Essays on Banking Crises

This thesis aims at finding the role of deposit insurance scheme and central bank (CB) in keeping the banking system safe. The thesis also studies the factors associated with long-lasting banking crises. The first essay analyzes the effect of using explicit deposit insurance scheme (EDIS), instead of using implicit deposit insurance scheme (IDIS), on banking crises. The panel data for the period of 1980-2003 includes all countries for which the data on EDIS or IDIS exist. 70% of the countries in the sample are less developed countries (LDCs). About 55% of the countries adopting EDIS also come from LDCs. The major finding is that the using of EDIS increases the crisis probability at a strong significance level. This probability is greater if the EDIS is inefficiently designed allowing higher scope of moral hazard problem. Specifically, the probability is greater if the EDIS provides higher coverage to deposits and if it is less powerful from the legal point of view. This study also finds that the less developed a country is to handle EDIS, the higher the chance of banking crisis. Once the underdevelopment of an economy handling the EDIS is controlled, the EDIS separately is no longer a significant factor of banking crises. The second essay aims at determining whether a country s powerful CB can lessen the instability of the banking sector by minimizing the likelihood of a banking crisis. The data used include indicators of the CB s autonomy for a set of countries over the period of 1980-89. The study finds that in aggregate a more powerful CB lessens the probability of banking crisis. When the CB s authority is disentangled with respect to its responsibilities, the study finds that the longer tenure of CB s chief executive officer and the greater power of CB in assigning interest rate on government loans are necessary for reducing the probability of banking crisis. The study also finds that the probability of crisis reduces more if an autonomous CB can perform its duties in a country with stronger law and order tradition. The costs of long-lasting banking crises are high because both the depositors and the investors lose confidence in the banking system. For a rapid recovery of a crisis, the government very often undertakes one or more crisis resolution policy (CRP) measures. The third essay examines the CRP and other explanatory variables correlated with the durations of banking crises. The major finding is that the CRP measure allowing the regulation forbearance to keep the insolvent banks operative and the public debt relief program are respectively strongly and weakly significant to increase the durations of crises. Some other explanatory variables, which were found by previous studies to be related with the probability of crises to occur, are also correlated with the durations of crises.

Nuorten kokema yksinäisyys ja sen yhteys tulevaisuusorientaatioon

The aim of this study was to examine 1) how much and how adolescents experience loneliness, 2) how they orientate to the future, 3) are loneliness experiences and future attitudes associated with self-esteem and 4) are loneliness experiences associated with future orientation. The data (n=172) was collected in September 2003 and it consisted of 9th grade students living in countryside and city. The research was quantitative questionnaire study and it was statistically analysed. So far the problem of loneliness has not been noticed enough. People experience loneliness when there is discrepancy between actual and desired levels of interpersonal contact. In adolescence loneliness is quite common because young people go through the crises of human relationships and identity. In adolescence the meaning of friends and fellows increases and the relationship with parents changes. Future orientation becomes meaningful in adolescence because young people have to make realistic choices concerning their future life. In this study almost every adolescent had someone to be with and talk to. However 19% of adolescents experienced loneliness. Lonely adolescents experienced lack of friendships and fellowships. Lonely adolescents also felt that they left outside of others and that they were alone. Boys experienced more often lack of friendships and fellowships than girls. Girls experienced that they left more often outside and that they were more often alone than boys. Adolescents living in city experienced a little more loneliness experiences than adolescents living in countryside. Lonely adolescents had also difficulties to make social relationships and they experienced loneliness also related with parents. Lonely adolescents had also weak self-esteem. Adolescents orientated to the future mainly positively. The most important future target was health and the least important target was the universal peace and problems solving of the world. Adolescents believed that they affect to their future mainly by themselves and they planed their future about 5-10 years ahead. For adolescents it was important to have education and work to the future. In the future it was also important to have a lifelong companion and own family. For most of the young people it was also important to keep up social relationships and realize him/herself. Adolescents thought high standard of living and money also quite important things in the future. Girls preferred different future targets more important than boys. For the boys only money and high standard of living were more important than for girls. 18% of adolescents had pessimistic attitude to the future. For pessimistic adolescents many future targets were less important than for the adolescents having affirmative or optimistic attitude for the future. Adolescents who had pessimistic attitude to the future had also weak self-esteem. For the lonely adolescents it was not so important 1) to keep up social relationships and realize themselves in the future. Lonely adolescents did not prefer 2) lifelong companion and own family as important as other young people. Also 3) others acceptance and appreciation were not so important for lonely adolescents. 4) Travelling was also more insignificant for lonely than for others. Lonely adolescents future attitudes were quite pessimistic. Parent related loneliness explained future targets insignificance and pessimistic attitude for the future the most. The experience of loneliness seems to be associated with future orientation in many cases. That s why it is important to pay attention to adolescents loneliness experiences. Loneliness is real and serious problem which threats health. Thus we need to examine further loneliness in adolescence and as a result of that it is possible to develop and use interventions to help lonely adolescents to orientate positively to their future.

Petusta pitsaan : Ruokahuollon järjestelyt kriisiaikojen Suomessa

From bark bread to pizza - Food and exceptional circumstances: reactions of Finnish society to crises of food supply This study on the food supply under exceptional circumstances lies within the nutritional, historical and social sciences. The perspective and questions come under nutrition science, but are part of social decision-making. The study focuses on the first and second world wars as well as on contemporary society at the beginning of the 21st century. The main purpose of this study is to explore how Finnish society has responded to crises and what measures it has taken to sustain institutional food services and the food supply of households. The particular study interests include the school catering and food services in hospitals during the world wars. The situation in households is reflected in the counseling work carried out by state-run or civic organisations. Interest also focuses on the action of the scientific community. The decisions made in Finland are projected onto the solutions developed in some other European countries. The study is based primarily on the archive documents and annual reports prepared by food and health care authorities. Major source materials include scientific and professional publications. The evaluation of the situation in contemporary Finnish society is based on corresponding emergency plans and guidelines. The written material is supplemented by discussions with experts. Food rationing during the WWI and WWII differed in extent, details and unity. The food intake of some population groups was occasionally inadequate both in quantity, quality and safety. The counseling of the public focused on promoting self-sufficiency, improving cooking skills and widening food habits. One of the most vulnerable groups in regard to nutrition was long-term patients in institutions. As for future development, the world wars were never-theless important periods for public food services and counseling practices. WWII was also an important period for product development in the food industry. Significant work on food substitutes was carried out by Professor Carl Tigerstedt during WWI. The research of Professors A. I. Virtanen and Paavo Simola during WWII focused on vitamins. Crises threatening societies now differ from those faced a hundred years ago. Finland is bet-ter prepared, but in many ways more vulnerable to and dependent on other actors. Food rationing is a severe means of handling the scarcity of food, which is why contemporary society relies primarily on preparedness planning. Civic organisations played a key role during the world wars, and establishing an emergency food supply remains on their agenda. Although the objective of protecting the population remains the same for nutrition, food production, and food consumption, threat scenarios and the knowledge and skill levels of citizens are constantly changing. Continuous monitoring and evaluation is therefore needed.

Kirkko, Kekkonen ja kommunismi poliittisina kriisivuosina 1958-1962

This study explores the relationship of the Evangelical Lutheran Church of Finland to communism and political power during the period of crises in Finnish foreign relations with the Soviet Union from 1958 to 1962. During this period the USSR repeatedly interfered in Finland´s domestic affairs and limited her foreign political freedom of action. The research subjects for this dissertation are the bishops of the Church of Finland and the newspaper Kotimaa, which can be regarded as the unofficial organ of the church at the time. A typical characteristic of the Church of Finland from the beginning of the twentieth century was patriotism. During the interwar years the church was strongly anti-communist and against the Soviet Union. This tendency was also evident during the Second World War. After the war the Finnish Church feared that the rise of the extreme left would jeopardize its position. The church, however, succeeded in maintaining its status as a state church throughout the critical years immediately following the war. This study indicates that, although the manner of expression altered, the political attitude of the church did not substantially change during the postwar period. In the late 1950s and early 1960s the church was still patriotic and fear of the extreme left was also evident among the leaders of the church. The victory of the Finnish People's Democratic League in the general election of 1958 was an unwelcome surprise to the church. This generated fear in the church that, with Soviet support, the Finnish communists might return to governmental power and the nation could become a people's democracy. Accordingly, the church tried to encourage other parties to set aside their disagreements and act together against the extreme left throughout the period under study. The main characteristics of the church´s political agenda during this period of crisis were to support the Finnish foreign policy led by the president of the republic, Urho Kekkonen, and to resist Finnish communism. The attitude of Finnish bishops and the newspaper Kotimaa to the Cold War in general was generally in agreement with the majority of western Christians. They feared communism, were afraid of the USSR, but supported peaceful co-existence because they did not want an open conflict with the Soviets. Because of uncertainties in Finland's international position the Finnish Church regarded it as necessary to support the Finnish policy of friendship towards the USSR. The Finnish Church considerer it unwise to openly criticize the Soviet Union, tried resist the spread of communism in Finnish domestic policy. This period of foreign policy crises was principally seen by the church as a time when there was a need to strengthen Finland's unstable national position.

Kirkko sydämessä : Uskonnon muokkautuminen ja individuaatio inkerinsuomalaisten elämänvaiheissa 1900-luvulla

The Church in one s heart. The formation of religion and individuation in the lives of Ingrian Finns in the 20th century. Sinikka Haapaniemi University of Helsinki, Finland 302 pages The study falls within the sphere of religious views and the problematique of the life trajectory. The target group comprises those Finnish speakers (Ingrian Finns, Ingrians) living in what was historically Ingermanland and who in varying circumstances became scattered. These times were characterized by pressures for change due to societal reasons and reasons of war. In conditions of change external living conditions matters of religious conviction may assume new meaning and form. The examination focuses on sustaining personal faith in difficult life situations and on how crises affected religious views. Another level of scrutiny takes shape through the terminology of the analytic psychology of C.G. Jung. Individuation is deemed to occur as a cumulative process through the stages of life. The basic data for the study comprises interviews with twenty (20) natives of Ingria and their biographical narratives written in standard language. Many biographical accounts and memoirs serve as secondary data. The interviewees, who were largely selected at random, recounted their lives without questions formulated in advance. The study falls within the field of comparative religion and adheres to the principles of qualitative research practice and the case-study method. Effort was made to get to know each interviewee in the situation which his/her narrative presents. The aim is to pay attention to the interpretations given by the narrators of their various experiences and to understand their meanings on a personal level. The years during which the Ingrians were scattered, wandering and returning raise problems of survival. An individual s own initiative assumes individual forms and emphases. Religion was part of the narrators lives as one factor in the quality of life. Their religious thinking was influenced by both their home upbringing and the teaching of the Church. The interviewees took a serious attitude to the informative teaching of confirmation training. When there was no longer a church, it was claimed that the church travelled with them. Changed circumstances tested the validity of the teachings. The message of the Church institution persisted and helped them to preserve their traditions. A striving for unity and for the presence of a community emerged both in the form of ritual behaviour and in a predilection to sociability. Gradually, as they returned, the activity of the Church of Ingria began to revive. At the turn of the millennium the network of parishes was extensive and cultural activity flourished wherever the Ingrians settled in the postwar decades. Religion is part of the process of individuation. Examination of religion and individuation shows that religion remained an individual view, whose factual base was formed by Christianity and the tradition of the Church. Home upbringing served to orientate, but not to bind. With ageing the importance of independent thought is emphasized, for example in relation to confession, it did not pose a threat to individuality. Keywords: Life story, Religiosity, individuation, Ingrian, the Church of Ingria

The Soviet Union, Finland and the Cold War : The Finnish Card in Soviet Foreign Policy, 1956-1959

From the Soviet point of view the actual substance of Soviet-Finnish relations in the second half of 1950s clearly differed from the contemporary and later public image, based on friendship and confidence rhetoric. As the polarization between the right and the left became more underlined in Finland in the latter half of the 1950s, the criticism towards the Soviet Union became stronger, and the USSR feared that this development would have influence on Finnish foreign policy. From the Soviet point of view, the security commitments of FCMA-treaty needed additional guarantees through control of Finnish domestic politics and economic relations, especially during international crises. In relation to Scandinavia, Finland was, from the Soviet point of view, the model country of friendship or neutrality policy. The influence of the Second Berlin Crisis or the Soviet-Finnish Night Frost Crisis in 1958-1959 to Soviet policy towards Scandinavia needs to be observed from this point of view. The Soviet Union used Finland as a tool, in agreement with Finnish highest political leadership, for weakening of the NATO membership of Norway and Denmark, and for maintaining Swedish non-alliance. The Finnish interest to EFTA membership in the summer of 1959, at the same time with the Scandinavian countries, seems to have caused a panic reaction in the USSR, as the Soviets feared that these economic arrangements would reverse the political advantages the country had received in Finland after the Night Frost Crisis. Together with history of events, this study observes the interaction of practical interests and ideologies, both in individuals and in decision-making organizations. The necessary social and ideological reforms in the Soviet Union after 1956 had influence both on the legitimacy of the regime, and led to contradictions in the argumentation of Soviet foreign policy. This was observed both in the own camp as well as in the West. Also, in Finland a breakthrough took place in the late 1950's: as the so-called counter reaction lost to the K-line, "a special relationship" developed with the Soviet Union. As a consequence of the Night Frost Crisis the Soviet relationship became a factor decisively defining the limits of domestic politics in Finland, a part of Finnish domestic political argumentation. Understood from this basis, finlandization is not, even from the viewpoint of international relations, a special case, but a domestic political culture formed by the relationship between a dominant state, a superpower, and a subordinate state, Finland.

Death, Ancestors, and HIV/AIDS among the Akan of Ghana

This is a study of crises caused by HIV/AIDS among the Akan of Ghana. It creates more awareness about the epidemic and has indicated other possible paths for campaign strategies. The pandemic has many devastating consequences; yet new infections are recorded daily despite campaigns against the disease. The search for therapy often sees the use of multiple outlets, which expresses Ghana's pluralistic medical system based on Kleinman's sector analytical model involving Western medicine, self-therapy, and folk healing. But it also leaves individuals and kin members in financial quandary. The fieldwork for this study is mainly through participant observation lasting 13 months (February 2003 to March 2004) among the Akan; in addition, some archival materials have been used. The Akan people live in the coastal south and forest zone of Ghana. Every Akan village or town is made up of corporate lineages, and social organisation is based on matrilineal descent. The society is holistic because the matrilineages seek the welfare of all their members. Meyer Fortes, R. S. Rattray and others on the Akan noticed this encompassing nature in the lineage organisation; but they did not make it salient (or failed to notice it) during illness, efforts for healing, and the care of the sick member. HIV/AIDS is an illness which shows the encompassing nature of the Akan matrilineage. It also reveals many contradictions in the group, viz. stigmatisation, abandonment, and attitudes that do not express altruism in a group expected to be closely-knit based on members' belief that they are of the 'same blood'. The crises have been analyzed in the total social system because the disease creates breaches at various levels of social interaction. An analysis of crises in a group is not far-fetched; Victor Turner has shown the way among the Ndembu and has revealed the contraditions in the seemingly uneventful life in the group. This study has identified that in dealing with HIV/AIDS patients and crises about the disease we are dealing with 'holistic' patients. Their cases produce many changes in the matrilineal structure--many orphans are being created and the care of patients is increasingly falling on the elderly. HIV/AIDS also challenges Akan cosmology because, for example, an AIDS death in local notions is a 'bad' demise which fails to produce ancestors who reproduce the society through reincarnation. Campaigns could emphasize this notion. The study begins with a description of the holistic nature of Akan matriliny, and the patients have been described as 'holistic' because their crises affect other people in the holistic society. Chapter 2 discusses the importance of ancestors as the starting points for social order who are constantly revered (in rites invoving the chief, Chapter 4). Chapter 3 focuses on funerals as an important social performance for the welfare of the dead and the living. Chapter 5 concentrates on HIV/AIDS as an illness threat marked by dominant discourses such as poverty, sexuality, migration, and condom use. Chapter 6 analyzes the attempts for therapy, and traditional healers' claims to have a cure. The efforts for therapy continues with spiritual church healing in Chapter 7, and chapter 8 is devoted to care of the patients and its inherent crises. Chapter 9 analyzes the effects of HIV/AIDS afflictions and AIDS deaths on the matrilineal group and in society. The study ends with a short part, devoted to Recommendations based on the findings in this investigation.

The phenomenon of oligarchy in Russia and its impact on Russian transition

Nowadays any analysis of Russian economy is incomplete without taking into account the phenomenon of oligarchy. Russian oligarchs appeared after the fall of the Soviet Union and are represented by wealthy businessmen who control a huge part of natural resources enterprises and have a big political influence. Oligarchs’ shares in some natural resources industries reach even 70-80%. Their role in Russian economy is big without any doubts, however there has been very little economic analysis done. The aim of this work is to examine Russian oligarchy on micro and macro levels, its role in Russia’s transition and the possible positive and negative outcomes from this phenomenon. For this purpose the work presents two theoretical models. The first part of this thesis work examines the role of oligarchs on micro level, concentrating on the question whether the oligarchs can be more productive owners than other types of owners. To answer the question this part presents a model based on the article “Are oligarchs productive? Theory and evidence” by Y. Gorodnichenko and Y. Grygorenko. It is followed by empirical test based on the works of S. Guriev and A. Rachinsky. The model predicts oligarchs to invest more in the productivity of their enterprises and have higher returns on capital, therefore be more productive owners. According to the empirical test, oligarchs were found to outperform other types of owners, however it is not defined whether the productivity gains offset losses in tax revenue. The second part of the work concentrates on the role of oligarchy on macro level. More precisely, it examines the assumption that the depression after 1998 crises in Russia was caused by the oligarchs’ behavior. This part presents a theoretical model based on the article “A macroeconomic model of Russian transition: The role of oligarchic property rights” by S. Braguinsky and R. Myerson, where the special type of property rights is introduced. After the 1998 crises oligarchs started to invest all their resources abroad to protect themselves from political risks, which resulted in the long depression phase. The macroeconomic model shows, that better protection of property rights (smaller political risk) or/and higher outside investing could reduce the depression. Taking into account this result, the government policy can change the oligarchs’ behavior to be more beneficial for the Russian economy and make the transition faster.

Political Risk in Credit Evaluation: Empirical Studies and Survey Results

Financing trade between economic agents located in different countries is affected by many types of risks, resulting from incomplete information about the debtor, the problems of enforcing international contracts, or the prevalence of political and financial crises. Trade is important for economic development and the availability of trade finance is essential, especially for developing countries. Relatively few studies treat the topic of political risk, particularly in the context of international lending. This thesis explores new ground to identify links between political risk and international debt defaults. The core hypothesis of the study is that the default probability of debt increases with increasing political risk in the country of the borrower. The thesis consists of three essays that support the hypothesis from different angles of the credit evaluation process. The first essay takes the point of view of an international lender assessing the credit risk of a public borrower. The second investigates creditworthiness assessment of companies. The obtained results are substantiated in the third essay that deals with an extensive political risk survey among finance professionals in developing countries. The financial instruments of core interest are export credit guaranteed debt initiated between the Export Credit Agency of Finland and buyers in 145 countries between 1975 and 2006. Default events of the foreign credit counterparts are conditioned on country-specific macroeconomic variables, corporate-specific accounting information as well as political risk indicators from various international sources. Essay 1 examines debt issued to government controlled institutions and conditions public default events on traditional macroeconomic fundamentals, in addition to selected political and institutional risk factors. Confirming previous research, the study finds country indebtedness and the GDP growth rate to be significant indicators of public default. Further, it is shown that public defaults respond to various political risk factors. However, the impact of the risk varies between countries at different stages of economic development. Essay 2 proceeds by investigating political risk factors as conveivable drivers of corporate default and uses traditional accounting variables together with new political risk indicators in the credit evaluation of private debtors. The study finds links between corporate default and leverage, as well as between corporate default and the general investment climate and measeures of conflict in the debtor country. Essay 3 concludes the thesis by offering survey evidence on the impact of political risk on debt default, as perceived and experienced by 103 finance professionals in 38 developing countries. Taken together, the results of the thesis suggest that various forms of political risk are associated with international debt defaults and continue to pose great concerns for both international creditors and borrowers in developing countries. The study provides new insights on the importance of variable selection in country risk analysis, and shows how political risk is actually perceived and experienced in the riskier, often lower income countries of the global economy.

Short-term Price Behavior and the Effect of Foreign Investors in Finnish Equity Markets (summary section only)

As globalization and capital free movement has increased, so has interest in the effects of that global money flow, especially during financial crises. The concern has been that large global money flows will affect the pricing of small local markets by causing, in particular, overreaction. The purpose of this thesis is to contribute to the body of work concerning short-term under- and overreaction and the short-term effects of foreign investment flow in the small Finnish equity markets. This thesis also compares foreign execution return to domestic execution return. This study’s results indicate that short-term under- and overreaction occurs in domestic-buy portfolios (domestic net buying) rather than in foreign-buy portfolios. This under- and overreaction, however, is not economically meaningful after controlling for the bid-ask bounce effect. Based on this finding, one can conclude that foreign investors do not have a destabilizing effect in the short-term in the Finnish markets. Foreign activity affects short-term returns. When foreign investors are net buyers (sellers) there are positive (negative) market adjusted returns. Literature related to nationality and institutional effect leads us to expect these kind of results. These foreign flows are persistent at a 5 % to 21 % level and the persistence of foreign buy flow is higher than the foreign sell flow. Foreign daily trading execution is worse than domestic execution. Literature which quantifies foreign investors as liquidity demanders and literature related to front-running leads us to expect poorer foreign execution than domestic execution.

Cobreaking of Stock Prices and Contagion

Financial crises have shown that dramatic movements in one financial market can have a powerful impact on other markets. The paper proposes to use cobreaking to model comovements between financial markets during crises and to test for conta-gion. It finds evidence of cobreaking between stock returns in developed markets. Finding cobreaking has implications for the diversification of international investments. For emerging mar-ket stock returns the evidence of cobreaking is mainly due to the non-financial event of the 9/11 terrorist attacks in 2001. Fi-nancial crises originating in one emerging market do not spread to other markets, i.e., no contagion.

Theorizing the Nature of Reflection

For the past decades reflection has been the buzzword of adult and higher education. Reflection is facilitated in many practices and there is abundant research on the issue. Despite the popularity of the concept, the reasons why bringing about reflection in educational practices is difficult remain unclear. The prevailing theories inform of the process in its ideal form. However, to a great extent, they fail to offer conceptual tools for understanding and working with the actualities of reflection. The aim of the doctoral thesis was to explore the challenges and prerequisites of reflection in order to theorize the nature of reflection. By the term reflection it is here referred to becoming aware of and questioning the assumptions that orient our thinking, feelings and actions. The doctoral thesis consists of five studies that approach these questions from different viewpoints and within different contexts. The methods involve both a philosophical and an empirical approach. This multifaceted approach embodies the aim of both gaining a more thorough grasp of the phenomenon and to develop the methodology of researching reflection. The theory building is based on conceptual analysis and rational reconstruction (see Davia 1998; Habermas 1979; Rorty1984) of Mezirow s (1981; 1991; 2000; 2009) theory of transformative learning. In order to explore the aspects which, based on the analysis, appeared insufficiently considered within Mezirow s theory, Damasio s (1994; 1999; 2003; 2010) theory on emotions and consciousness as well as Clausewitz s (1985) view on friction are used as complementary theories. Empirical analyses are used in dialogue with the theoretical, in order to challenge and refine the emerging theorization. Reflection is examined in three different contexts; regarding university teachers pedagogical growth, involuntarily childless women recovering from a life-event crisis, and soldiers preparing to act in chaotic situations of the battlefield as well as recovering from it. The choice of these contexts is based on Mezirow s notion of disorienting dilemma as a trigger for reflection. This notion indicates that reflection may more naturally emerge in association to life-event crises or other cumulative sets of instances, which bring our worldview and beliefs under question. Nevertheless, reflection is often being promoted in educational contexts in which the trigger conditions may not readily prevail. These contextual issues as well as the differences between the facilitated and non-facilitated contexts have not, however, been considered in detail within the research on reflection (or transformative learning). The doctoral thesis offers a new perspective into reflection which, as a further development on Mezirow s transformative learning theory, theorizes the nature of reflection. The developed theory explicates the prerequisites and challenges to reflection. The theory suggests that the challenges of reflection are fundamentally connected to the way the biological life-support system affects our thinking through emotions. While depicting the mechanisms that function as a counterforce to reflection, the developed theory also opens a perspective for considering possibilities for carrying out reflection, and suggests ways to locate and deal with the assumptions to be reflected on. The basic dynamic of the challenges to reflection was explicated by conceptually bridging the gap between Mezirow s and Damasio s theories, through exploring the connections between the meaning perspective and the biological functions of emotions. The concepts of comfort zone and edge-emotions were formed so as to depict the emotional orientation of our thinking, as part of the explanation of the nature of reflection.

The phenomenon of oligarchy in Russia and its impact on Russian transition

Nowadays any analysis of Russian economy is incomplete without taking into account the phenomenon of oligarchy. Russian oligarchs appeared after the fall of the Soviet Union and are represented by wealthy businessmen who control a huge part of natural resources enterprises and have a big political influence. Oligarchs’ shares in some natural resources industries reach even 70-80%. Their role in Russian economy is big without any doubts, however there has been very little economic analysis done. The aim of this work is to examine Russian oligarchy on micro and macro levels, its role in Russia’s transition and the possible positive and negative outcomes from this phenomenon. For this purpose the work presents two theoretical models. The first part of this thesis work examines the role of oligarchs on micro level, concentrating on the question whether the oligarchs can be more productive owners than other types of owners. To answer the question this part presents a model based on the article “Are oligarchs productive? Theory and evidence” by Y. Gorodnichenko and Y. Grygorenko. It is followed by empirical test based on the works of S. Guriev and A. Rachinsky. The model predicts oligarchs to invest more in the productivity of their enterprises and have higher returns on capital, therefore be more productive owners. According to the empirical test, oligarchs were found to outperform other types of owners, however it is not defined whether the productivity gains offset losses in tax revenue. The second part of the work concentrates on the role of oligarchy on macro level. More precisely, it examines the assumption that the depression after 1998 crises in Russia was caused by the oligarchs’ behavior. This part presents a theoretical model based on the article “A macroeconomic model of Russian transition: The role of oligarchic property rights” by S. Braguinsky and R. Myerson, where the special type of property rights is introduced. After the 1998 crises oligarchs started to invest all their resources abroad to protect themselves from political risks, which resulted in the long depression phase. The macroeconomic model shows, that better protection of property rights (smaller political risk) or/and higher outside investing could reduce the depression. Taking into account this result, the government policy can change the oligarchs’ behavior to be more beneficial for the Russian economy and make the transition faster.