IFC issued a new survey on investment climate in Ukraine as viewed by private businesses. The main finding it that about 1% of GDP in 2008 was spent on compliance with numerous regulations. Here is the summary on the diagram:

The most problematic area is tax compliance. In this area, Ukraine is  #181 out of 183 countries in another survey, "Doing business: 2010"
Other government agencies that enormously complicate life of the entrepreneurs are those dealing with permits, inspections (fire inspectors are singled out as one of the most business unfriendly), and technical regulations:

According to IFC, most of the regulatory procedures are artificial and do not lead to higher safety, better quality, and tighter competition. To the contrary, Ukraine lags behind most countries in the region in terms of number of enterprises:

It also leads to negative dynamics in introducing innovations and new products:

Reserve accumulation and easy money helped to cause the subprime crisis

Guillermo Calvo outlines the buliding blocs of a macro model that would explain current crisis:

A view that is gaining popularity as one of the fundamental explanations for the current crisis is that emerging markets’ voracious appetite for international reserves coupled with record-low US policy interest rates and lax financial regulation to produce a frantic “search for yield,” the creation of fragile financial instruments, and occasionally outright fraud.

Best assessement of crisis in Ukraine

Edilberto Segura has a very detailed analysis of the current economic situation in Ukraine at the FIRST ANNUAL INTERNATIONAL FORUM ON THE ECONOMIC DEVELOPMENT OF UKRAINE. The report can be found here.

Export diversification in CIS

CIS countries are quite open relative to other countries. For example, Ukrainian trade openness presented at Figure 1 below was very high taking into account that Ukraine is a large country:

 However, the trade of CIS is poorly diversified in products that are not the main items of their export. For example, Russian export of oil and Ukrainian export of metals are diversified geographically quite well, but export of other product is not diversified and  concentrated within the CIS region. Here is the figure from me recent paper "Export diversification across industries and space: do CIS countries diversify enough?" that demonstrates geographical and product diversification of exports in CIS and Eastern Europe:

Shadow economy growth during crisis

According to the ministry of economy of Ukraine, the sharp collapse of the GDP in Ukraine can be partially explained by the relative expansion of the shadow economy. The shadow economy grew by 2.3% in 2008 according to the integral index of shadow economy. Actually it is an average of estimates calculate by three different methods: based on money demand, based on retail sales, and based on the share of unprofitable enterprises. The first two methods reported considerable increase of the shadow economy to 38% (by 12% according to the money demand based method), while the third method gives more conservative estimates of 29%.

The next picture demonstrate the differences in the size of the shadow economy in different industrial sectors in 2008 computed by the share of unprofitable enterprises method:

This figure actually cast some doubts on the method because it really surprising that the share of shadow activities in construction is lower than in the extraction of raw materials.

Pigs as collateral

Bloomberg reports that as much as 25% of all loans made by the Russian banking system can become problem loans. As an example, National Reserve Bank seized collateral of 40,450 pigs offered against a loan from a cash-strapped borrower:

“We had a court decision to take away the collateral, which is the pigs,” Lebedev, 49, said in an interview in Moscow. The borrower, a farm near Samara on the Volga river, agreed “with the local authorities to establish a quarantine” against African swine fever. The former KGB officer is still waiting to collect the pigs offered against a loan of 100 million rubles ($3.5 million). 

Quarterly export and import of Ukraine: back to 2006

After two quarters of 2009, Ukrainian exports and imports are at the level of the 2nd quarter of 2006. There is an upward trend but it will take several years to return to the level of the 3rd quarter of 2008 even under the optimistic view on the world trade recovery:

It is especially disturbing since Ukraine is a very open economy:

Mass falsifications of Moscow 2009 elections and statistics

Statistics presented below can nicely demonstrate manipulations in the last elections in Moscow

Here is the figure that shows how a percentage got by a political party  in a voting district (y-axis) depends on voter's turnout as a percentage of total number of voters. The funny thing is that for all parties except for the ruling  "Edinaja Rossia" (United Russia) backed by Medvedev and Putin, there is no correlation between the voter's turnout and the results of elections, while for "United Russia" (blue dots) there is a nice upward trend.

Source of the figure is here
Question: how does this pattern can be explained>
H0: by pure chance. Probability of this really is almost surely zero
H1: voters of United Russia are very heterogeneous -- they are very active in some areas of Moscow and very passive in other areas. This heterogeneity is not observed for supporters of other parities
H3: An invisible hand messed around with the results of elections

Nobel prize in Economics

Oliver Williamson and Elinor Ostrom have got the Nobel Prize in economics this year. While Williamson was on the list of potential candidates since the time when D. North have got his prize in 1993, E. Ostrom is quite an unexpected choice (here is the Greg's Mankiw list). Actually, she is the first woman who won the Nobel prize in Economics.
The choice might reflect the change in mood among economists since the start of financial crisis. It is safe to reward someone who has not been involved with financial modelling like E. Fama or macroeconomics like R. Barro and J Taylor.

Tobacco companies warn about an increase in smuggling of cigarettes

On the 1st of May, 2009, the government of Ukraine increased an excise duty on tobacco products. A a result, in May-September, 2009, the production of cigarettes in Ukraine has decline by 21.5%. The decline can not be attributed to the current crisis because before the introduction of the new excise, the production declined by 8% only.
The MPs who introduced the excise see here a sign of declining cigarette consumption. However, the tobacco companies think otherwise. They claim that Ukrainian smokers has switched to consumption of Russian and Moldavian cigarettes which are smuggled to Ukraine. They claim to have evidence that during 8 months of 2009 the illegal import discovered by customs has increased by 2500%.
Sociologists are inclined to takes the side of MPs. They report that 1/3 of smokers has switched to cheaper brands and only 5-8% have started smoking imported brands.

EU plans to triple funding for energy research

One of the things that contributed to the current recession is the volatility of oil prices. Diversification of sources of energy would reduce the volatility. All leading economies realize that. EU has joined the US, China, and Japan in search for better energy use and alternative energy sources:

BRUSSELS (Reuters) - Europe has launched a campaign to triple funding for energy research to 8 billion euros ($11.7 billion) a year in a technology race with China, Japan and the United States, but said industry would have to pay the bulk.

"We don't have much choice if we are serious with tackling climate change and remaining competitive," European research commissioner Janez Potocnik told reporters on Wednesday.

Robert Solow on future recovery and state of macro

Robert Solow views the technology oriented investments as the driving force of the future recovery:

3 Questions: Robert Solow on the struggle ahead

Q. What is your assessment of the economy now, and where is it going?

A. Forecasting is hard and dangerous, and I don't do it. But it appears that the worst of the recession is over. However, the economy will be getting better slowly. And saying the economy is getting better is not the same thing as saying the economy is doing well. Real GDP fell by about 3.5 percent during the recession. But capacity increased 2.5 percent. We were producing 6 percent less than we knew how to produce. That gap has to narrow to reduce unemployment. If we rely only on the normal self-curing powers of a market economy, it may take until late in 2010 or early 2011 before we reduce that gap. So for that reason we should not rule out further stimulus in the next six to nine months. It's not easy because we have this enormous deficit. But we should recognize that even if the economy improves on its own, it won't do very much.

I had hoped that President Obama at the beginning of his term, while his popularity was at its highest, would have taken a very strong line. I don't think he could have asked for $1.4 trillion in stimulus, but he could have had a slightly bigger and better package, had he bullied a little bit more. If Obama or [David] Axelrod were to reply, "Boy, are you naïve," about the politics, I don't think I could have answered that. I'm just saying what I think God would have done if God were making these decisions. Congress falls well short of God.

Q. Your research made clear how much technology can contribute to economic growth. To what extent might we see technology driving growth now?

A. I actually think the situation of the economy calls for a surge in technologically oriented investment. We have to expect consumer spending to be weak in our economy, not just for six months, but for the next few years. It will not be as strong a driving force as it has been the past several years. Something has to take its place. Government spending can't, since government will have a hard time financing the inevitable deficits and is not in a position to aggressively increase its deficit spending. 

That leaves two sources of expenditure to replace the pullback of consumers. One of those is net exports. That's a long story. The other is business investment. We need business investment to support the economy. We have every reason to want to divert our resources toward secure and renewable sources of energy, new materials and environmental improvement. It's our job, a place like MIT, to produce those new technologies, then it's the job of private industry to grab them, but I also think it's the job of the federal government to shift incentives, from incentives to consume more to incentives to invest more. Obama ran on this kind of platform, and if he can put some money behind that fundamentally correct view, he might generate something. It's going to take more than that to replace 5 percent of GDP, but that would be a neat place to start. 

Q. In 2005 you wrote that you were "disaffected" by the "assumptions and methods" of macroeconomics. There has been a lot of debate about this subject in the last month. What is your assessment of the state of macroeconomics now?

A. The disaffection I expressed is still my assessment. The beast [the economic crisis] expressed the same disaffection in 2007 and 2008, and the currently fashionable way of doing macroeconomics in the profession literally had nothing to offer in response. The problem as I have thought about it is that currently fashionable macroeconomics likes to formulate things in a way that inevitably endows the economy with more coherence and purpose than we have any right to assume. I certainly hope this is obvious enough to the younger people in the profession, the graduate students and even junior faculty. I expect there will be a revival of doing macroeconomics that does not push that kind of coherence on aggregate economic behavior. Which is not to say that some individuals don't behave in a coherent way, but the system does not translate that behavior into something like a super-individual.

Yuliya Timoshenko lures foreign investors

The prime minister of Ukraine thinks that the economy of Ukraine is too monopolized and invites foreign investors to demonopolize it (link in Russian).
However, the talk is cheap. Foreign investors are really keen to see some actions. My intuition tells me that Tymoshenko will be the next president and she will be in a unique position to preside over a double digit economic growth and surge of investments. I expect it not because I believe that Tymoshenko  knows some magic tricks to revive the economic activity. Simply, the current situation is so bad that there is only way up.

Recession probabilities

Jeremy Piger computes recession probabilities for US in real time:

recession probabilities for the United States obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales.  For additional details, including an analysis of the performance of this model for dating business cycles in real time, see:

 Chauvet, M. and J. Piger, “A Comparison of the Real-Time Performance of Business Cycle Dating Methods,” Journal of Business and Economic Statistics, 2008, 26, 42-49.