Empirical essays on Russia's macroeconomic and integration development in transition era

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School of Business | Doctoral thesis (article-based) | Defence date: 2012-06-08
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172 s.
Aalto University publication series. DOCTORAL DISSERTATIONS, 54/2012
The dissertation empirically studies macroeconomic and integration issues in Russia during transition period. In the first part of dissertation we focus on economic growth in Russia and in the second part we analyze patterns of foreign investment in Russian economy. Both issues are very important for achieving strategic goals of country’s development. The dissertation consists of four research essays. It makes contributions to two kinds of literature. First, it contributes to the literature on Russian economic transformation and second, it adds to the literature on international economics. In the first essay we specify a modification of Barro and Sala-i-Martin empirical framework of growth model to examine determinants of per capita growth in 74 Russian regions during period of 1996-2005. We find that in general regional growth in 1996-2005 is explained by the initial level of region’s economic development, the 1998 financial crisis, domestic investments, and exports. In the second essay we assess the direct and indirect impacts of oil price shocks on Russia and its main trading partners. The indirect impacts are transmitted through foreign trade. VAR models for different countries are linked together via a trade matrix. We find that in general Russia benefits from oil price shocks. However, Russian economy is hurt by indirect effects of positive oil price shocks (albeit this negative indirect effect is quite small), as economic activity in their exporter countries suffers. For Russia’s trading partners (all net oil-importers), the effects are more diverse. In some countries, output falls in response to an oil price shock, while other countries seem to be relatively immune to oil price changes. In the third essay we study the determinants and dominant strategies of FDI inflows into Russian regions before and after the 1998 financial crisis. We utilize a spatial autoregressive model of cross-sectional and panel data. We find that the important determinants of FDI inflows into Russian regions since transition are market size, the presence of large cities and sea ports, oil and gas availability, proximity to European market and political and legislative risks. Our results also indicate a shift from horizontal FDI strategy to vertical FDI strategy after 1998 financial crisis. The fourth essay examines how foreign ownership strategies in Russia are influenced by the corruption distance between the home country and Russia. It also examines how anticorruption regulation in the home country affects the modal choice. Based on transaction cost and resource-based theories, the modal choice is viewed as a trade-off between the benefits and costs of having a local partner. In the case of Russia, the benefits were found to exceed the costs, as corruption distance and anti-corruption legislation in force in the home country are positively related to shared ownership.
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Haaparanta, Pertti, professor
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