Published: 19.06.2024

Today at the award ceremony held at Latvijas Banka, prizes were awarded to the winners of the 22nd Competition of Student Scientific Research Papers.

Konkursa laureati

The first prize 

Igors Tatarinovs, Reinis Fals (SSE Riga)

Phillips Curve in the Eurozone: Forecasting Inflation and the Output Gap Using Explainable Neural Networks

This paper introduces the use of Hemisphere Neural Networks for forecasting the inflation and output gap in the eurozone within the macroeconomic model of Phillips Curve. The use of this method is challenging due to the complexity of data structure of this region. The study implements advanced data preprocessing, machine learning techniques and optimisation algorithms and scales the Hemisphere Neural Networks for forecasting output gap and inflation components, augmenting the research with comparison with conventional models.

Hemisphere Neural Networks model is an innovative method, firstly introduced by P. G. Coulombe in 2022 in a study for the US. This paper adapts the method for the eurozone.

Authors show that all tested HNN models surpass the benchmark linear regression and univariate ARIMA models in predictive accuracy for inflation forecasting and help with the interpretation of results. The results for predicting output gap showed models' ability to track general economic trends.

The second prize 

Luīze Mestere, Anastasija Sergeļa (SSE Riga) 

Navigating Climate Risks: Assessing Cross-Border Spillovers of African Climate Shocks on European Union through International Trade. Stockholm School of Economics in Riga

The authors estimate the spillover effects of climate shocks in Africa on the European Union countries, by examining changes in trade across different product categories. Natural disasters serve as the treatment variable and the data are from 1988. The occurrence of significant floods, droughts, and storms has been on the rise. The authors use the difference-in-difference approach and include 6 lags. In terms of specific extra-EU import groups, foodstuffs and stone and glass product imports are significantly negatively affected after a disaster; however, the location of the trade partner has a greater impact than the specific product category being traded. The countries of Southern Europe rely most heavily on Africa's trade. For Africa, the European Union is the largest trade partner. 


Abigeila Keirāne, Jekaterina Šagejeva (SSE Riga)

Latvian Labour Market under the Microscope: Minimum Wage Impacts on Income Disparities Across Different Occupations 

Authors analyse the impact of minimum wage increases on wage disparities in employment across occupations in Latvia by using data from the State Revenue Service from 2020 to 2023 and applying the differences-in-differences methodology. Findings indicate that while the 2021 minimum wage increase modestly improved wages for lower-paid occupations, the 2023 increase had a more significant positive effect on reducing wage disparities, with no negative effect on employment observed. The study touches on the role of minimum wages in addressing the issue of shadow economy. Authors conclude that progressive wage policies are viable tools for reducing income inequality and emphasize the need for broader economic and social reforms. 

The third prize

Polīna Karaseva, Ilze Katrīna Lumpova (SSE Riga) 

Removing China from the EU's equation: The replacement of imports during Covid-19 

Using a creative approach of investigating the European Union's capacity to diversify its import sources away from China during the Covid-19 pandemic, the authors examine EU countries' ability to shift away from China in case of potential de-risking policies. The authors develop a Replacement Index, which acts as a proxy for determining the vulnerability of a country in case of de-risking. The authors find that the EU increased imports from alternative partners when China enforced workplace closures due to the pandemic. The effect of import substitution was more pronounced for EU countries with pre-existing reliance on Chinese homogenous and capital goods, while it was more challenging to replace heterogeneous and final consumer products. The authors conclude that many EU countries will find it difficult to shift away from China in case of de-risking – only two countries are classified as low-risk based on product differentiation; and three – based on product end-use. The authors argue that the results of their work contribute to the discourse on the EU's risks associated with an over-reliance on a single external supplier, suggesting that diversification can indeed mitigate such risks but may be problematic for some product categories. 


Ieva Vitaitytė (Vilnius University Business School)

Determination of Indicators Influencing Investment Yields in the Baltic Commercial Real Estate Market

The author aims to determine what factors influence commercial real estate investment yields in the Baltic States by considering factors that have significantly affected commercial real estate yields globally and creating yield models that are relevant to the Baltic market. The author finds that in retail segment prime yield has been determined by GDP, unemployment, Covid-presence, and investment volumes. The retail model has a positive constant term, signalling heightened investment risk, ceteris paribus. Following that, the author recommends separating traditional retail from multifunctional projects. The author also finds that inflation, FDI, GDP, rents, investment volumes, and certified stock impact the yields in the industrial segment. Moreover, the author concludes that the sustainability feature adds sales premium in the office and industrial segments. Based on the short-term modelling and available forecasts, the author also concludes that the Baltic office and industrial yields are expected to decrease, while the retail yields should see an upward trend.


Oliver Strastin, Rasmus Strastin (SSE Riga)

European Emissions Trading Scheme (EU ETS) impact on firm economic performance 

In their study, the authors analyse how the rollout of Phase 3 of the European Union Emissions Trading System (EU ETS)affects the short-term economic performance of manufacturing firms in the EU. The work is very strong both in terms of data and methodology: they merge two datasets, the European Union Transaction Log (EUTL) and firm financial statements from ORBIS and apply propensity score matching (PSM) and Difference-in-Differences (DiD) methodologies. The findings reveal no significant impact of the EU ETS Phase 3 on the economic performance indicators of the treated firms, suggesting that these firms were able to adapt effectively to the regulatory framework without detriment to their economic health. At the same time, some data limitations do not allow to claim with confidence that this holds for all types of firms. Overall, the study contributes to the literature on the efficacy and economic consequences of cap-and-trade systems, indicating the potential for environmental regulations to achieve policy objectives without negatively affecting firm performance. 


Honourable mentions

Markuss Baltais, Evita Sondore (SSE Riga)

Economic impact potential of real-world asset tokenisation

Authors devote their study to quantifying the gross benefits of tokenisation of real-world assets (RWA). Tokenisation of real-world assets can fundamentally transform trading, custody, and settlement, removing many inefficiencies from existing markets. This is a novel field of study, and the authors appreciate that there is no existing methodology which can be relied upon therefore they have developed it from scratch. The estimated total potential economic gain of RWA tokenisation is around $ 2.4 trillion per annum globally from increased efficiencies. The largest gains in both proportional and absolute terms are in foreign exchange, driven by the existing inefficiencies, the size of the asset class, and the high turnover. Scaled back to the current trajectories for tokenisation, realistic annual gross gains of RWA tokenisation lie between $ 31 billion and $ 130 billion by 2030. Authors acknowledge in their work that this study focuses only on gross gains. However, it must be emphasised that no policy recommendations and calls to facilitating its rollout must be made before conducting a comprehensive assessment of related risks.


Ilze Verpakovska (University of Latvia)

Factors Affecting the Risk of Long-term Unemployment in the Latgale Region

The author studies the issue of long-term unemployment, focusing on the Latgale region and exploring what factors contribute to its high level in this region. The author finds that the risk of long-term unemployment in the Latgale region is higher for unemployed people who are male, have no spouse or cohabiting partner, have a nationality other than Latvian, have low or medium level of education, are in the age group of 50–64 and have performed simple duties in the last job. It is also concluded that these factors affect the risk of long-term unemployment not only in Latgale, but also in other regions. Moreover, the author finds that only the Riga and Pieriga regions have a statistically significantly lower risk of long-term unemployment than the Latgale region; yet the risk of overall unemployment in all other regions is significantly lower than in the Latgale region.


Matīss Jānis Rekerts, Sirle Saareväli (SSE Riga)

Private Equity Activity in the Baltics: Impacts on Portfolio Firm Financial Performance

The study investigates the effects of private equity investment on firm financial performance. The data was compiled from different sources, but they were somewhat limited. Private equity involvement leads to heightened total asset growth over the three years of post-investment compared to counterparts, but to less short-term profitability. Larger private equity investment may lead to a larger decrease in short-term profitability. Immediately after the investment is made, private equity firms seem to focus on acquiring the assets and talent necessary for long-term success, often through mergers and acquisitions. Authors do not find evidence that private equity takeovers cause layoffs and increase unemployment.

About the contest

Mārtiņš Kazāks, Governor of Latvijas Banka, extended a warm welcome to the participants of the event. The authors of the papers winning awards received money prizes.

In the academic year 2023/2024, Latvijas Banka organised its annual 22nd Competition of Student Scientific Research Papers, inviting the participation of students from Latvia, Lithuania and Estonia who at the time of the competition were registered as students of bachelor or master programmes of higher educational institutions accredited in the Baltic States as well as inhabitants of the Baltic States studying abroad.

33 papers were submitted to the competition this year from 6 higher educational institutions of Latvia and foreign countries. More detailed information on the competition is available at:


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