On the Role of Exogenous Shocks in the Great Recession: the Evidence from Belarus

• Název v anglickém jazyce: On the Role of Exogenous Shocks in the Great Recession: the Evidence from Belarus
• Klíčová slova: SVAR, Small Open Economy, Monetary Policy Shocks, External Shocks
• Klíčová slova anglicky: SVAR, Small Open Economy, Monetary Policy Shocks, External Shocks
• Akademický rok vypsání: 2012/2013
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: PhDr. Jaromír Baxa, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 01.06.2013
• Datum zadání: 01.06.2013
• Datum a čas obhajoby: 23.09.2014 11:30
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 30.07.2014
• Datum proběhlé obhajoby: 23.09.2014
• Oponenti: PhDr. Oliver Polyák

Zásady pro vypracování

Hypotheses

1. The largest share of current account imbalance, which led to drying up of international foreign reserves and currency depreciation, can be explained by endogenous factors rather than attributed to changes in terms of international trade (caused by the global economic crisis).
2. Problem of “twin deficit” is not relevant for Belarus, as growing foreign trade deficit was accompanied by increase in the budget surplus that reached 3% of GDP in 2008.
3. World commodity price shock affects prices in Belarus with a significant lag due to the poor development of Belarusian financial market.
4. Oil price shocks contribute significantly to variability of GDP growth, real exchange rate and dynamics of current account balance in Belarus – oil importer and oil products exporter.

Outline

Section 1: Background
1.1 Introduction and motivaion
1.2 Overview of the literature
1.3 Belarusian economic model in 2005-2010: factors of development
1.4 Overview of Belarusian economy in 2011: Endogenous versus Exogenous Shocks
Section 2: Data
2.1 Variables‘ description
Section 3: Methodology
3.1 Time-series vector autoregression
3.2 Granger causality
3.3 Impulse responses
3.4 Variance decomposition
3.5 Robustness check
Section 4: Empirical results and analysis
4.1 Granger causality test
4.2 Impulse response analysis
4.3 Variance decomposition analysis
4.4 Robustness check
4.5 Comparison with the results of other studies
Section 5: Conclusions and policy implications

Seznam odborné literatury

1. Krznar I., Kunovac D. (2010): “Impact of External Shocks on Domestic Inflation and GDP” Croatian National Bank Working Papers W – 26.
2. Merza E., Alawin M., Bashayreh A. (2012): “The Relationship between Current Account and Government Budget Balance: The Case of Kuwait” International Journal of Humanities and Social Science, Vol. 2 No. 7: pp. 168–177.
3. Hallegatte S., Ghil M. (2007): “Endogenous Business Cycles and the Economic Response to Exogenous Shocks” ETA – Economic Theory and Applications, http://ssrn.com/abstract=968378.
4. Mirdala R. (2009): “Effects of Fiscal Policy Shocks in the European Transition Economies” http://mpra.ub.uni-muenchen.de/19481/.
5. IMF Country Report No. 12/114 (2012): “Republic of Belarus: Selected Issues” http://www.imf.org/external/ pubs/ft/scr/2012/cr12114.pdf.
6. Rahmanov R. (2007): “Do oil price shocks matter for transition economies? Evidence from Kazakhstan, Russia and Ukraine” www.etd.ceu.hu/2009/rahmanov_ramiz.pdf.
7. Dibooglu S., Kutan Ali M. (2001): “Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary” Journal of Comparative Economics № 29, pp. 257–275.
8. Jiménez-Rodríguez R., Morales-Zumaquero A., Égert B. (2010): “The Varying Effect of Foreign Shocks in Central and Eastern Europe” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1650114.
9. Belitski, M., Péliová, J. (2011): “Output Sustainability to Exogenous and Endogenous Shocks: Evidence from Emerging Economies” International Journal of Sustainable Economy 3(3), pp. 255-280.
10. Horváth R., Rusnák M. (2008): “How Important Are Foreign Shocks in Small Open Economy? The Case of Slovakia” William Davidson Institute Working Paper Number 933.

Předběžná náplň práce

Being one of the fastest growing economies in the CIS, Belarus experienced hardly noticeable effect of the global economic and financial crisis in 2008-2010. In 2011, however, the country fell into a deep recession: national currency was devalued by 187% over the year, annual inflation rate amounted to 108.7% (more than two-times prices increase), interest rate of the Central Bank rose from 12% to 45%. All these factors negatively influenced real wages and attractiveness of Belarus to foreign investors. A common explanation of the economic hardship was slow-down in the world economic activity in the crisis aftermath and increase in energy prices by Russia. At the same time Belarus had been experiencing long-lasting international trade imbalance, growing foreign debt, and boosted demand caused by expansionary monetary policy before the presidential elections of 2010, all of which, as many scholars argue, were the main reasons for economic recession. Most of this topic related literature explores the shocks influence on transition EU economies, or groups of CIS countries, paying no attention to Belarus. In the paper I will analyze the relative importance of domestic and external shocks for the movements and volatility of current account balance, inflation, real exchange rate, real wages and GDP in Belarus. VAR models will be employed for the estimation. Based on the results, I will explore and judge the ability of policymakers to apply particular tools for economic policy improvement.

Předběžná náplň práce v anglickém jazyce

Being one of the fastest growing economies in the CIS, Belarus experienced hardly noticeable effect of the global economic and financial crisis in 2008-2010. In 2011, however, the country fell into a deep recession: national currency was devalued by 187% over the year, annual inflation rate amounted to 108.7% (more than two-times prices increase), interest rate of the Central Bank rose from 12% to 45%. All these factors negatively influenced real wages and attractiveness of Belarus to foreign investors. A common explanation of the economic hardship was slow-down in the world economic activity in the crisis aftermath and increase in energy prices by Russia. At the same time Belarus had been experiencing long-lasting international trade imbalance, growing foreign debt, and boosted demand caused by expansionary monetary policy before the presidential elections of 2010, all of which, as many scholars argue, were the main reasons for economic recession. Most of this topic related literature explores the shocks influence on transition EU economies, or groups of CIS countries, paying no attention to Belarus. In the paper I will analyze the relative importance of domestic and external shocks for the movements and volatility of current account balance, inflation, real exchange rate, real wages and GDP in Belarus. VAR models will be employed for the estimation. Based on the results, I will explore and judge the ability of policymakers to apply particular tools for economic policy improvement.