Economic growth of Ukrainian regions and determinants of financial resilience: Modeling the causal nexus

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Stable economic progress and upward dynamics of economic growth in the regions depend on their level of security and ability to withstand adverse macroeconomic and other shocks, as well as the state of affairs in which risks cannot be transformed into threats and dangers. The study aims to assess the causal nexus and the level of sensitivity of regional economic growth components to changes in financial resilience determinants. The research methods include systemic and structural analyses (building an information and analytical model for studying financial resilience), Granger test (identifying causal relationships between the variables under study), risk theory (studying the nature of fluctuations), and spatial and temporal approach. Data from the regions (oblasts) of Ukraine between 2015 and 2021 form the informational and analytical basis of the study. The paper reveals that the targeted use of transfers for socio-economic progress, increasing investment capacity, and bolstering financial and budgetary autonomy through increasing local budget revenues are the dominant financial determinants of regional economic growth. The results show that the most dominant causal nexus exists between (1) budgetary efficiency, interest rates on consumer/mortgage loans, and SME development, (2) the volume of loans/deposits and labor market efficiency and SME development, and (3) innovation development and foreign economic cooperation. Intensification of investment activity is crucial for ensuring real changes in the economic structure of all regions, particularly outsiders, accelerating transformation processes, mitigating regional economic divergence, and increasing competitiveness.

Acknowledgments
The study was conducted within the framework of the “Financial Determinants of Ensuring Economic Growth of Regions and Territorial Communities based on Behavioral Economics” project (№ 2020.02/0215) funded by the National Research Foundation of Ukraine (Competition “Support for Research of Leading and Young Scientists”).

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    • Table 1. Decomposition of regional financial resilience: An informational and analytical framework
    • Table 2. Interpretation of the indicator of regional economic growth sensitivity to changes in the determinants of financial resilience (β value)
    • Table 3. Empirical indicators of economic growth in the regions of Ukraine: Compositional approach, 2015–2021, %
    • Table 4. Groups of Ukrainian regions by the criterion of economic growth, 2015–2021
    • Table A1. Causal relationship between the financial resilience determinants and economic growth of Ukrainian regions, 2015–2021: Granger causality test
    • Table B1. A measure of sensitivity of economic growth components to changes in the financial resilience determinants: β value by groups of Ukrainian regions, 2021
    • Conceptualization
      Olha Mulska, Khrystyna Patytska, Halyna Voznyak
    • Data curation
      Olha Mulska, Iryna Storonyanska, Khrystyna Patytska, Halyna Voznyak
    • Formal Analysis
      Olha Mulska, Khrystyna Patytska, Ulana Ivaniuk, Halyna Voznyak
    • Investigation
      Olha Mulska, Iryna Storonyanska, Khrystyna Patytska, Ulana Ivaniuk, Halyna Voznyak
    • Methodology
      Olha Mulska, Halyna Voznyak
    • Visualization
      Olha Mulska, Ulana Ivaniuk
    • Writing – original draft
      Olha Mulska, Iryna Storonyanska, Khrystyna Patytska, Ulana Ivaniuk, Halyna Voznyak
    • Writing – review & editing
      Olha Mulska, Iryna Storonyanska, Khrystyna Patytska, Ulana Ivaniuk, Halyna Voznyak
    • Funding acquisition
      Iryna Storonyanska, Ulana Ivaniuk, Halyna Voznyak
    • Resources
      Iryna Storonyanska, Khrystyna Patytska, Ulana Ivaniuk, Halyna Voznyak
    • Supervision
      Iryna Storonyanska, Khrystyna Patytska, Halyna Voznyak
    • Validation
      Iryna Storonyanska, Ulana Ivaniuk, Halyna Voznyak