The paper both compares productivity of Russian firms that have foreign direct investments with productivity of fully domestically owned firms and analyses spillovers from foreign-owned firms to domestic firms. Foreign firms are found to be more productive than domestic ones, but productivity of the former is negatively affected by slow progress of reforms in the regions where they operate. It is also found that there are positive spillovers from foreign-owned firms to domestic firms in the same industry, but negative effects on domestic firms that are vertically related to foreign-owned firms. The stock of human capital in regions where foreign firms operate is one of the factors which help domestic firms to benefit from the entry of foreign firms.JEL classifications: F2, O3.

The paper both compares productivity of Russian firms that have foreign direct investments with productivity of fully domestically owned firms and analyses spillovers from foreign-owned firms to domestic firms. Foreign firms are found to be more productive than domestic ones, but productivity of the former is negatively affected by slow progress of reforms in the regions where they operate. It is also found that there are positive spillovers from foreign-owned firms to domestic firms in the same industry, but negative effects on domestic firms that are vertically related to foreign-owned firms. The stock of human capital in regions where foreign firms operate is one of the factors which help domestic firms to benefit from the entry of foreign firms. JEL classifications: F2, O3.

Policymakers around the world introduce special policies aimed at attracting foreign direct investments (FDI). They motivate their decision by the spillover effect, which FDI have on domestic companies. Empirical literature so far has failed to find any robust evidence of this effect. In this paper, we make an attempt to explain this finding. Using data from Poland, Romania, Russia, and Ukraine, we demonstrate that not all FDI have positive spillover effects on domestic firms. Spillovers are positive only in the case of export-oriented FDI and, more generally, are driven by the more productive foreign companies. Moreover, effects of FDI on domestic firms are not limited to knowledge spillovers: exposure to foreign technologies alters the form of their production functions. Specifically, foreign entry is associated with higher capital intensity and lower labor intensity of domestic firms in relatively more developed countries, such as Poland, while the opposite is the case in the less developed countries, such as Russia. These results are subject to threshold effects: benefits are more likely to materialize once a relatively large stock of foreign capital is accumulated. Absorptive capacity of domestic firms plays a crucial role in reaping the benefits of FDI. Both, knowledge spillovers and production function changes, occur predominantly in the more educated and the less corrupt regions.

The IMF published in April 2018 the book Advancing the Frontiers of Monetary Policy written by its experts and edited by Tobias Adrian, Douglas Laxton, and Maurice Obstfeld, providing a rare chance to learn the views of people who could be called the architects of inflation targeting. The book deals with practical issues of using this monetary policy regime which has quickly gained wide acceptance and is currently employed by central banks of most countries in the world. Some issues of inflation targeting policy further improvements brought up in the book are also relevant to Russia.

An international team of economists examines the factors influencing the