Bank of Lithuania
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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 43

What drove the rise in bank lending rates in Lithuania during the low-rate era?

  • Abstract

    While Euro area interest rates were responding to accommodative monetary policy and decreasing throughout 2015-19, in stark contrast, Lithuania’s bank lending rates increased. Although the rates have slightly dropped around the onset of the pandemic, they are still elevated and well above the EA figures. This paper calls into question, what were the drivers of such interest rate dynamics in Lithuania? By analysing the historical events and practical aspects of loan pricing in Lithuania’s banking industry, we build an empirical model that exploits lending rate variation across banks, time and lending segments, and maps it to different drivers of pricing. We find that the recent changes in lending rates can be attributed to average bank margins, which moved largely in response to changes in market concentration.

    Keywords: interest rates, loan pricing, banking, concentration, capital requirements.

    JEL Codes: D22, D40, E43, G21, L11.

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



No 42

Housing and credit misalignments in a two-market disequilibrium framework

  • Abstract

    During the Covid-19 pandemic, house prices and mortgage credit are growing at a long-unseen pace. However, it is unclear, whether such growth is warranted by the underlying market and macroeconomic fundamentals. This paper offers a new structural two-market disequilibrium model that can be estimated using full-information methods, and applied to analyse housing and credit dynamics. Dealing with econometric specification uncertainty, we estimate a large ensemble of the two-market disequilibrium model specifications for Lithuanian monthly data. Using the model estimates, we identify the historical drivers of Lithuania’s housing and credit demand and supply, as well as price and market quantity variables. The paper provides a novel approach in the financial stability literature to jointly measure house price overvaluation and mortgage credit flow gaps. We find that by mid-2021 Lithuania was experiencing a heating in housing and mortgage credit markets, with home prices overvalued by around 16% and the volume of mortgage credit flow being 20% above its fundamentals.

    JEL Codes: C34, D50, E44, E51, G21.

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



No 41

Overview of disclosure of non-financial information of the companies listed on Nasdaq Vilnius

  • Abstract

    The objective of disclosing non-financial information is to create a reliable, transparent and responsible environment and to contribute to long-term sustainable business. This will also contribute to faster economic growth and greater public involvement.

    In recent years, with fast climate change and changes in people's lives, the themes of ecology and sustainability have become increasingly more important, with all institutions concerned and investors looking for investments in a cleaner and more transparent environment, even if this reduces their return.

    Assessing and improving the sustainability factors – environmental, social and governance (ESG) – is an inseparable part of every company's operations. ESG principles are gradually becoming mandatory. Companies that comply with ESG principles get comprehensive benefits as they are important for all stakeholders: employees, customers, suppliers, investors, etc. In this Overview, the Bank of Lithuania seeks to assess how companies disclose information in their social responsibility reports. In accordance with the Republic of Lithuania Law on Financial Reporting by Undertakings and the Republic of Lithuania Law on Consolidated Financial Reporting by Groups of Undertakings, large public interest undertakings or public interest undertakings – large groups of undertakings, whose average annual number of  employees exceeds 500 as of the last day of the reporting financial year, are required to include the report on social responsibility in the annual report or to prepare a separate report.

    In addition, an assessment was made of how companies took into account the 2020 enforcement priorities for financial statements published by the European Securities and Markets Authority (ESMA) related to the disclosure of non-financial information and alternative performance measures (APMs) related to the COVID-19 pandemic.

    This Overview assesses the disclosures in the annual reports and corporate social responsibility reports, if any, of the 21 companies listed on the regulated market of AB Nasdaq Vilnius. The scope and specifics of these companies' activities often determine the peculiarities of disclosures (indicators, risks, solutions, etc.). Most companies indicated which European Union (EU) or international frameworks or methodologies they followed. The companies state that they consider themselves to be compliant with the guidelines on sustainable business and that they follow them.


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



No 40

Beyond the Traditional Unemployment Rate during Covid-19 in Lithuania

  • Abstract

    This paper provides empirical evidence on the impact of Covid-19 on unemployment and underemployment in Lithuania. Based on the Labor Force Survey, we document the evolution of the unemployment rate using broader definitions that incorporate the underemployed and marginally attached workers. Our results show that, compared to previous recessions, Covid-19 had a milder impact on the Lithuanian labor market. Moreover, Lithuania fared reasonably well relative to other Eurozone countries. However, the data reveal a substantial increase in marginal workers and underemployment during 2020, with women, young workers and individuals in rural areas being most affected by the pandemic-induced recession.

    Keywords: labor market statistics, labor force, unemployment.

    JEL codes: E24, J21, J64

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