Bank of Lithuania
Target group

Discussion Paper Series

discussion paper series.jpg

Discussion papers disseminate economic research relevant to the tasks and functions of the Bank of Lithuania and of the European System of Central Banks. One of the main objectives of the series is to deepen the understanding of policy-relevant questions and stimulate more in-depth expert discussions by offering a more rigorous analysis of an issue under review. The research featured in the Discussion Paper Series provides a theoretically and empirically founded basis for policy-making. Discussion papers help to develop and strengthen collaboration between the Bank of Lithuania and other central banks, Lithuanian and foreign institutions acting in the fields of economic policy, analysis and/or research.

Papers are only available in English.

No 36

Loans vs Subsidies: Lithuania’s State Support Policies During the COVID-19 Pandemic

  • Abstract

    This paper analyzes the firm’s choice between subsidy support and loan support during the COVID-19 crisis and explores the implications of this choice on firms’ employment growth. We compile a novel micro-level dataset of Lithuanian firms’ balance sheet data and government support records during the pandemic period. We use the dataset to provide a set of stylized facts, categorizing the variety of enacted support policies and tracking aid distribution patterns. We show that larger firms were more likely to choose loans over subsidies. This result cannot be fully explained by policy eligibility criteria and the severity of the pandemic shock, suggesting that firm characteristics played a significant role. Finally, we show that the type of support has implications for firms’ outcomes – subsidy-recipient firms experienced higher employment growth compared to loan-recipient firms.

No 35

Mergers and Acquisitions Over the Cycle – An Empirical Investigation

  • Abstract

    Using US firm-level data from 1985-2019, this paper investigates how the characteristics of matches between acquirers and targets of mergers and acquisitions (M&A) vary over the business cycle. We document several findings. (1) Acquirers are on average larger, more profitable, and in a stronger financial position than targets. (2) Targets are more innovative than acquirers, and (3) M&A targets during a recession have worse financial health but higher levels of innovation compared to M&A targets in booms. Our empirical evidence suggests that an economy may benefit from an economy may benefit from adjusting its antitrust stance over the business cycle.

    Keywords: mergers, M&A, business cycle, R&D, productivity

    JEL codes: E22, E32, G34

No 34

Consumer price rigidity in periods of low and high inflation: the case of Lithuania

  • Abstract

    I provide new monthly statistics on consumer price rigidity in Lithuania. The statistics are derived from CPI price records, covering an average of 90% of the ECOICOP4 weights between 2019 and 2023. Through a comparative study of two distinct periods – low inflation from January 2019 to December 2020, and high inflation from January 2021 to March 2023 – a significant shift in the frequency of price changes is observed in the latter period. This shift is mainly due to a significant rise in the frequency of price increases, while the average size of these increases has remained relatively constant over the years. Furthermore, I show that structural aggregate demand and energy shocks induced shifts in the frequency of price changes during the high-inflation period, suggesting that state-dependent sticky price models may be more suitable than time dependent ones for explaining inflation fluctuations in Lithuania.

    Keywords: consumer price rigidity, price-setting, high inflation, frequency of price changes.

    JEL codes: D40, E31, E50

No 33

Household Wealth and Finances in Lithuania

  • Abstract

    This report presents the stylized facts gathered in the fourth wave of the Eurosystem Household Finance and Consumption Survey, which was conducted in Lithuania as the second wave of results. The survey provides household-level data on wealth, finances, consumption, savings, and additional individual characteristics, covering a sample of 1,664 households. Although the reference period for the data varies across countries, for Lithuania, it pertains to 2021. The report compares new results with those from the previous survey conducted in 2017. The results indicate an increase in measures for household wealth and finances that were only minimally affected by the COVID-19 pandemic.

    Keywords: Household-level data, assets, liabilities, net wealth, financial pressure, consumption

    JEL codes: D12, D14, D31