Domestic investment and exports stimulate most economic growth in Russia

Domestic investment and exports are among the most important factors for stimulating economic growth across Russia. This is shown in a study by Lic.Sc. Svetlana Ledyaeva for the Aalto University School of Economics.

For about 70 years, the Russian economy and rest of the Soviet Union operated on the basis of a centrally planned economy. Since collapse of the Soviet Union in 1991, Russia has started to develop market economy.

Ledyaeva's study focuses mainly on macroeconomic and international integration issues during Russia's transition from centrally planned to market economy. It also focuses on economic growth in Russia and analyzes patterns of foreign investment in Russian economy. Both issues are important for achieving strategic goals of country's development.

Many factors determine foreign direct investment inflows
Ledyaeva also examines the impact of oil price shocks on oil-producer and oil-consuming economies and their transmission via foreign trade. According to the results, Russia as a net oil exporter, gains from oil-price shocks in both the short and long run. However, the indirect impact from the main trading partners is negative, albeit very small.

Finally Ledyaeva studies strategies of foreign investors in the Russian economy. She finds that there are several important determinants of foreign direct investment inflows since transition. The determinants are market size, the presence of large cities and sea ports, oil and gas availability, proximity to European market and political and legislative risks.

She further examines how foreign ownership strategies (shared ownership with Russian partners versus full foreign ownership) in Russia are influenced by the corruption distance between the home country and Russia and by anti-corruption regulation in the home country. Corruption distance means the absolute difference in corruption level between investing countries and Russia.

The type of ownership is viewed as a trade-off between the benefits and costs of having a local partner. In the case of Russia, the benefits were found to exceed the costs, as corruption distance and anti-corruption legislation in force in the home country are related to shared ownership.

Svetlana Ledyaeva (Lic.Sc., Moscow State University) will defend her dissertation Empirical essays on Russia's macroeconomic and integration development in transition Russia in the subject area of economics on Friday, June 8, 2012 at 12.15 pm at the Aalto University School of Economics (hall A-401, 4th floor, Main Building, Runeberginkatu 14-16).

Provided by Aalto University