Abstract

The paper discusses the application of Hyman Minsky’s financial instability theory to open economy issues. It is claimed that the financially fragile nature of the present day capitalist economy retains its key features regardless of how intense the country’s interactions with the foreign sector are. The Minskian approach, as opposed to standard neoclassical development economics, provides the negation of external financing in developing countries by pointing out that it is, in essence, a Ponzi financing scheme. This result was confirmed by Evsey Domar in discussion of US policy in the post-war period. In fact, Domar’s solution to produce stability of the external debt to GDP ratio represents conditions for a successful Ponzi scheme. Shortcomings of the traditional development theory are also stressed. In this approach, constraints on developing countries are identified as deficient domestic savings, scarcity of domestic resources and inadequate capacity to produce capital goods. Proposed measures to overcome these constraints and to increase domestic savings, external financing via bilateral grants and concessional lending through international institutions are criticized. In the global economy, Keynes’s long-standing recommendation to use capital controls to limit foreign borrowing needs to be reappraised. Economic development in that case should be financed using domestic financial institutions and stimulating employment in domestic manufacturing and export-oriented sectors.

Keywords: Hyman Minsky, financial instability, financial crises, development economics, open economy macroeconomics.

JEL: B22, E12, F41, О11.

Jan Kregel - Director of Research. Levy Economics Institute of Bard College (30, Campus Rd., Blithewood, Annandale-on-Hudson, NY, USA, 12504–5000).

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Abstract

The article is based upon the discussion materials from the presentation of the Russian translation of Hyman Minsky’s seminal book “Stabilizing an Unstable Economy”. The theoretical heritage of one of the most prolific and remarkable representatives of Post-Keynesian economics is examined from different, partly opposite positions. Many concepts elaborated in the monograph, namely causes of financial crashes, sources of permanent instability of modern market economies, and ways of coping with crises, are of special interest with regard to the Great Recession of 2007–2009. The authors vindicate the relevance of the book’s key thesis, but at the same time point to the necessity of modification, updating and even revision of some of them. The article reflects the following aspects of Minsky’s theory: the relation between exogenous and endogenous money supply, tendencies of financialization and growing systemic financial fragility, tools for reducing financial instability and mitigating the credit cycle. Special attention is paid to the barriers for the creation of financial and labor markets’ mega-regulators — Big Bank and Big Government. A separate section of the article is devoted to the Minskian lender of last resort concept and its meaning for the current monetary policy practices of the leading central banks. It is stressed that some elements of Minsky’s approach are integrated today into the most advanced macroeconomic research undertaken at universities and under the auspices of the International Monetary Fund, the Bank for International Settlements etc. The authors also compare the methodological settings of Minsky and contemporary mainstream macroeconomics represented by the New Neoclassical Synthesis, with an emphasis on economic policy recipes.

Keywords: Hyman Minsky, Post-Keynesian economics, economic crises, financial crises,

macroeconomic policy.

JEL: E12, E32, G01.

Yulia V. Vymyatnina - Сand. Sci. (Econ.). European University at Saint Petersburg (6/1А, Gagarinskaya ul., Saint Petersburg, 191187, Russian Federation).

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Vadim O. Grishchenko - Central Bank of the Russian Federation (12, Neglinnaya ul., Moscow, 107016, Russian Federation).

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Vsevolod M. Ostapenko - Cand. Sci. (Econ.). Saint Petersburg State University (7–9, Universitetskaya nab., Saint Petersburg, 199034, Russian Federation).

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Viktor T. Ryazanov - Dr. Sci. (Econ.). Saint Petersburg State University (7–9, Universitetskaya nab., Saint Petersburg, 199034, Russian Federation).

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Abstract

After the Bank of Russia had switched to inflation targeting, its key rate became the main instrument of monetary policy. Based on the experience of both developed and developing countries, the authors conclude that besides regulating the key interest rate monetary authorities have a wide range of interest rate policy instruments. By regulating the width of the interest rate corridor and the location of the key rate within the corridor, monetary authorities get the opportunity to manage not only the level of the target interest rate and its volatility, but also to influence transnational capital flows. Interest rate instruments known since early 1990s were widely used by inflationtargeting monetary authorities during the crisis of 2008–2009 and the post-crisis period, when many of them experienced an increase of short-term foreign capital inflows and exchange rate volatility, which entailed increased risks for price and financial stability. The authors also confirm the significant role of such a traditional instrument of monetary policy as required reserves. Monetary authorities of developing countries use them to regulate monetary conditions in order to eliminate imbalances in the structure of credit organizations’ liabilities and, first of all, for the purpose of dedollarization and stimulation of the attractiveness of long-term deposits in national currency. According to the authors, widening the spectrum of interest rate instruments used by the regulator will help increase the flexibility and effectiveness of the Bank of Russia’s monetary policy.

Keywords: inflation targeting, interest rate policy, interest rate corridor, asymmetric interest rate corridor, required reserve ratios, monetary authorities.

JEL: E58, E61, Е66, F36.

Sergey M. Drobyshevskiy - Dr. Sci. (Econ.). Gaidar Institute for Economic Policy (3–5, Gazetnyy per., Moscow, 125009, Russian Federation); Russian Presidential Academy of National Economy and Public Administration (84, Vernadskogo pr., Moscow, 119571, Russian Federation).

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Anna M. Kiyutsevskaya - Cand. Sci. (Econ.). Gaidar Institute for Economic Policy (3–5, Gazetnyy per., Moscow, 125009, Russian Federation); Russian Presidential Academy of National Economy and Public Administration (84, Vernadskogo pr., Moscow, 119571, Russian Federation).

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Pavel V. Trunin - PhD (Econ.). Gaidar Institute for Economic Policy (3–5, Gazetnyy per., Moscow, 125009, Russian Federation); Russian Presidential Academy of National Economy and Public Administration (84, Vernadskogo pr., Moscow, 119571, Russian Federation).

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Abstract

In this paper, we attempted to solve two problems — to understand whether there are distinctions in banks’ interest rate reactions to each other caused by differences in banks’ sizes and, if yes, how these distinctions are reflected in banks’ loan supply to the economy. As is well known, banks’ price wars lead to the reduction of interest rates on loans, but does this mean that the supply of banks’ loans will necessarily be stimulated? We divided the Russian banking system into four groups depending on the banks’ size: Sberbank (group 1); other banks in top‑30 (group 2); other banks in top‑100 (group 3); and banks outside the top‑100 (group 4). Estimation results show, first, that the banks’ size indeed plays a significant role in terms of observed intensities of banks’ interest rate reactions to each other during both the boom and bust phases of the business cycle and, second, that these intensities within and between groups are indeed crucial for banks’ loan supply in both retail and corporate credit markets. We then prove that, in most of cases, the banks’ gains from successful price wars during the bust phases turn out to be economically smaller than the banks’ losses from the price wars when the economy is in its boom phases. Therefore, the price wars turn out to be destructive and are not able to deliver the long-term advantages to its winners compared with the costs required to conduct the war.

Keywords: price competition, interest rate, price wars, collusion, supply of loans.

JEL: G21, G28, D22, D43, C23.

Mikhail E. Mamonov - Cand. Sci. (Econ.). Center for Macroeconomic Analysis and Short-Term Forecasting, Institute of Economic Forecasting, Russian Academy of Sciences (47, Nakhimovsky pr., Moscow, 117418, Russian Federation).

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Abstract

The questions of why similar transactions can be organised in completely different ways and why some of these transactions do not happen despite their apparent utility are very interesting. Modern economists explain this phenomenon from the point of view of transaction costs and their minimization. The transaction costs theory has come a long way from its inception in Coase’s work to its maturing in Williamson’s work and to its further development in the works of various contemporary scientists. Having started as a marginal idea, it became a successful empirically testable theory that can be used to analyse numerous economic industries ranging from the market for football players to factory process management in the aerospace industry. In this article, we analyse contemporary theoretical and empirical research papers to unveil the development of this theory. We show first how the notion of transaction cost emerged. Its appearance was prompted by the understanding among several scientists that there is a mismatch between theoretical conclusions and the real-life situation. An understanding came that all transactions lead to additional costs that are not directly related to production costs. Thus, an attempt was made to explain these additional costs. We show how the interaction with classical economics influenced the development of the theory, which concepts were abandoned in the struggle to enter the mainstream, and which ideas survived and became indispensable. We describe the opportunities for studying economic activity provided by this theory.

Keywords: firm, transaction costs theory, neo-institutionalism.

JEL: B25, L1.

Anna A. Panova - Cand. Sci. (Econ.). Center for Institutional Studies, National Research University Higher School of Economics (4, str. 2, Slavyanskaya pl., Moscow, 109074, Russian Federation).

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Abstract

The motives which guide an individual making an economic choice traditionally attract attention of economic science. However, there is a certain lack of choice models oriented towards people’s irrational inclinations, which to an essential degree determine their economic behavior along with rational motives. The goal of the present research is to form a choice model which takes into consideration the expanded structure of demands that determine an economic individual’s choice in actual practice. The article provides a detailed overview of approaches of various economic schools to the nature and the extent of behavioral rationality of such an economic individual. Based on the broader view on decision making motives as well as the analysis of evolving limitations, the author introduces the term ‘low-rational managerial behavior’ as a mechanism of implementing the foregoing preferences, and presents examples from business practice. The author reviews the low-rational behavioral features inherent to dominating shareholders of companies. It is noted that their low-rational priorities affect such areas of business operations as establishing the organizational structure and the choice of CEOs, which results in resolving the agency problem. In conclusion, exemplified by BREXIT, it is shown that lack of attention to low-rational preferences not only prevents an accurate prediction of their choice, but can even change the course of a whole country. At the same time, taking these factors into consideration helps evaluate more clearly the real motives of individuals’ behavior.

Keywords: economic individual, economic choice, rational behavior, low-rational behavior.

JEL: B52, D02.

Dmitry A. Zhdanov - Dr. Sci. (Econ.), Associate Professor. Russian Presidential Academy of National Economy and Public Administration (82/5, pr. Vernadskogo, Moscow, 119571, Russian Federation); Central Economics and Mathematics Institute RAS (47, Nakhimovskiy pr., Moscow, 117418, Russian Federation).

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Abstract

The article reviews various factors that potentially determine the fees of player transfers between clubs in professional football. The list of potential determinants was based on the findings of previous academic papers. The authors focus on two groups of factors: bargaining power and player statistics. This approach allows one to exclusively analyze the influence of clubs and individual achievements of footballers on the transfer value. Cause-effect relationships were established using the multivariate regression analysis technique, where a player’s transfer fee is used as the dependent variable. A set of control variables was introduced in order to include the effects of the player’s age, height, preferred foot, and position. The research sample includes 324 transfers from England, Germany, Italy and Russia. Separate models were constructed for the bargaining power and sports statistics variables. The results show that the independent variables related to the clubs involved in a transfer deal show a much higher predictive power (R2) than player statistics. Another regression model, designed using a stepwise method, is presented in

the article. Overall the model included 21 independent variables, 11 of which were related to club bargaining power. These findings highlight that, in order to maximize profits from transfer deals, clubs need to sell players to teams located in the more commercially developed markets. This article may assist football governing bodies in establishing a more transparent approach towards estimating player transfer fees, which have seen a massive increase over the last years.

Keywords: sports economics, football economics, transfer market, estimating player fees, bargaining power, player contracts.

JEL: Z23, G12.

Ilya V. Solntsev - Cand. Sci. (Econ.), Associate Professor. Plekhanov

Russian University of Economics (36, Stremyannyy per., Moscow, 117997,

Russian Federation).

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Nikita A. Osokin - Financial University under the Government of the Russian

Federation (15, Verkhnyaya Maslovka ul., Moscow, 127083, Russian

Federation).

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Maksim A. Taranenko - Plekhanov Russian University of Economics (36,

Stremyannyy per., Moscow, 117997, Russian Federation).

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Anton O. Zheleznyakov - Plekhanov Russian University of Economics (36,

Stremyannyy per., Moscow, 117997, Russian Federation).

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