional budgets, public debt, deficit, transfer dependency.

JEL: Н61, Н68, Н72, H74, H77.

Alexey L. KUDRIN, Cand. Sci. (Econ.), Professor. St. Petersburg State University (7–9, Universitetskaya nab., St. Petersburg, 199034, Russian Federation), Chairman of the Council of the Center for Strategic Research (10, Vozdvizhenkaya ul., Moscow, 119019, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Alexander N. DERYUGIN. Institute of Applied Economic Research, Russian Presidential Academy of National Economy and Public Administration (RANEPA) (82, prosp. Vernadskogo, Moscow, 119571, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

This article attempts to estimate the scale of state participation in the Russian economy in temporal dynamics and in comparison with other countries. Our unique methodology suggests a set of alternative approaches to measuring 3 independent components: stateowned enterprises (SOEs), state unitary enterprises and the public administration sector. Our results reveal growth of state involvement in the economy up to 46% of GDP in 2016. The share of SOEs and public administration in GDP rose from 20.2% and 16.9% in 2006 to 25.3% and 19.2% in 2016, respectively, by conservative estimates. A crosscountry comparison suggests that market capitalization, employment and SOEs’ share in GDP are significant and increasing. The share of public administration corresponds to the same estimate for OECD countries, but it is also increasing. The total state share and its growth can be evidence of an alarming trend for the Russian economy. It is 6%-12% higher than the estimate for most developing countries and, unlike in China or India, it keeps growing. This leads to state expansion in the economy, growth of state influence on SOEs and a transfer of noneconomic risks to SOEs. Apart from increasing state involvement in added value creation, the state plays an active role in reallocation of financial resources, and there is some evidence that it is even more significant than the state share in creating added value measured by GDP.

Keywords: state ownership, state-owned enterprises, public administration sector, state share in GDP.

JEL: B20, D20, D60, G38, H82, H83, K40, L30, P20.

Alexander E. ABRAMOV, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Ivan V. AKSENOV, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Alexander D. RADYGIN, Dr. Sci. (Econ.), Professor. Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation); Gaidar Institute for Economic Policy (3–5, Gazetny per., Moscow, 125009, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Maria I. CHERNOVA. Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

The question of the existence of a relationship between the level of economic activity and the real interest rate is the most important in the construction of macroeconomic models. In economic theory since Keynes, the interest rate channel has been one of the key channels for the transmission of shocks of monetary and fiscal policies to macroeconomic indicators due to the impact on household consumption trajectories and investments. The efficiency of the interest rate channel plays a pivotal role in the discussion of monetary policy measures to stabilize economic activity. For instance, a change in the nominal interest rate subject to non-absolute price flexibility may affect the real interest rate, thereby affecting aggregate demand in the economy. However, the ability of the Bank of Russia to influence economic activity in the Russian Federation is often questioned due to the lack of stable empirical evidence of dependence of Russian output on the interest rate. The article examines the theoretical foundations of IS curve construction and presents a review of empirical research in this area. The hypothesis of a negative correlation between the output and the interest rate in the Russian economy is tested. The approach to estimating the structural equation of the IS curve involves considering deviations of the Russian GDP from the trend using the generalized method of moments for the period from Q1 1999 to Q3 2014. The results of the empirical analysis testify to the existence of a negative correlation between the economic activity and the real interest rate in Russia.

Keywords: interest rate channel, IS curve, Euler equation, modeling aggregate demand in Russia, business cycle, monetary policy.

JEL: E12, E20, E32, C30.

Alexandra V. BOZHECHKOVA, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 117517, Russian Federation), Gaidar Institute for Economic Policy (3–5, Gazetny per., Moscow, 125009, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Andrey V. POLBIN, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 117517, Russian Federation), Gaidar Institute for Economic Policy (3–5, Gazetny per., Moscow, 125009, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

In this paper, the interest rate channel of the monetary policy transmission mechanism in the Russian economy is examined using error correction models. Results suggest that there is a pronounced, statistically significant, and increasing as time passes impact of Bank of Russia interest rates on lending and deposit rates of Russian banks. This impact is heterogeneous and differently reveals itself in different segments of the bank operation market. The response of commercial banks’ interest rates to changes in Bank of Russia rates is characterized by a prominent asymmetry: interest rates on active bank operations quicker respond to an increase in monetary policy rates, while interest rates on passive bank operations quicker respond to a decrease of monetary policy rates. Heterogeneity and asymmetry of the response of commercial banks’ interest rates to the monetary policy in Russia in general correspond with the results of the monetary transmission mechanism analysis in some leading emerging and advanced countries. As far as the authors know, this paper is the first attempt where the asymmetry of the interest rate channel in Russia is studied. Our results may become one of the starting points for further analysis of the interest rate channel in the Russian economy. Moreover, they can be useful for the Bank of Russia since they explain the functioning of an interest rate channel in greater details. As a result, this new information will help the Bank of Russia conduct a more effective inflation targeting policy.

Keywords: asymmetry of monetary transmission mechanism, interest rate channel of monetary policy transmission mechanism, lending rates, deposit rates, Russian commercial banks, Bank of Russia policy.

JEL: C22, E43, E52, E58, G21.

Aleksei V. EGOROV, Cand. Sci. (Econ.), Associate Professor. Plekhanov Russian University of Economics (36, Stremyanny per., Moscow, 117997, Russian Federation), Monetary Policy Department at the Bank of Russia (12, Neglinnaya ul., Moscow, 107016, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Olga A. BORZYKH, Cand. Sci. (Econ.). Monetary Policy Department at the Bank of Russia (12, Neglinnaya ul., Moscow, 107016, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

Due to its implicit nature, financial repression is a convenient fiscal policy measure for the populist government. Financial repression gives the populist government the opportunity to finance more government spending with less explicit taxes. The optimal parameters of financial repression in the form of nonmarket debt placement are determined for the populist government. Populism is introduced by the choice of government spending and tax on capital higher and lower respectively than those chosen through voting procedure. The overlapping generations model with a fully funded pension system and financial repression is used to determine the optimal fiscal policy of the populist government. Moreover, the influence of the two fiscal regimes on household welfare is considered. It is shown that financial repression in the form of nonmarket debt placement is an element of the optimal fiscal policy for the populist government. Such government will set the gross interest rate on government bonds lower than the gross interest on capital by placing its debt in the captive pension fund. This leads to the fall in the pension fund’s yield and to the decrease in household wealth. The optimal repressed interest rate on government bonds is higher the bigger the population growth rate is, the less the government is addicted to populism and the lower is the elasticity of substitution between consumption and government spending. We also show that the financial repression regime under populism is associated with higher welfare compared to the voting regime without populism. This result is the consequence of the fact that the populist policy allows the reduction of the distorting capital tax rate and its replacement by lump-sum financial repression.

Keywords: financial repression, populism, optimal fiscal policy, overlapping generations, budget deficit, voting in the absence of populism.

JEL: E61, E62, G28, H21, H61.

Olga A. NORKINA, Cand. Sci. (Econ.). National Research University Higher School of Economics (20, Myasnitskaya ul., Moscow, 101000, 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 explain why it is necessary to reform the pension system in Russia and, in particular, to increase the pension age. Moreover, we emphasize the positive consequences of such a reform, focus on potential risks and analyze measures for their prevention, as well as state counter-arguments to the most common objections. It is shown that due to demographic processes, the growth of informal employment and the reduction of average tenure, the number of pensioners is increasing while the population of donors of the pension system is declining. Under such conditions, the maintenance of the existing level of pensions will require significant additional costs. Raising the general retirement age as one of the measures for optimization of the pension system will help not only to maintain the level of pensions, but also to prevent the expansion of transfer payments from the federal budget and the increase of tax burden on the population and business. The reform will improve the situation on the labor market and stimulate the process of active longevity. It is also shown that the arguments against the increase of the retirement age are not well-founded. Several scenarios of the retirement age increase are considered, and the choice of the most favorable way for the Russian economy is made: up to 63 years for men and 60 years for women at the pace of 3 months per year in the first four years of the reform, then 6 months per year. The most crucial tasks which should be solved in order to maximize the social and economic output of the reform are also considered in the paper.

Keywords: pension age, life expectancy, elderly employment, ageing, pension reform.

JEL: J26, J14, J11, J21.

Yuriy M. GORLIN, Cand. Sci. (Econ.). Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 119034, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Victor Yu. LYASHOK. Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 119034, Russian Federation); 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

Tatiana M. MALEVA, Cand. Sci. (Econ.), DBA. Institute of Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 101000, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

In the context of Russia’s need to make a transition towards a new developmental model and in light of the international experience suggesting that advanced regions within large economies could become the primary drivers of national growth, this article analyzes the developmental model that has been shaping up in the Republic of Tatarstan (the RT). In Russia, since the mid‑2000s, this model has been considered as an example of best practice. We identify the main characteristics and stages in the evolution of the RT developmental model, as well as highlight its strengths and limitations using the SWOT-analysis technique. It is noted that a ”special” investment climate has formed in the region, featuring predictable government policies, lower costs and risks of doing business, and informal guarantees for entrepreneurs willing to invest in the RT’s priority projects. The article points out that consolidation of interests of major regional elite groups, their consensus regarding the priorities for regional development and the associated policy instruments have been important comparative advantages of Tatarstan. The prospects for formation in the RT of a catching-up developmental model similar to ones in the successful countries of Southeast Asia will depend upon the extent to which the current Tatarstan’s elite could find a consolidated response to the new challenges confronting the RT recently, as well as the degree of soundness of the federal policy with respect to the more developed regions. The main obstacles to development include the current closed ownership structure of core assets, limiting possibilities of market entry for new players, and lower average wages prejudging the outflow of skilled personnel from the RT. In the environment of tightening regional competition for federal resources Tatarstan would have to make additional efforts in order to strengthen its competitive position in the eyes of the Federal Government. In this regard, expanding cooperation with the neighboring regions looks like an attractive policy option for the RT.

Keywords: elite consolidation, regional development, catching-up developmental model, Tatarstan, Russia.

JEL: O25, O43, P25, P35, R58.

Andrey A. YAKOVLEV, Cand. Sci. (Econ.), Professor. National Research University Higher School of Economics (str. 9, 28/11, Shabolovka ul., Moscow, 119049, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Lev M. FREINKMAN, Cand. Sci. (Econ.). National Research University Higher School of Economics (str. 9, 28/11, Shabolovka ul., Moscow, 119049, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Sergey A. MAKAROV. National Research University Higher School of Economics (str. 9, 28/11, Shabolovka ul., Moscow, 119049, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Victor S. POGODAEV. National Research University Higher School of Economics (str. 9, 28/11, Shabolovka ul., Moscow, 119049, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

The religious market is considered as partially regulated, which means that the state does not prevent the emergence of sects as well as does not persecute non-religious people, and they exist along with the official denominations. A modification of the Hotelling’s spatial model is used in the paper under the simplifying assumption that the entry costs in the religious market are negligible. In contrast to the existing models, where agents seek the closest denominations in terms of strictness, the capacity of the existing churches is also taken into account. This capacity directly affects religious capital acquisition. It was shown by Michael McBride that in an unregulated market there is a natural bound for the number of churches. The authors show that such a bound does not exist in the modified model — moreover, sects and non-religious communities will arise. If the society moderately values the religious capital, then the denominations that arise will be significantly diverse. At the same time the entry costs may hinder the birth of some denominations. Although the majority of results are proven under the condition of a uniform density of preferred strictness among the agents, it is shown that when the monopoly denomination lowers its strictness under the shift in religious preferences, the number of non-religious agents will increase nonetheless, compared with the status quo.

Keywords: religious market, denomination strictness, non-religious community, an equilibrium individual.

JEL: C02, C31, C63.

Kirill A. BUKIN, Cand. Sci. (Phys.-Math.), Associate Professor. National Research University Higher School of Economics (20, Myasnitskaya ul., Moscow, 101000, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Mark I. LEVIN, Dr. Sci (Econ.), Professor. National Research University Higher School of Economics, Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

The purpose of this article is to analyze the results of work of private joint-stock companies during the industry restructuring during the First World War and the influence of this process on the economic condition of Russia on the eve of the February revolution of 1917. At the turn of the 20th century, joint-stock companies succeed among other forms of business set-up, mostly because of their organizational, legal and economic features. The process of industrialization in Russia increased the importance of these companies, which were capable of making large investments in such capital-intensive branches as banking, extraction of new types of natural resources (coal mining, oil extraction etc.), and creation of innovative industries. An overview of the condition of joint-stock companies during the First World War and on the eve of the February revolution is presented by the issue “Joint-Stock Companies in Russia According to the Official Data of the Ministry of Trade and Industry and the Ministry of Finance”. It was the only reference book in Russia which contained systematized data about the joint-stock companies active in Russia. The reference book was printed annually as of 1912; the latest issue is dated 1917. As a result of the analysis, the author makes a conclusion that in spite of the difficulties associated with the transfer of the county’s economy to war regime, generally, the work of joint-stock companies was successful up to February 1917 inclusive; at that it is applicable not only to those firms which received military orders from the state, but also those which worked on a free market. The evidence of this is the growth of the main capital and payment of per cent on dividends, which, starting from 1915, demonstrated a stable tendency for growth.

Keywords: Joint-stock companies, First World War, military orders, dividend, main capital, military-industrial committees.

JEL: N4, N5, N6, Z18.

Alexander A. BESSOLITSYN, Dr. Sci. (Econ), professor. Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo prosp., Moscow, 119571, Russian Federation); Centre of economic history, The Institute of Russian History of the Russian Academy of Sciences (IRH RAS) (19, Dmitriya Ul’yanova ul., Moscow, 117292, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Abstract

The article considers, based on the example of the formation of the world railway network, the process of appearance and diffusion of epochal innovation in interrelation with economic growth. The influence of the previous level of economic and institutional development on the time of the appearance of railways in each country and the dynamics of subsequent development of the railway network has been revealed. It is shown that the institutional conditions that have developed in the UK, which ensure technological creativity of society, individual freedom and entrepreneurial activity, predetermined the country’s leadership in the first half of the 19th century, both in the appearance of railways and further development of the railway network, and in industrial development in general. As a higher level of economic development and quality of institutions in the country contributes to a more dynamic diffusion of innovations, the gap in the level of economic development between the more developed and less developed countries is widening. Overcoming this gap and implementing the strategy of “catch-up” development are possible only through fundamental institutional changes. Cardinal acceleration of economic growth can be achieved only on the basis of a synergy of institutional and innovative development. Given the major role of transport, which is the material basis of global commodity exchange, in the modern economy, economic growth can be successfully stimulated through a synergy of quality institutions and transport innovations.

Keywords: exchange, railways, innovations, institutions, economic growth.

JEL: L92, N 13, N 70, O31, O33, R 49.

Dmitry A. MACHERET, Dr. Sci. (Econ.), professor. Russian University of Transport (MIIT), (9, Obraztsova ul., Moscow, 127994, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Nadir A. VALEEV, Cand. Sci. (Econ.). Joint Stock Company Railway Research Institute (JSC “VNIIZhT”) (10, 3-ya Mytishchinskaya ul., Moscow, 129626, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Anastasiya V. KUDRYAVTSEVA, Cand. Sci. (Econ.). Joint Stock Company Railway Research Institute (JSC “VNIIZhT”) (10, 3-ya Mytishchinskaya ul., Moscow, 129626, Russian Federation). E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it