Bank of Lithuania
2021-02-23
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The Board of the Bank of Lithuania granted two awards for scientific research in economics amounting to €10 thousand and €5 thousand. The Vladas Jurgutis Award was granted to Audinga Baltrūnaitė for her relevant scientific research on the link between political contributions and the results of public procurement tenders, whereas the Award for Dissertation in the Field of Economics was granted to Karolis Liaudinskas for his research on financial intermediation: loan pricing, risk management and rationality in Lithuania and other European countries.

This year’s recipient of the Vladas Jurgutis Award Audinga Baltrūnaitė examines whether firms that make political contributions are more successful in gaining public procurement contracts. Her research paper “Political Contributions and Public Procurement: Evidence from Lithuania” was published in the Journal of the European Economic Association, one of the top academic journals in the field of economics. By utilising original Lithuanian data and a ban on corporate donations to political parties and campaigns, the author shows that after the ban came into force, the chances of winning procurement tenders by former political donors decreased by 5 percentage points.

“My hypothesis was that there may be two ways to achieve the desired result without infringing the law and without attracting unnecessary attention from the media: either by affecting the contract design, i.e. by stipulating tender calls so that only a contributing firm can satisfy the necessary requirements, or by leaking confidential information, for example, on competing bids. Data analysis revealed the second scheme to be more plausible”, says Audinga Baltrūnaitė, who is currently working as an economist at Italy’s central bank.

According to her, a unique aspect of this research is that it illustrates the material benefit that firms gain by making political contributions. Additional calculations have also shown that due to artificially increased prices, the public sector used to spend a significantly larger amount of resources on public procurement. These findings support limiting the influence of the private sector on the public sector argued for by proponents of political campaign transparency.

Karolis Liaudinskas, in his dissertation „Essays in Financial Intermediation”, finds evidence that capital is not always allocated efficiently because, due to information asymmetry, even successfully operating firms find the process of switching banks expensive, and banks can exploit this by overcharging the firms. Using the Lithuanian banking sector data, Liaudinskas determines that closing problematic banks could not only affect financial stability, but also significantly reduce borrowing costs for businesses that are forced to look for another bank. However, this positive effect was not identified when researching the closure of a healthy bank branch which occurred due to network optimisation purposes.

The author also researches other financial intermediation issues in his dissertation: he arrives at the conclusion that professional investment managers do not always act rationally and that fully automated stock trading algorithms prevent this problem.

“The lessons learned from the bank closures are important for creating better borrowing conditions for businesses and ensuring financial stability. Meanwhile, the algorithmic trading research results can aid in predicting the future development of the financial world, grasping the potential of robotisation and assessing one of the key assumptions in the theory of economics - that humans always make rational decisions”, says this year’s laureate Liaudinskas, who is currently working as a researcher at Norway’s central bank.

Every year, between August and September, the Bank of Lithuania invites researchers in economics and those with a Ph.D. in economics or finance to apply for the awards. The submitted papers are assessed by a commission comprising scientists from the Bank of Lithuania’s Center for Excellence in Finance and Economic Research (CEFER) and representatives of Lithuanian and foreign universities. This year, 5 works were submitted to the commission for Vladas Jurgutis Award as well as 5 applications for the Award for Dissertation in the Field of Economics.

The Bank of Lithuania’s Vladas Jurgutis Award pays tribute to academic and professor Vladas Jurgutis, the first Governor of the Bank of Lithuania, and his merits to banking in Lithuania. The award’s prize amounts to €10,000. The Bank of Lithuania’s Award for Dissertation in the Field of Economics is granted to honour the authors of the best dissertations in economics or related fields, defended over the last two years until August 1 of the current year. This award’s prize is €5,000.