Financial Journal № 6(46) November-December 2018
I. V. Prilepskiy
Impact of Fiscal Rules on Exchange Rate Volatility, p. 9-20
Decrease of dependency level between oil prices and ruble exchange rate is among the key goals of a new version of Russia’s fiscal rule. This study analyzes motivation to adopt this goal by reviewing the estimates for impact of exchange rate volatility on economic growth. It proceeds to assessment of commodity-exporting countries experience and considers the effects of fiscal rule implementation on real and nominal exchange rate volatility. Moreover, the author conducts the long-term scenario analysis of ruble exchange rate volatility for different versions of the fiscal rule. The main results are as follows. First, reduction of the exchange rate volatility leads to a modest increase in investment and export growth. Second, in general, adoption of fiscal rules does not result in reduction of the exchange rate fluctuations, though in the case of Russia since 2017 ruble exchange rate has been significantly de-linked from oil prices. Finally, according to scenario analysis compared with other versions of the fiscal rule (2013 Russian version; Norwegian version; targeting non-oil deficit; tying expenditure growth to GDP growth; no fiscal rule) the current Russian version yields a substantial decrease in exchange rate volatility, though its performance could be further improved by introduction of a mechanism for the base oil price modification in case of a long-term fall in actual oil prices below 40$/barrel in constant 2017 dollars (which is the base price in the current version of the rule).
Keywords: fiscal policy, fiscal rule, exchange rate, volatility, oil prices, welfare fund
JEL: E62, E65. H68
E. L. Goryunov
Sectoral Effects of Bank of Russia Disinflation Policy, p. 21-33
Usually disinflation policy leads to decline in economic activity in medium term. Later, inflation expectation decrease and money circulation normalization will lead to interest rate decline and widening of a planning. These effects, both positive and negative, affect various industries differently. In this paper the author aims to assess sectoral consequences of disinflation policy, which has been recently implemented by the Bank of Russia.Economic theory predicts the following. Firstly, tight monetary policy hits industries producing investment goods, since demand for that type of goods in sensitive to interest rates change. Secondly, procyclical industries suffer. Thirdly, interest rate hike constrains loans to small and medium enterprises more than to large ones. Furthermore, real exchange rate appreciates during disinflation policy and therefore worsen terms for exporters. All these effects, except real appreciation of ruble, are present in Russian economy. Along with that mortgage lending is widening and long-term interest rates are decreasing.
Keywords: monetary policy, sectoral effects, transmission mechanisms, yield curve, mortgage lending, small and medium enterprises
JEL: E21, E22, E23, E32, E43, E51, E52, E58, E65, L16
Y. M. Gorlin, V. Y. Lyashok
Tax Incentives in Russia and Other Countries: Critical Analysis, p. 34-46
Nowadays tax incentives are widely used in many countries including Russia. Nevertheless, this tax instrument has a number of significant disadvantages. Firstly, they decrease budget revenues, and at the same time the efficiency of tax incentives usually is not estimated and seems to be not positive. Secondly, a lot of tax incentives can be replaced by more comfortable types of direct expenditures. Finally, as a rule, from an equity standpoint tax exemption is not a good, as recipients of tax exemption are usually wealthy people. This paper discusses main theoretical aspects of tax incentives (with focus on personal income taxation), provides a review of the world taxation practices and analyzes the tax exemptions in Russia. The results of analyses allow to outline the recommendations intended to improve the personal income taxation.
Keywords: tax allowance, tax credit, tax rate relief, tax-free threshold, tax credit on earned income, child tax credit, tax system.
JEL: E62, H20, H24
A. B. Berberov, N. S. Milogolov
Assessment of the Scope of Tax Base Erosion in Russia, p. 47-58
This article is focused on the evaluation of the scale of tax base erosion in Russia. To achieve this goal the authors use the indicator methodology for tax base erosion assessment, according to Action 11 of the BEPS (Base Erosion and Profit Shifting) Plan. Estimations are based on the data from the competent authorities of Russia, as well as information provided by supranational institutions. The results of the study show that tax base erosion problem is highly significant for the Russian Federation and requires an adequate response from the competent authorities, including implementation of the OECD recommendations in national legislation.
Keywords: tax base erosion, multinational companies, BEPS plan, foreign direct investment, effective tax rate, debt burden, OECD
JEL: H25, H26
A. D. Andryakov
Contingent Government Liabilities of PPP Projects: International Experience and Russian Practice, p. 59-70
This study discusses only one aspect of the public-private partnership (PPP), namely contingent government liabilities of PPP projects. PPP is long and widely used mechanism for infrastructure development in the world. An extensive international experience and recommendations for accounting, reporting, budgeting and managing contingent government liabilities of PPP projects are available to experts and professionals. Russia has relatively recently begun to use PPP mechanism and issues of PPP contingent government liabilities have not been widely discussed in the literature. The author presents a comparison of international experience and Russian practice in dealing with PPP contingent government liabilities, which shows that all these liabilities except state guaranties on private party debt are excluded from budgetary process and management in Russia. It is only partly due to the budget accounting on cash basis adopted in Russia, because international experience presents a variety of mechanisms to overcome problems of this particular accounting system.
Keywords: public-private partnership, contingent government liabilities, implicit government liabilities, budget accounting
JEL: JH54, H43, H41
M. I. Kudelich
“Factory” for Project Financing: Budget Problems and Risks, p. 71-82
The launch of the “Factory” for Project Financing program in early 2018 was a new stage in the development of project financing in Russia with state support. At the same time, the rules of the program create certain imbalance in risks allocation between government and private investors comparing to general rules of undistorted market environment. In this regard, this article discusses the key features of project financing “Factory” program and also contains proposals for program improvement rules in order to increase justification of federal budget expenditures and reduce the risks of state when implementing investment projects within the program.
Keywords: “Factory” for project financing, federal budget, investment project, specialized society of project financing, State Development Corporation “VEB.RF”, subsidies, state guarantees
JEL: H54, H81
S. S. Lazaryan, N. E. German
Forecasting Current GDP Dynamics With Google Search Data, p. 83-94
In order to conduct a conscious economic policy, timely assessment of the main economic indicators, viz GDP, is needed. In this paper the authors justify the reason why an inclusion of query search data may help to produce better nowcasts compared to the currently used Russian GDP models, which are built on the data from official statistical services. The authors also check, whether this hypothesis holds true in the real-time forecasting experiment. For this purpose the authors suggest two competing dynamic factor models: the one, which includes data on the query search frequency, and the other one, which excludes it. The models show that the inclusion of query search data does not change the forecast performance of the model built only upon official economic indicators. At the same time, both models have produced more accurate nowcasts of Russian GDP then AR(1) model did. Finally, the authors try to explain the resulting irrelevance of query search data in nowcasting GDP. The article discusses both fundamental reasons and the pitfalls of the methodology used in this paper, which could have led to such result.
Keywords: forecasting, factor models, GDP, nowcasting, search queries, data frequency
JEL: C32, C53
B. I. Alekhin
Benchmarking Russian’ Government Bond Market, p. 95-108
This article describes how the Russian government has tried to create a liquid government bond market by using auctions to concentrate its domestic debt in key maturities. The maturity structure of bonds for 2005–2017 is calculated and explored in absolute and relative terms. For comparison the author uses the Italian Treasury issuance policy. Bonds with maturity 3, 5, 10 and 15 years dominate the Russian government’s debt portfolio. However issuance is characterized by bonds’ long-life cycle, unstable auction cycles and long distances between the last auction of an outgoing bond, the first auction of the incoming one and other shortfalls, while Italian issuance is determined by “extreme regularity, transparency, and predictability”. To reduce exposure to volatility and liquidity risks auction participants reduce their bids.
Keywords: public debt, benchmark bonds, bond issuance, auction, liquidity
K. V. Shvandar, V. Y. Cherkasov
Cash or Card? Retail Payments in Armenia, p. 109-119
The article discusses the problem of penetration of non-cash payment instruments into the retail market. Settlements without cash facilitate transparency of transactions. Limitation of the allowable amount of cash payment for retail purchases, which has examples in the world, can facilitate counteraction to transactions that hide criminal activity and tax evasion. However, the grounds for large cash payments limitation are convincing when non-cash instruments have penetrated deeply into the small transactions market. Payment cards compete with cash in transactional costs, and their competitiveness depends on the size of interchange fee. The authors assume, that restricting the allowable amount of cash payments would be a rational step for Armenia to restrain shadow economic activity, but non-cash payment instruments should penetrate deeper into the retail market at first. Efficient solutions could be facilitated by a study of costs in the payment system.
Keywords: non-cash payments, restrictions on cash payments, costs, interchange fee, Armenia
JEL: E42, E51, H26, J33
M. R. Zembatov
Progress of Regulatory Impact Assessment in the Republic of Armenia, p. 120-127
Public finances and the optimization of budget expenditures are among of the most important directions of modern financial science development. These directions are actively enriched by approaches of related scientific disciplines in recent decades. One of such cross-disciplinary interaction is the study of the regulatory impact assessment. In this survey an attempt is made to evaluate the current conditions and terms of regulatory impact assessment in the Republic of Armenia. The data on regulatory impact assessment in the Republic of Armenia are systematically analyzed. There is also a comparative approach to legal regulation of regulatory impact assessment in the Republic of Armenia regarding both laws — the old one of 2002 and the newest one of 2018.
Keywords: legislation of the Republic of Armenia, regulatory impact assessment, regulatory act
JEL: H11, K00, P21
А. М. Maryasin
The Methodology of Non-Financial Assets Impairment Recognition, p. 128-135
This article studies key differences between assets impairment methodology according to IAS 36 — Impairment of Assets and relevant Russian analogue — Impairment of Assets Federal Standard. Financial system of Russian government sector requires reconsideration of some IFRS provisions. As result, not the whole set of procedures under IAS 36 may be adopted for Russian government sector.
Keywords: IFRS, non-financial asset, impairment of assets, fair value, recoverable amount, value in use, cashgenerating unit, goodwill