Bank Of Greece Sa · ATHEX:TELL
Bank Of Greece Sa — Technical Presentation (2022)
38 slides from Bank Of Greece Sa's technical presentation, 2022
Slide 1: Adjusting to Economic Sanctions
Adjusting to Economic Sanctions Povilas Lastauskas Aurelija Proškutė Bank of Lithuania, Vilnius University Bank of Lithuania, Vilnius University Alminas Žaldokas HKUST ECB Research Cluster Workshop, 2022, Bank of Greece *The views expressed here are those of the authors and do not necessarily rep
Slide 2: Trade Restrictions Around
Trade Restrictions Around
Slide 3: Trade Restrictions Around
Trade Restrictions Around . wa Another trade war is brewing, this time fm et ik between France and the US Trump targets France over ‘discriminatory’ digital tax © Fri, Dec 6, 2019, 05:00 | Updated: Fri, Dec 6, 2019, 14:50 Lara Marlowe _ D2 4 London on Tuesday.
Slide 4: Trade Restrictions Escalating
Trade Restrictions Escalating
Slide 5: Trade Restrictions Escalating
Trade Restrictions Escalating
Slide 6: The Event We Investigate
The Event We Investigate I Russia-Ukraine conflict in 2014 led to political tensions between Russia and EU I EU financial sanctions on certain individuals in Russia I Response measures by Russia to ban of imports of agricultural, food product and certain raw materials (meats, dairy products, fruits,
Slide 7: The Event We Investigate
The Event We Investigate I Russia-Ukraine conflict in 2014 led to political tensions between Russia and EU I EU financial sanctions on certain individuals in Russia I Response measures by Russia to ban of imports of agricultural, food product and certain raw materials (meats, dairy products, fruits,
Slide 8: Focus of Our Study
Focus of Our Study I Firm responses to a strong negative demand shock - adjustments along a number of dimensions I How and when do such adjustments interact and reinforce each other? I Is the heterogeneity of the adjustments limited to non-uniform adjustment costs and expectations of the demand shoc
Slide 9: Related Literature
Related Literature I Firm adjustments to trade shocks, mostly partial equilibrium: I Labor margin adjustments (Hogan and Ragan (1995), Mouelhi (2007), Fabiani et al. (2015), Asquith et al. (2019), Tanaka et al. (2019), Egger et al. (2020)); general equilibrium effects (Dix-Carneiro and Kovak 2019, D
Slide 10: Additions to the Literature
Additions to the Literature I Trade shocks are likely to be correlated with other economic adjustments or expectations; our paper presents a cleanly identified demand shock (sudden, unanticipated and abrupt) when the trade stops completely, holding other economics factors constant I Quite a bit is k
Slide 11: Main Results
Main Results I We build an internally consistent conceptual framework to explain the empirical findings and derive new predictions: I Part-time labor, as the most flexible margin, adjusts first I Firms also revert to more active export redirection, if the shock is large I A larger and persistent sho
Slide 12: Empirical Evidence
EMPIRICAL EVIDENCE
Slide 13: Exports to Russia of Banned Products
Exports to Russia of Banned Products I Banned product exports by the food manufacturing sector firms to Russia went virtually to zero:
Slide 14: Total Exports to Russia
Total Exports to Russia I Sanctions also completely cut food manufacturing sector’s total exports to Russia:
Slide 15: Total Revenues
Total Revenues I That resulted in a drop in total revenues of food manufacturing firms (even if with a minor rebound later):
Slide 16: Empirical Strategy
Empirical Strategy I Dataset - all firms in the economy: I Disaggregated balance sheet data I Detailed trade data by partner country, 8-digit HS product level I Treated firms: I Food manufacturing firms that had banned product exports to Russia in 2013 I Control firms (for each treated firm): I Food
Slide 17: Main Specification
Main Specification I Reduced form difference-in-differences estimation: ∆Yi,t = β 1 × Banned export sharei × Post2014t + γi + τt + ei,t I ∆Yi ,t : difference in the adjustment margin Yi ,t (part-time employees, full-time employees, investment, exports to other markets but Russia), where the differen
Slide 18: Part-time Employees
Part-time Employees (1) (2) Banned export share x Post 2014 -146.909*** -125.123** (50.223) (48.105) Banned export share x Post 2016 -56.133 (52.725) Constant 24.411*** 24.378*** (4.478) (4.474) R2 0.755 0.757 N 151 151 I Average exposed firm with 6.69% Banned export share reduced part-time employee
Slide 19: Exports Outside of Russia
Exports Outside of Russia (1) (2) Banned export share x Post 2014 46.042** 19.626 (20.687) (24.308) Banned export share x Post 2016 54.657* (30.436) Constant -9.581*** -9.566*** (1.799) (1.807) R2 0.889 0.892 N 165 165 I Dollar value export adjustments to other countries than Russia.
Slide 20: Investment
Investment (1) (2) Banned export share x Post 2014 -24.459** -26.798* (11.235) (13.657) Banned export share x Post 2016 6.103 (14.727) Constant -0.926 -1.274 (1.609) (1.772) R2 0.596 0.597 N 126 126 I A drop in investment for the food manufacturers
Slide 21: Full-time Employees
Full-time Employees (1) (2) Banned export share x Post 2014 -384.578** -128.022 (177.502) (159.867) Banned export share x Post 2016 -661.058** (314.478) Constant 141.696*** 141.306*** (16.923) (17.150) R2 0.953 0.956 N 151 151 I Average exposed firm with 6.69% Banned export share reduced full-time e
Slide 22: Conceptual Framework
CONCEPTUAL FRAMEWORK
Slide 23: Assumptions
Assumptions I CES demand structure + Cobb-Douglas production function over part-time employment, capital and full-time labor I We adopt a simplified version of Helpman et al. (2010), where a firm exports its varieties in addition to selling on a domestic market I Our point of deviation includes firm
Slide 24: Firm's Problem
Firm’s Problem I In a perfect foresight environment, a firm is forward-looking and its profit maximization problem cannot be split into static sub-problems due to adjustment costs I A firm faces different adjustment margins I Part-time employees can be changed most quickly I Reflecting institutional
Slide 25: Testable Implications, I
Testable Implications, I Proposition (1) An exogenous increase in trade costs with Russia induces layoffs of part-time employees. This effect is larger the larger fixed exporting costs and the lower variable exporting costs (and thus the larger export basket) to Russia had been before a shock.
Slide 26: Testable Implications, I
Testable Implications, I Proposition (1) An exogenous increase in trade costs with Russia induces layoffs of part-time employees. This effect is larger the larger fixed exporting costs and the lower variable exporting costs (and thus the larger export basket) to Russia had been before a shock. Propo
Slide 27: Testable Implications, II
Testable Implications, II Proposition (3) A forward-looking firm reduces investment proportionally to a forthcoming drop in part-time employment.
Slide 28: Testable Implications, II
Testable Implications, II Proposition (3) A forward-looking firm reduces investment proportionally to a forthcoming drop in part-time employment. Proposition (4) The layoffs of full-time labor are more likely, the are higher variable firm’s costs to trade with the rest of the world and the smaller i
Slide 29: Role of Part-time Labor
Role of Part-time Labor I Heterogeneity of firm adjustments due to various unobservable characteristics hard to estimate empirically: variable exporting costs, time preference, expected probability of the shock persistence, and various adjustment costs I Yet, it can be captured by how strongly the f
Slide 30: Role of Part-time Labor
Role of Part-time Labor I Heterogeneity of firm adjustments due to various unobservable characteristics hard to estimate empirically: variable exporting costs, time preference, expected probability of the shock persistence, and various adjustment costs I Yet, it can be captured by how strongly the f
Slide 31: Role of Part-time Labor – Result
Role of Part-time Labor – Result (1) (2) ∆FT empl. ∆Inv. Banned exp. share x Post 2014 -128.022 -26.798* (154.568) (13.679) Banned export share x Post 2016 -484.914* 7.230 (271.284) (15.670) ∆Part-time x Post 2016 -0.896 -0.097 (1.379) (0.077) Banned exp. share x ∆Part-time x Post 2016 22.104*** 0.7
Slide 32: Role of Trade Diversion
Role of Trade Diversion I Can the firms do something else when faced with the shock? I We test for the firms’ ability to adjust towards finding new export markets I Empirically: additional interaction of the change in dollar value of exports outside of Russia between 2013 and 2014 to our dynamic spe
Slide 33: Role of Trade Diversion – Result
Role of Trade Diversion – Result (1) Full-time empl. Banned exp. share x Post 2014 -128.022 (163.557) Banned export share x Post 2016 -546.798** (261.905) ∆ NonRu exports (2013-2014) x Post 2016 -0.951 (1.053) Banned exp. share x ∆ NonRu exports (2013-2014) x Post 2016 25.454* (13.311) Constant 142.
Slide 34: Takeaways and Conclusions, I
Takeaways and Conclusions, I I A major sector of a small open economy lost its main export market for reasons unrelated to economic conditions I We apply reduced form difference-in-differences strategy to quantify the adjustment margins: part-time and full-time labor, investment, new export markets
Slide 35: Takeaways and Conclusions, II
Takeaways and Conclusions, II I Adjustments start on the margin with no adjustment costs – part-time labor and continue onto less flexible and more costly adjustment margins
Slide 36: Takeaways and Conclusions, II
Takeaways and Conclusions, II I Adjustments start on the margin with no adjustment costs – part-time labor and continue onto less flexible and more costly adjustment margins I Part-time labor adjustment also serves as characteristic of shock severity for the firm, capturing unobservable parameters
Slide 37: Takeaways and Conclusions, II
Takeaways and Conclusions, II I Adjustments start on the margin with no adjustment costs – part-time labor and continue onto less flexible and more costly adjustment margins I Part-time labor adjustment also serves as characteristic of shock severity for the firm, capturing unobservable parameters I
Slide 38: Thank You
THANK YOU