Russian Journal of Money and Finance: How patents predict investment and what drives the price gap between primary and secondary housing markets
The Bank of Russia presents this year’s second issue of the Russian Journal of Money and Finance. In this issue, our contributors show how business cycle phases can be identified using business survey data, explain how patents are linked to investment activity, focus on the drivers of the price gap between new-build and second-hand homes, and propose an approach to constructing a yield curve for Russian yuan-denominated OFZ bonds.
Forecasting Fixed Capital Investment with Patent Activity Indicators
Innovation activity indicators can carry valuable information about the future trajectory of investment, particularly as technologically complex and knowledge-intensive sectors of the economy play an increasingly pivotal role. Zhanna Shuvalova (Bank of Russia) compares a range of machine learning models and finds that forecasts of fixed capital investment become significantly more accurate when patent data are included in the models. Put differently, innovation serves as a leading indicator of economic development.
Identifying Turning Points in Bank of Russia Business Activity Indicators Using Machine Learning Methods
Reliable indicators are essential for the early detection of signs of a cooling or overheating economy. Valeria Zvereva and her co-authors at the Bank of Russia address this by using the Bank of Russia’s business surveys. Two indicators prove to be the most reliable signals of business-cycle turning points: firms’ assessments of actual demand and the business climate index, derived from both demand and output estimates.
Modelling Determinants of the Price Gap Between the Primary and Secondary Housing Markets
The price gap between primary and secondary housing matters for more than just home buyers. The price premium for new-build homes increases risks in the mortgage market: if a borrower is forced to sell a property bought in the primary market, its secondary market value may fall short of the outstanding mortgage balance. Olga Klachkova (Lomonosov Moscow State University) and her co-authors analyse the factors influencing this price gap across Russian regions. They find that the most impactful factors are the monopolisation of regional primary housing markets and the government-subsidised Family Mortgage programme. Competition among banks, by contrast, helps narrow the price gap.
Constructing the Yield Curve for Yuan-Denominated OFZs
Recent years have seen the emergence of yuan-denominated federal government bonds (OFZs) as a new instrument in the Russian financial market. This has created demand for tools enabling investors to assess returns. However, conventional methods for constructing yield curves are inapplicable to yuan-denominated OFZs owing to the small number of such issues. Mikhail Makushkin (HSE University) presents a model for yield-curve construction that incorporates data on both OFZs and yuan-denominated corporate bonds to obtain a more reliable estimate of the yield curve.
All the papers are available on the Russian Journal of Money and Finance website.