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Occasional Paper Series

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Occasional papers feature analytical descriptive or discussion articles and extended commentaries prepared by the Bank of Lithuania staff on subjects relevant for central banking. The papers within the series analyse topical questions and issues relevant to the activities of the Bank of Lithuania, introduce the results of analytical and policy work conducted at the institution, explaining its decisions and opinions. Occasional papers target a wider audience, including policymakers, financial analysts, academics, the media and the general public. 

Papers are available in Lithuanian or English.

No 38
2021-07-22

Non price competitiveness of Lithuanian exports

  • Abstract

    Foreign trade accounts for a significant part of Lithuania’s economy and the growth of export volumes is a common occurrence in Lithuania, even with rapidly growing wages. With a growth in Lithuania’s exports, the share of exports is also increasing. This indicates that Lithuanian-origin goods and services are competitive in the international market. The competitiveness of Lithuanian-origin exports may be of two kinds: based on the price and costs and based on other, non-price, factors. This article examines two methods of exports competitiveness calculation. When examining exports competitiveness based on the first method, standard formulation for the export equation, regressions are drawn up where exports growth is a dependent variable, whereas demand and the real effective exchange rates (reflecting the impact of prices and costs) are independent variables. Residual variance (i.e. random value) is seen as non-price factors that influence exports growth. When examining exports competitiveness based on the second method, exports of goods are analysed more closely, broken down into four competitiveness groups. The results indicate that the competitiveness of Lithuanian-origin exports in 2001-2019 was essentially determined by factors other than price or costs. In other words, the labour cost growth experienced by exporters is not a key factor that influences the competitiveness of Lithuanian-origin exports.

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


    Available only in Lithuanian

No 37
2021-05-24

Joint Debt Arrangements in EMU: From NextGenEU to Eurobonds

  • Abstract

    EU’s landmark Next Generation EU programme is an important step forward in both European crisis response and, more generally, EMU deepening, given that the package features elements of both joint debt issuance and fiscal transfers. This paper analyses the programme in comparison to other most prominent joint EMU debt proposals and provides a comparative Scoreboard of the arrangements discussed. It concludes that Next Generation EU falls short of filling in key gaps in the current architecture of the EMU – in particular, the gap laid bare by the lack of a genuine European safe asset. A true “safe haven” instrument – a Eurobond with joint and several guarantees – could move the EMU into a closer alignment with the Optimum Currency Area (OCA) criteria and help compensate for the macroeconomic intra-euro area imbalances. The guarantee structure of the Eurobond, working as an insurance mechanism for Member States’ sovereign debt, would allow for joint debt to significantly strengthen the euro area’s macroeconomic and market stability, the financial sector, or the international role of the Euro. However, issuance of the Eurobond is associated with important moral hazard, political and legal risks, and would most of all require an unprecedented level of trust by Member States.

    The views expressed are those of the authors and do not necessarily represent those of the Bank of Lithuania.

     

No 36
2021-03-24

Overview of business-wide assessments of money laundering and terrorist financing risks performed by financial market participants

  • Abstract

    The Overview provides key insights into business-wide assessments of money laundering and terrorist financing risks performed by financial market participants. The Overview is based on conclusions obtained by the Bank of Lithuania from the supervision of financial market participants and on an analysis of risk assessments of 20 financial market participants (banks, electronic money institutions and payment institutions) and contains examples of good practice identified during the analysis and cases where risk assessments need to be improved.

No 35
2021-02-10

A picture of investment in Lithuania

  • Abstract

    This article analyses Lithuania’s investment environment by reviewing investment structure and its changes, assessing the impact of Lithuania’s economic structure on investment performance, revealing the main drivers behind Lithuania’s investment development, showing the interaction between government and business investment and assessing the impact of foreign capital on the country’s economic development. The article shows that the investment to value added ratio in Lithuania is lower than the EU average, which may be partially related to low investment intensity of the main economic activities. It has been identified that the main drivers of investment development in Lithuania are demand variables, such as foreign demand and private consumption. The analysis of government investment revealed that this investment seems to “crowd in” business investment rather than crowding it out. Lithuania’s public infrastructure level is close to the indicator of developed countries, therefore, new investment should be mainly focused on the maintenance of the current infrastructure. In terms of attracting foreign direct investment (FDI), Lithuania is lagging behind other Central and Eastern European countries. The reserves of qualified labour, which made the largest contribution to the attraction of FDI, may be depleted in the medium- or long-term period. The potential for foreign capital inflows could be boosted by the regionalisation processes and value chain shortening highlighted by the COVID-19 crisis as well as by larger-scale digitalisation and automation. The article analyses investment dynamics in Lithuania and reflects its current state, while its future will depend on individual actions of decision-makers and the allocation of limited public and private resources in the right direction.

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


    Available only in Lithuanian