Authors and abstracts: Armenian Economic Association 2013 Conference
1	Name	Armen Arakelyan
	Affiliation	University College for Financial Studies (Spain)
	Title	Market-Wide Liquidity in Credit Default Swap Spreads
	Abstract	This paper analyzes the importance of market-wide illiquidity in the CDS market by examining the changes in CDS spreads of credit quality portfolios for five alternative maturities. We document that aggregate liquidity is a pricing factor in CDS spreads. The illiquidity CDS betas across all credit quality portfolios and maturities are positive and statistically significant. Low credit rating CDS spreads tend to be highly sensitive to aggregate illiquidity shocks relative to high credit quality CDS spreads. Using a two-factor intensity model, we also document a significant illiquidity risk premium embedded in the CDS term structure, especially for high-yield portfolios.
	Co-authors	Gonzalo Rubio (CEU Cardenal Herrera University), Pedro Serrano (University Carlos III of Madrid)
2	Name	Zareh Asatryan
	Affiliation	ZEW Mannheim and University of Freiburg (Germany)
	Title	Direct democracy and local public finances under cooperative federalism
	Abstract	This paper exploits the introduction of the right of referenda at the local level in the German state of Bavaria in 1995 to study the scale effects of direct democracy. In the first part of the paper, we establish the relationship between referenda activity  and  scal performance by using a new dataset containing information on all 2500 voter initiatives between 1995 to 2011. This selection on observables approach, however, suffers from obvious endogeneity problems in this application. The main part of the paper exploits population dependent discontinuities in the signature and  quorum requirements of referenda to implement a regression discontinuity design (RDD). To safeguard against co-treatments that might affect scale outcomes simultaneously at the same thresholds, we validate our results by extending the RDD approach to a dfference-in-discontinuity (DiD) design. By studying direct legislation in an archetypical cooperative federation as Germany, our paper extends the literature to a novel institutional setting. The results indicate that in our setting { and in contrast to most of the evidence from Switzerland and the US { direct democracy causes an expansion of local government budgets.
	Coauthors	Thushyanthan Baskaran (University of Gottingen), Theocharis Grigoriadis (Free University of Berlin), Friedrich Heinemann (ZEW Mannheim and University of Heidelberg)
3	Name	Gurgen Aslanyan
	Affiliation	Migration Challenge for PAYG
	Title	CERGE-EI Prague
	Abstract	Immigration has been popularised in the economics literature as a tool to balance the troubled PAYG pension systems. A pivotal research by Razin and Sadka showed that unskilled immigration can surmount the pension problem and, further, boost the general welfare in the host economy. However a large strand of current economics literature is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, causes undesired shifts in general welfare. This work shows that actually recurring unskilled immigration may challenge the very pension system and decrease the pension benefits themselves. Moreover, it is shown that at any time given the opportunity the population will vote for the unskilled immigration that is welfare depriving in the long-term.
4	Name	Avag Avanesyan
	Affiliation	Russian-Armenian (Slavonic) University
	Title	Armenian pension system reform: problems, prospects, opportunities.
	Abstract	The goal of this research is to analyse and offer alternative ways for Armenian pension system reform, which will be initiated on year 2014 by Armenian government and central bank. The PAYG system in RA will no longer be available for individuals born after 1974. The new pension system will be based on «mandatory savings» model and provide full pension coverage for the elderly. This should trigger economic and social changes which may be positive, as well as negative. The research is using works of over 15 individual authors and research teams on the topic, as well as macroeconomic and social data throughout the world. By utilizing basic econometric models we try to predict what possible changes may the reform have on elderly income and poverty as well as government spending. Through legislation analyses we have been able to pinpoint problematic parts of the reform and offer adequate solutions, by developing basic alternate models of parametric reform.
	Co-authors	Mariam Voskanyan
5	Name	Gayane V. Barseghyan
	Affiliation	Central Bank of Armenia
	Title	Forecast performance of an estimated DSGE model for Armenian economy
	Abstract	The paper investigates forecast performance of the log-linearized micro-founded small open economy new Keynesian dynamic stochastic general equilibrium (DSGE) model, developed and estimated for Armenian economy. Forecast performance of the model is evaluated, using Bayesian methods. The predictive distribution is estimated, focusing on the mean and covariance matrix of h-step ahead forecasts. Available sample on Armenian data is divided into two subsamples, one of which is used for the estimation purposes and the second one is used for the evaluation of out-of-sample forecasts. The DSGE model forecasts are compared with those of nonstructural benchmarks, such as BVAR, VAR, AR and random-walk models. The paper shows that the estimated DSGE model provides competing forecast, compared with the benchmark models. Moreover, for key macroeconomic variables this result is strengthened over the longer forecast horizons.
6	Name	Edgar Begrakyan
	Affiliation	Central Bank of Armenia
	Title	Inequality, Human Capital, Growth and Mobility in Armenia
	Abstract	The paper examines the relationship between income distribution, human capital  and economic growth in Armenia over the last decade.  I use "Household's Integrated Living Conditions Survey" database, real GDP per capita and real private investment per capita from the National Statistical Service of Republic of Armenia for empirical estimation. The paper finds that income inequality and human capital have negatively and positively significant influence on economic growth respectively. The dynamic analysis of the interplay between income inequality and economic growth is also conducted showing that it takes economic growth rather long time to return back to its long run trend due to the shock in income inequality. In addition,  the evolution of income distribution is demonstrated both from the static and from dynamic point of view in Armenia. The findings show that the probability is high that the poor (the rich) will remain poor (rich) over the time.  Moreover, the intergenerational educational transition matrices and mobility indices are constructed which state that if a parent has higher (primary) education the probability is greater (smaller) that the offspring will also get higher education.
7	Name	Bruce Boghosian
	Affiliation	American University of Armenia
	Title	Asset exchange models, the origin of Pareto's Law, and the origin of oligarchy
	Abstract	A key assumption of neoclassical theory is that economic agents trade to further their own best interests without making mistakes.  In the real world, agents make mistakes, resulting in losses for some and windfall gains for others.  Because the effect of these mistakes can be to anybody's benefit or detriment, one might think that their net effect would average away, and that the principal results of neoclassical theory would be robust in this regard, albeit with some level of superposed noise.  It turns out that this intuition is incorrect, and that the effect of a constant rate of mistakes, no matter how small or infrequent they may be, is a gross distortion in the overall distribution of wealth, tending to concentrate it in the hands of a small minority of agents.  This effect can be kept in check by some amount of redistribution -- for example by taxation and public spending, or by price controls.  In this work, we show that the combination of these mechanisms is sufficient to explain the general form of Pareto's Law of wealth distribution, but the consequences of this observation are far broader than that.  In essence, contrary to most Western economic policy of the past three decades -- but perfectly consistent with its observed consequences -- the more "free" the market, the fewer are the mechanisms for wealth redistribution, and the greater is the tendency toward oligarchy.  In this light, it is not surprising that the sudden withdrawal of price controls and state subsidies called for by the "shock therapy" imposed on the states of the former Soviet Union led directly to the oligarchies that currently prevail in many of those states.
8	Name	Aram Derdzyan
	Affiliation	International School of Economics at TSU (ISET)
	Title	Wheat price transmission from the world market to Armenia
	Abstract	World food prices have significantly spiked upward in July 2012 driven by higher cereal prices due to adverse weather in the United States and Eastern Europe.  The increase in food prices has been driven in large part by cereals: overall food prices climbed 7.6 percent in September from June, while cereal prices increased 18 percent, in particular 22 percent change was observed in wheat prices. Afterwards a slight deflation and stabilization is noticed (FAO, 2013).   Armenia is self-sufficient in most varieties of vegetables and fruits but is heavily dependent on imports of several basic food items. The country imports almost two-thirds of its consumption of wheat, 98 percent of consumed sugar, 97 percent of vegetable oil and butter, and 87 percent of poultry (NSS, 2012). Therefore change in prices of these food items in the international market may have direct and indirect implications on Armenian consumers through price, consumption and income. Price transmission shows the impact of price changes in one market on prices in another market. When the relation of the international price changes on local markets is analyzed, we have a case of spatial price transmission. The Law of One Price, along with the predictions on market integration provided by the standard spatial price determination models (Takayama and Judge, 1972) state that in equilibrium the difference of prices of a commodity sold on foreign and domestic markets is a transfer cost. The models predict that changes in one market will affect trade and therefore prices in other markets. This implies that increase and decrease in international prices will have symmetric impact on local markets.  However, price transmission in real world may not follow the Law of One Price due to specific market structure, government policies, imperfect information and transaction costs such as poor transport and communication infrastructure. As a result, the international prices may have no long-term relationship with local ones. In terms of statistics two prices may be not co-integrated. It is also possible that local markets react differently in case of increase in international prices than to their decrease. The latter is known as asymmetric price transmission (APT).
9	Name	Astghik Galoyan
	Affiliation	ISET (International School of Economics at TSU)
	Title	Debt sustainability: Case study for Armenia
	Abstract	Debt sustainability is one of the most important issues while running an economy. The maintenance of the external debt is a more delicate subject as it is borrowed with foreign currency. This paper is going to concentrate on external debt analysis. The question is:  Does the increase in external debt cause GDP growth or prevent its growth? There is a huge literature which estimates the relationship between economic growth and external debt. The well-spread hypothesis is an inverted U-shape relationship between economic growth and external debt. However, the recent news about the uncertain dataset of the most cited authors of the topic (Reinhart and Rogoff) doubts the economic theory of public debt as well as external debt. This paper uses econometric tools to estimate the relationship between GDP growth and external debt using Armenian data and calculates the threshold level for borrowing for Armenian economy. The paper also investigates the impact of different types of loans on growth and suggests appropriate conclusion according the obtained results. The main impact of the paper is that it analyzes Armenian economy and draws conclusion for Armenian policy making institutions giving some suggestions for further policies.
10	Name	Arman Gasparyan
	Affiliation	Caucasus Research Resource Centers
	Title	Alternative Energy as a Mean for Reducing the Monopoly of “ArmRusgasprom” in Armenia
	Abstract	This paper aims at measuring the current status of energy industry in Armenia and to provide alternatives for improving it and making more stable both to foreign and to domestic challenges. First of all it starts with two introductory chapters, the aim of which is to discuss the main problems monopoly may cause to market and why “ArmRusgasprom” is a typical monopoly. The main research question was whether Armenia can shift from natural gas to alternative energy. In order to better understand the situation and come up with prognosis the Danish case was taken as a success-story, due to its past similarities to that of Armenia in having monopolized energy industry. Denmark is currently one of the world leaders in terms of alternative/renewable energy usage. Also, interviews with two profound Armenian and Danish experts on energy industry were conducted to allocate more in-depth information on the topic, i.e. to discuss the Danish path and to find out whether Armenia can follow it. At last, Assessment of PV Industry Development Potential in Armenia was taken as a possible handbook for alternative/renewable energy development in Armenia. This research came up with several results among which the main ones are: — ArmRusgazprom monopoly stands as an obstacle to the development of energy alternatives — Government cooperation with more than one energy providers — Similarities between Armenian and Danish cases — Shift to alternative energy is promising and attainable for Armenia
	Coauthors	Ani Aghoyan, Perchuhy Kazhoyan, Lilly Minasyan, Nune Sakapetoyan
11	Name	Aleksandr V. Gevorkyan
	Affiliation	St. Joseph University (New York)
	Title	Redefined fundamental uncertainty, fiscal rules, fiscal net, fiscal sustainability and emerging markets scenarios
	Abstract	Sustaining initial blows of the crisis of late 2000’s, emerging markets may now be operating in the perfect storm environment pulling into single totality problems of adequate fiscal balance, capital flows, exchange rate volatility, foreign currency denominated debt, industrial development, and social balance. In this environment, the fiscal state assumes a stabilizing role counterbalanced by limited financial capacity. To the extent relevant on the global scale this paper develops bare-bones analytical fiscal policy rules model under uncertainty, optimized for a controlled fiscal revenue mix via superfund, with preexisting social commitments and economic priorities. The paper advances a concept of redefined fundamental uncertainty as characteristic feature of the post-crisis economy with concerns over growth sustainability. Hypothetical post-crisis scenarios based on nonlinear model predictive control algorithms are reviewed and fiscal net framework is conceptualized as analytical proxy stability measure.
	Coauthors	Arkady Gevorkyan, The New School, New York, NY
12	Name	Anna Gevorgyan
	Affiliation	Yerevan State University
	Title	Assessment Methods of the Economic Modeling of Assets and Liabilities of Commercial Banks
	Abstract
13	Name	Aleksandr Grigoryan
	Affiliation	American University of Armenia
	Title	Intention to migrate: evidence from Armenia
	Abstract	Armenia experiences a vicious circle: People migrate and remit to their family members in the home country. These transfers create domestic demand and boost the economy. Nevertheless, the rate of economic development is not convincing for many Armenians to work and live in the home country and in effect even more people migrate. In this paper, using ETF Potential Migration Survey data, we study a possible channel through which the circle repeats: higher remittances relax wealth constraints for remittance-receivers and they  express more willingness to migrate.  The evidence of brain drain is in implicit form and subject to further study: intentions to migrate are stronger among respondents with work status, while years of education have no impact on intentions.
14	Name	Gayane Grigoryan
	Affiliation	Armenian State University of Economics
	Title	Analysis of Regional Development Policy of Southern Italy
	Abstract	Thoughtful analysis of international policy of regional economic development is an important and necessary condition for viable development of economic, political, social and legal spheres. This paper presents a clear concept of the essence of a regional economy: its elements, costs, and methods internationally.  Specifically, it reviews international policy of regional economic development in Italy where an argument is made that it is necessary for a region to mobilize a system of natural and socio-economical territorial sections.  Regional economy is delimitation and differentiation based on territory, transportation costs, production locality and costumer demand . In addition, regional economy includes household, industrial economies and infrastructures.  The regional economic development policy of Italy is the focus of this paper. Essentially, the question of the role of the informal (communitarian) versus formal (societal) institutions is explored and analyzed based upon experiential study in 2013 in Italy. 04/2013 - 06/2013 by a program of analyzing the markets of Italy, organized by the Economic University of Palermo, in Sicily, Italy, I have done research about the unequal development of the Northern and Southern part of the Italy. The main topics of the program were analyzing the different types of the markets and big companies, which have branches in both the north as well as the south.  One of the main aspects of the analysis was the Italian mafia and its influence on economic development as well as its policy regulation. During the study program the following methods were used: making reports with data of Economic University of Palermo and other institutions; comparing the policies realized by national government and informal institutions, and the realization of these policies in different regions of Italy. Based on these studies I was able to distinguish between the policies which are used by the Italian government and informal institutions.   The theory of regional economy development policies is to provide a plan of improvement of unequal developed territories, by the system of innovation. As such, regional economic development policy may be encouraged by the realization of regional competitive advantage based on specific location and specialization capabilities and regional capacities, nurtured by socio-institutional and cultural structures.  While researching in Italy, various types of businesses which had development potential in certain regions were discovered, and new ways of realizing policies in different territories were explored. After much analysis, this paper supports that the main concept of regional development policy is that each location has to shape its own competitive advantage. While taking into account that such development initiatives must exist on the basis of functional and effective interactions between regional economic agents and socio-institutional forces; I found that in Italy there is substantial distance between government and non-formal institutions. Conclusions following such observations attest that interaction and balance between society and community is needed in shaping the development potential of regions.
15	Name	Karen Grigoryan
	Affiliation	Armenian State University of Economics
	Title	Survey of substantial instruments of trade policy and export promotion in the European Union and in Armenia
	Abstract	As it is known export promotion is the important part of trade policy of each country, as well as the European Union and Armenia. The paper signifies the importance of trade liberalization and integration in EU by pursuing export expansion strategies. The primary purpose of this paper is to examine the role and significance of export promotion in the European Union (EU) on the basis of detailed survey of substantial instruments of export promotion -  EU Market Access Strategy and Market Access Database making process and mechanism of their implementation. The EU Market Access Strategy is an essential component of the Global Europe Strategy and the Market Access Database was created as the main operational tool of this strategy. In this field particular attention is paid to partnership and connection with private sector, to the participation of EU Member State Representatives and others, to the Different Structures among EU member states, as well as to the new relationship with Member States and business. The usage of such a instruments in Armenia could improve the technical and methodological assistance to exporters making promotion more targeted. This study tries also to examine in detail the process of trade barriers regulation as one of the main tool and instrument for trade policy and analyses what this process entails for the European economy and besides this, the trade agreements and public procurement regime are discussed. The paper also seeks to identify the main characteristics of institutions involved in export promotion in Armenia and find out the ways of its improvements.
16	Name	Shushanik Hakobyan
	Affiliation	Fordham University, New York
	Title	Trade Patterns after the Expiration of the US Generalized System of Preferences
	Abstract	This paper investigates whether the expiration of the most comprehensive trade preference program offered by the US had a detrimental impact on the imports from developing countries. The US Generalized System of Preferences (GSP), introduced in 1975, allows select developing countries to export to the US duty free. But it is not a permanent program and needs to be, and has been, renewed by the Congress regularly. In 2010, the Congress unexpectedly failed to renew the program, and it remained expired through the first 10 months of 2011. Using panel data on all exporters to the US, and because the GSP is applied to select countries and particular products, I am able to examine the impact of its expiration with a triple difference-in-differences estimation controlling for both country and product-level import surges. The results suggest that the expiration of GSP had a considerable impact on the level of exports to the US, particularly of textiles and apparel products. These import responses were the largest in product categories that faced higher tariffs. These findings provide further support for trade preference programs as instruments to stimulating exports from developing countries.
17	Name	Sevan Hambarsoomian
	Affiliation	University of Wuppertal (Germany)
	Title	The role of board of directors in private equity firms
	Abstract	Listed Private Equity (LPE) Companies, which belong to the alternative investment class, have been receiving increasing attention since 2007. Prominent cases of Private Equity IPOs are The Blackstone Group and KKR, which both announced their IPO in 2007. Whereas KKR received $1.25 billion Blackstone gained $4.13 billion which is three times more than KKR.   In this paper we investigate the performance of listed private equity (LPE) firms and the role of the board of directors. In particular we look on the board structure of LPE firms and their composition. For our empirical investigation we construct an unbalanced panel with 523 observations form 1995 until 2012. Looking at the board structure allows us to study the determinants of LPE performance. To measure the performance of the LPEs we use Tobin´s Q follow Kaplan and Zingales (1997).  Our results suggest that the number of outside directors has a negative impact on the performance, which is consistent with the theory. Agrawal and Knoeber (1996) found evidence that an increasing number of outside directors decrease the information flow in the board of directors. Furthermore, we show with our data that CEO duality has a positive impact on firm performance. This founding is consistent with the literature on CEO duality, which linked the board´s vigilance positively with CEO duality (Finkelstein and D´Aveni 1994).
	co-authors	Prof. Dr. André Betzer University of Wupperta, Dr. Peter Limbach University of Karlsruhe
18	Name	Tamara Hovhannisyan
	Affiliation	YSU
	Title	Entrepreneurial characteristics and entrepreneurial inclination
	Abstract
19	Name	Vahagn Jerbashian
	Affiliation	CERGE
	Title	Knowledge licensing in a model of R&D-driven endogenous growth
	Abstract	In this paper I present an endogenous growth model where the engine of growth is in house R&D performed by high-tech firms. I model knowledge (patent) licensing among high-tech firms. I show that if there is knowledge licensing, high-tech firms innovate more and economic growth is higher than in cases when there are knowledge spillovers or there is no exchange of knowledge among high-tech firms. However, in case when there is knowledge licensing the number of high-tech firms is lower than in cases when there are knowledge spillovers or there is no exchange of knowledge.
20	Name	Sona Kalantaryan
	Affiliation	Migration Policy Centre at the European University Institute
	Title	Housing Market Responses to Immigration; Evidence from Italy
	Abstract	This study empirically examines the impact of immigration on the dynamics of housing prices across Italian provinces during the period of 1996 until 2007. There is massive debate going on upon the impact of current intensive immigration flows on the wellbeing of native Italian population and Europeans in general. The ongoing research is mainly focused on the influence of immigration on Italian labor market outcomes. However, such an intensive inflow of extra consumers may lead to an increase in the demand for housing and hence, in housing prices. Taking into account the importance of housing expenditures and the fact that the prevailing part of the real assets of Italian households are concentrated on real estate, the estimation of influence of immigration on housing prices can significantly improve the understanding of its impact on the real income and wealth in Italy. This paper contributes to the existing literature in the following way: First, it enhances the understanding of influence that recent intensive immigration flow has on Italian economy by estimating its impact on the housing market. Second, it exploits different methodological approach with respect to the one dominating migration literature. Particularly, given potential endogeneity of immigration, its lagged variables are proposed as instrumental variables, the validity of which is discussed. I used data on the self-reported housing values from the Survey of Households Income Wealth in Italy to measure the changes in housing prices in Italian provinces. Using the number of valid residence permits as a measure of immigration stock, I find that the increase in the concentration of immigrants in Italian provinces has a positive but declining effect on the average housing prices in provinces. The estimations show that an increase of immigrant population leads to an increase in the average housing prices. The performed Difference and System GMM estimations confirm both the positive response of average housing prices to the increase in immigrant population and the non-linearity of its response to immigrants’ concentration in all specifications.
21	Name	Hayk Khachatryan
	Affiliation	University of Florida
	Title	The Application of Eye Tracking Technology in the Study of Buying Impulsiveness and Choice Decisions
	Abstract	Although consumer behavior research has investigated impulsive buying behavior since the early 1950s, no studies explored the relationship between eye gaze metrics, buying impulsiveness scores and purchase decisions.  The present study is a preliminary approach to setting consumer purchase decisions as a function of not only product attributes, but also individuals’ buying impulsiveness and eye gaze measures, which were collected using an eye tracking device during choice experiments. Specifically, we investigated the moderation effects of eye gaze measures on the relationship between buying impulsiveness and consumers’ purchase intentions.  Impulsive buying behavior, which is defined as “a sudden, often powerful and persistent urge to buy something immediately”(Rook and Fisher, 1995), contributes to the U.S. retail industry by an estimated $4 billion in annual sales (Mogelonsky, 1998).  To the best of our knowledge, the extent to which impulse buying, triggered by emotional rather than rational decisions, contributes to the green industry product sales has not been investigated. To address this shortcoming, the present study integrates eye tracking technology and conjoint analysis to better understand individuals purchase intentions. To incorporate consumers’ gaze metrics into the choice experiment, eye tracking technology was used to track participants’ eye gaze patterns when viewing plant choice scenarios on a computer screen. The results showed that impulsive buying scores were negatively related to purchase decisions, and that eye gaze duration (when viewing plant displays) influenced that relationship, depending on the type of the display information viewed (e.g., price vs. production methods or plant type signs).  Theoretical contributions to choice behavior literature and implications for developing effective plant sales marketing efforts are discussed.
	co-authors	Bridget K. Behe, Michigan State University, Benjamin Campbell, University of Connecticut, Charles R. Hall, Texas A&M University, Jennifer Dennis, Purdue University
22	Name	Karen Khachtryan
	Affiliation	Middlesex University, UK
	Title	Gender Differences in Preferences at a Young Age? Experimental Evidence from Armenia
	Abstract	We look at gender differences in competitiveness, risk preferences and altruism among a sample of 824 children and adolescents aged 8 to 16 in Armenia. Exploring four different competition tasks, girls are significantly more competitive in one task when it comes to performance change, and there are no gender differences in the other tasks or in the propensity to choose to compete. We find that girls are more altruistic and less risk taking than boys, and that the latter gap appears around the age of puberty. These results suggest that gender gaps in competitiveness are not always present.
23	Name	Irma Lapiashvili
	Affiliation	International School of Economics at TSU
	Title	Opening the Russian Market: A CGE Approach
	Abstract	This paper analyzes the effect of Russian embargo abolishment on Georgian economy. For the analysis I employee Computable General Equilibrium (CGE) model. The data that is used for the model analysis is arranged in the Social Accounting Matrix (SAM) and the information for SAM is taken from the Georgian National Statistic Department’s supply table for the year 2011. This paper analyzes three potential trade policies that may be employed between two countries after the sanction is abolished. First one accounts for the distortions in the economy if Russia allows trade with agricultural production between Georgia and itself. The second scenario analyzes the agreement, according to which the northern neighbor will abolish the restrictions on all Georgian products and decrease the non-tariff barriers between the two countries; while the last counterfactual analysis studies the possible free trade agreement between Georgia and Russia and assumes the omission of all trade barriers. The scenarios showed that trade liberalization between Russia and Georgia positively affected our country’s economy. Under all three scenarios, Georgian output expanded and prices decreased. The improvement was depicted in the overall level of consumption also.
24	Name	Ana Mazmishvili
	Affiliation	International School of Economics
	Title	Price Transmission Mechanism in Georgian Retail Gasoline Market
	Abstract	The objective of this study is to test for the asymmetric price behavior of retail gasoline prices in Georgia using the weekly data from 24 April 2008 till 13 May 2013. As Georgian firms follow the same trend of price adjustments, the analysis employs the retail price, which the Socar Georgia Petroleum Ltd. provides. Retail gasoline and refined oil prices were estimated using the error correction model and besides, using the cumulative adjustment function, I analyzed how Georgian retail prices react to the positive and negative price shocks. Due to the regression results, in the long-run the positive price shocks are fully transmitted in the retail gasoline prices. Besides, it is evident that responses to the negative cost shocks are faster compared to the positive shock cases. Moreover, as the data shows, Georgian oil market is the very specific one, because the retail prices appeared to be rigid in respond to the world price changes. Besides, oil importer companies seem to follow each other, which gives birth a doubt that there is collusive agreement between them.
25	Name	Anna Minasyan
	Affiliation	University of Goettingen and University of Heidelberg
	Title	Can Donor-Recipient Genetic Distance Explain Aid (In)-Effectiveness?
	Abstract	Vast literature on aid effectiveness shows puzzling and inconclusive results as shown by Doucouliagos and Paldam (2008). While anecdotal evidence from development practitioners points on misaligned incentives and ignorance of local social-cultural complexities when delivering aid projects, see: Easterly (2001); Altaf (2011). Recent research on fundamentals of economic development shows that income differences are correlated with genetic distance according to Spolaore and Wacziarg (2009). Differences in income can also explain variations in values and beliefs in population(s) as argued by Granato et al. (1996). Additionally, such values, beliefs and norms are transmitted from parents to offspring through genes as Bisin and Verdier (2001) show. In my paper, I attempt to find whether such differences between donors and recipients can explain some part of aid effectiveness.  I proxy differences in norms, beliefs and values between donors and recipients with genetic distance and employ methodology presented in Clemens et al. (2011). I find that more than median genetic distance to average donor has negative and significant impact on aid effectiveness. On the other hand, less than median genetic distance to average donor has positive and significant impact on aid effectiveness when technical assistance in considered. The results are robust for extreme cases of genetic distance to average donor.
26	Name	Astghik Mkhitaryan
	Affiliation	International School of Economics at TSU (ISET)
	Title	The quality of human capital and its effect on labor market outcomes: the case of Georgia
	Abstract	After the collapse of the Soviet Union people had human capital but it did not match the new needs of the economy. The accumulated human capital that was previously well fitting the structure was not optimal anymore. The reason is that the dissolution of the Soviet Union was followed by a deep crisis in newly independent countries resulting in a complete restructuring of their economies.  The planned system was already in the past and the countries were turning a new page in their history by a transition to a market economy.  Previously dominant machine manufacture and chemical industries were almost replaced by the agricultural sector where people were working for their subsistence. The engineers working in former leading industries lost their jobs and there was no demand towards the human capital they possessed.  The latter resulted in a high level of unemployment followed by a significant downfall in the output by more than 40 % between 1990 and 1995 (The World Bank, 2002). In order to stabilize the situation reforms were performed in all sectors and the educational system was not an exception. The changes were made to establish a system which was supposed to meet new needs of the economy. Having changes that transition process introduced in the economy on one hand and in the education process on the other hand, it is interesting to see if there are any differences in human capital between the “old” generation which is born before 1970 and possessing the soviet education, and “new” generation which has more or less contemporary education and fits the needs of the market system.   Being a former Soviet Union republic Georgia has also faced all the stages discussed above. In particular, according to the World Bank report (2002) the country has 80% downfall in output during the transition period.  This drop resulted in the cut of spending in the educational system reaching 2% of GDP. The situation stabilized gradually by means of reforms and the targets of the country have changed since then.  According to president Saakashvili’s (2012) words Georgia is a country with limited natural resources and should mostly depend on the human capital for the future development.  The aim of this paper is to measure the quality of human capital in the country. The research concentrates on the revelation and comparison of differences in the quality of human capital across regions and between people who obtained education before and after the collapse of the Soviet Union. The paper focuses on the income-based approach of human capital measurement using the data from Georgian annual “household surveys”. The study has shown that the quality of human capital is lower for people who received the education during the Soviet time compared with ones who possess recent educational degree. In addition, it is observed that the quality of human capital varies across regions and the high quality is mostly concentrated in the capital city of Tbilisi.
27	Name	Arevik Mkrtchyan
	Affiliation	European University Institute, Italy
	Title	Tariffs and Trade Costs: An Assessment of the Eurasian Customs Union
	Abstract
28	Name	Nana Mukbaniani
	Affiliation	International School of Economics at Tbilisi State University
	Title	Consumption Habits and Price Differential in Clothing Markets of Tbilisi
	Abstract	At the first glance the highly competitive non-brand clothing market in Georgia is characterized by high profit margins. In the non-brand competitive markets, where lots of individual sellers operate and prices should be equal to marginal costs, profit margins seem to be high. Clothes are mostly imported from Turkey. While costing at least 30 lari to buy a women’s blouse in Georgia, its price in Turkey is about 10 lira (10.7 lari). What is the main reason behind such high margins? Is it overhead costs or price discrimination? On the one hand, the low barriers to entry in the retail clothing import market in Georgia – the liberal visa regime with Turkey and low custom duties - should encourage entry and competition, driving down the markups. The observed high price differential between Georgian and Turkish prices, therefore, can either be attributed to hidden overhead costs (such as, for example, retail location dues, or an extra layer of intermediation), be a result of price discriminating behavior on the part of the sellers, or for some sellers be coming from the existence of search costs. This paper is an empirical estimation of the suggested theories that describe the existence of positive profit margins (at least in the short run) in free entry markets. In order to conclude whether the price differential is high only for non-brand market, the research of the brand clothing price differential is also in the order. For this reason, this paper also includes a partial analysis of the brand clothing market too and concludes how the variables affecting the price differential of non-brand clothing influence the price differential for the total clothing market in Georgia. The paper finds that high price differential between Turkish and Georgian clothing prices is mainly noticed in non-brand clothing market and it is driven by the high profit margins in addition to overhead costs. High profit margins are supported by the high willingness to pay of low income individuals (because they lack of purchasing choices) and by the high marginal disutility from search.
29	Name	Suren Pakhchanyan
	Affiliation	University of Oldenburg; Oldenburg, Germany
	Title	Business Environmental Determinants of Operational Risk in German Speaking Countries
	Abstract	Several prominent loss events from the recent past show that even banks operating a supposedly sophisticated risk management system are not safe from falling victim to operational risk.  As operational risk can materialise in various forms like fraud, accounting errors, IT failure, modelling errors, or natural disasters, and as it may even coincide with – or be mistaken for – other types of business risk, identifying and properly managing operational risk is a challenging (if not burdensome) task. In this context, our research focuses on the interaction of observable firm-specific and business environment factors on the one hand and operational risk events in financial institutions on the other hand in four German-speaking countries, namely Germany, Austria, Switzerland, and Liechtenstein. Existing empirical studies provide evidence that both firm-specific and macroenvironmental factors can have a significant impact on a firm’s operational risk exposure. Moreover, prior research found cyclical components in operational risk measures, as well as a positive correlation between operational losses and financial crises. In addition, operational losses are shown to have an immediate impact on stock market performance of financial institutions. We perform multivariate regression analyses to study whether changes in certain firm-specific and business environmental factors could be used to explain the occurrence of operational risk events. In selecting explanatory variables we mainly draw on the above mentioned literature. This allows us to compare our results with prior results relating to other countries, and enables us to corroborate claims put forward by Cope et al. [4] with respect to the effects of the geographic region on operational risk exposure. The analysis is based on an operational loss database provided by the Association of German Public Sector Banks (Bundesverband öffentlicher Banken). The final sample consists of 381 loss events that occurred in 64 financial institutions between 1990 and 2012. Our results show a positive and significant relationship between firm size and operational losses, which is consistent with prior studies, indicating that larger firms exhibit a greater exposure to operational risk, probably due to higher transaction volumes and increased complexity of operations. In addition, we identify a U-shaped relationship between cash holdings and operational risk events, suggesting that increasing cash holdings up to a certain threshold could counteract operational loss occurrence, while further increases in cash holdings may have an adverse effect. Finally, with respect to other firm-specific and macro environmental factors we find no significant relationship to operational losses, a finding that runs contrary to prior empirical evidence for other countries. As we control for time and firm fixed effects in our analyses, this suggests that these factors’ explanatory power identified by prior research may be unique to the respective country or geographical region studied, and thus does not allow for a generalization.
30	Name	Karen Poghosyan
	Affiliation	Central Bank of Armenia
	Title	Alternative models for forecasting the key macroeconomic variables in Armenia
	Abstract	This paper uses three well known models, particularly VAR, Bayesian VAR and Factor Augmented VAR for forecasting the key macroeconomic variables in Armenia (real growth of GDP, inflation, nominal interest rate and nominal exchange rate). We apply three models to the Armenian economy using quarterly macroeconomic time series from 2000 to 2012. The main purpose of the current paper is to compare different forecasting models, in order to describe that model which is more accurate for the Armenian economic trends. In order to find the best models we conduct out of sample forecast experiments. Based on the out of sample forecast experiments we make comparisons between small-scale and large scale models.