Bank of Lithuania
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All results 141
No 21
2020-07-22

The persistently high rate of suicide in Lithuania: an updated view

  • Abstract

    This article examines possible factors related to the rate of suicide in Lithuania, which is the highest in Europe and one of the highest worldwide. Using statistical methods, we select possible determinants from the literature in the fields of economics, psychology and sociology. We look at annual data from 1994 to 2016 for the Baltic States, with a specific focus on Lithuania. The main factors linked to suicide in the region seem to be GDP growth, demographics, alcohol consumption, psychological factors and global warming. For Lithuania in particular, other macroeconomic variables (especially linked to the labor market) may matter. The percentage of rural population does not seem to be a key robust factor.

    JEL Codes: I15, I31, J11, J17, O15.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 77
2020-06-18

Macroeconomic implications of insolvency regimes

  • Abstract

    The impact of creditor and debtor rights following firm insolvency are studied in a firm dynamics model where defaulting firms choose between restructuring or exit. The model accounts for differing effects of productivity shocks across economies that differ in the credit/debtor rights. Following a negative shock labour productivity falls sharply in a creditor-friendly regime such as the UK while in a debtor-friendly regime such as the US, there is a larger employment response. This paper suggests a possible explanation for the different employment and labour productivity response in the UK and US since the financial crisis.  

    JEL Codes: D21, E22, G33.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 76
2020-06-18

Workers' job mobility in response to severance pay generosity

  • Abstract

    This paper studies the impact of severance pay generosity on workers' voluntary mobility decisions. The identification strategy exploits a major labor market reform in Spain in February 2012 together with the exposure of some workers to a layoff shock. I rely on rich administrative data to estimate a discrete time duration model with dynamic treatment effects. The results show that a decrease in mobility costs induced by a reduction in severance pay made workers who expected to be displaced in the near future more likely to voluntarily leave their employers. The results indicate that policies targeting employers may also affect workers' behavior. They further reveal the relevance of taking into account interactions between employment protection and unemployment insurance.

    JEL Codes: J62, J63, J65.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 20
2020-06-01

Relevance of Sovereign Bond Valuations Topic in the Speeches of ECB Officials

  • Abstract

    The aim of this paper is to assess how relevant is the topic of sovereign bond valuations in official ECB Executive Board member speeches and, in particular, under what circumstances do ECB officials begin communicating the driving factors of sovereign bond pricing. For this purpose, we downloaded over 2000 public ECB Executive Board member speeches and applied various text mining techniques. The visual analysis revealed that the importance of the topic of sovereign bond pricing and related risk factors in ECB officials’ speeches has greatly fluctuated over time. The main structural break points were linked to the financial market turbulences, but this topic, possibly due to the introduction of sovereign bond purchases, remained relatively popular even after stress episodes. The linkages between the publicly communicated terms of sovereign bond pricing and related risk factors were rather complex and change in respect to the market situation. Meanwhile, the sentiment balance of the credit risk factor was usually on the negative side, while the ones of other terms were much more neutral.

    JEL Codes: C80, E43, E58, G12.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 19
2020-05-19

Household Wealth and Finances. Results for Households in Lithuania for 2017

  • Abstract

    This paper reports new data on the household balance sheet and the consumption situation in Lithuania. It uses a unique Household Finance and Consumption Survey (HFCS) dataset, which collects detailed information about different asset classes and outlines the composition of the household balance sheet in Lithuania. At 93.2%, the homeownership rate in Lithuania is the highest in Europe. Real assets correspond to the highest share of households’ wealth and generate a median net wealth of 46 000 €. Lithuanian households participate poorly in financial assets, with only deposits and individual insurance/pensions generating more significant aggregate values. Household participation in debt markets is also limited in Lithuania, with only 11.7% of households having some mortgage-based liabilities. Lithuanian households spend a significant share of their income on food and utilities. This share is among the highest in Europe. A large number of Lithuanian households can be characterized as "hand-to-mouth" households, as they own a significant amount of wealth in illiquid real estate and very little wealth in liquid financial assets.

    JEL Codes: D1, D3.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 75
2020-03-26

Shock dependence of exchange rate pass-through: a comparative analysis of BVARs and DSGEs

  • Abstract

    In this paper, we make use of the results from Structural Bayesian VARs taken from several studies for the euro area, which apply the idea of a shock-dependent Exchange Rate Pass-Through, drawing a comparison across models and also with respect to available DSGEs. On impact, the results are similar across Structural Bayesian VARs. At longer horizons, the magnitude in DSGEs increases because of the endogenous response of monetary policy and other variables. In BVARs particularly, shocks contribute relatively little to observed changes in the exchange rate and in HICP. This points to a key role of systematic factors, which are not captured by the historical shock decomposition. However, in the APP announcement period, we do see demand and exogenous exchange rate shocks countribute significantly to variations in exchange rates. Nonetheless, it is difficult to find a robust characterization across models. Moreover, the modelling challenges increase when looking at individual countries, because exchange rate and monetary policy shocks (also taken relative to the US) are common to the whole euro area. Hence, we provide a local projection exercise with common euro area shocks, identified in euro area-specific Structural Bayesian VARs and in DSGE, extrapolated and used as regressors. For common exchange rate shocks, the impact on consumer prices is the largest in some new member states, but there are a wide range of estimates across models. For core consumer prices, the coefficients are smaller. Regarding common relative monetary policy shocks, the impact is larger than for exchange rate shocks in any case. Generally, euro area monetary policy plays a big role for consumer prices, and this is especially so for new member states and the euro area periphery.

    JEL Codes: E31, F31, F45.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 74
2020-03-13

Assessing credit gaps in CESEE based on levels justified by fundamentals – a comparison across different estimation approaches

  • Abstract

    Also published in the Oesterreichische Nationalbank Working Paper Series, no. 229/2020.


    Relying on a rich panel regression framework, we study the role of different “fundamental” credit determinants in Central, Eastern and Southeastern European (CESEE) EU Member States and compare actual private sector credit-to-GDP ratios to the derived fundamental levels. It turns out that countries featuring positive credit gaps at the start of the global financial crisis (GFC) have managed to adjust their credit ratios downward toward levels justified by fundamentals, but the adjustment is apparently not yet complete in all countries. In addition, negative credit gaps have emerged or widened in most countries that had seen credit levels close to or below the fundamental levels of credit at the start of the GFC. The estimated speed of adjustment implies that at the end of the review period, there was still a rather long way to go for countries with very large credit gaps.

    JEL Codes: C33, E44, E51, G01, G21, O16.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 73
2020-02-18

Banking regulation and collateral screening in a model of information asymmetry

  • Abstract

    This paper explores the impact of banking regulation on a competitive credit market with ex-ante asymmetric information and aggregate uncertainty. I construct a model where the government to impose a regulatory constraint that limits the losses banks make in the event of their default. I show that the addition of banking regulation results in three deviations from the standard theory. First, collateral is demanded of both high and low risk firms, even in the absence of asymmetric information. Second, if banking regulation is sufficiently strict, there may not exist an adverse selection problem. Third, a pooling Nash equilibrium can exist.

    JEL Codes: D86, G21, G28.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 72
2020-02-07

Statutory, effective and optimal net tax schedules in Lithuania

  • Abstract

    We estimate effective and optimal net income tax schedules and compare them to estimated statutory rates for the case of Lithuania in the period 2014-2015. Values of effective net tax rates are estimated from the survey of EU Statistics on Income and Living Conditions, the statutory net tax rates are estimated with the European tax-benefit simulator Euromod, while optimal net taxes are calculated via Saez (2002) methodology. We find that the three net tax schedules are similar for employees in the middle of the income distribution. At the bottom of the income distribution, optimal net tax schedules suggest higher in-work benefits. The net tax schedules diverge substantially for the self-employed. At the top of the income distribution, where the majority of self-employed are concentrated, the self-employed are required to pay 15 cents less net taxes per euro than employees - and they effectively pay 29 cents less.

    JEL Codes: H2, H21.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 32
2020-02-07

The life-cycle profile of worker flows in Lithuania

  • Abstract

    We use survey micro-data for 31 European countries, and estimate the life-cycle profiles of worker transition probabilities across employment, unemployment and nonparticipation. The estimated transition probabilities are then used to explain aggregate difference in employment rates between Lithuania and Europe. We show that the separations from employment is a key in understanding differences in labor market outcomes of both genders, and that demographics play a large negative role for Lithuanian employment rates. The results have important implications for economic policies that are discussed at the end of the analysis.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 71
2020-01-24

Changes in income inequality in Lithuania: the role of policy, labour market structure, returns and demographics

  • Abstract

    We model the household disposable income distribution in Lithuania and explore the drivers of the increase in income inequality between 2007 and 2015. We quantify the contributions of four factors to changes in the disposable income distribution: (i) demographics; (ii) labour market structure; (ii) returns and prices; and (iv) tax-benefit system. Results show that the effects of the factors were substantial and reflected heterogeneous developments over two sub-periods: changes in the tax and benefit system successfully accommodated a rapid rise in market income inequality due to the global financial crisis during 2007-2011, but failed to do so during the subsequent years of economic expansion, when rising returns in the labour and capital markets significantly increased disposable income inequality. We also find that declining marriage rates contributed to the increase of income inequality in Lithuania.

    JEL Codes: D31, H23, J21, J31, I38.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

No 31
2020-01-21

The Challenges of Lithuania’s Economic Convergence and Labour Market

  • Abstract

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.


    Available only in Lithuanian

     

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