Financial factors for restraining the underground economy: case of Ukraine


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The underground economy in Ukraine is one of the major obstacles on the way to accelerative economic growth and European integration processes. The high level of undergrounding leads to the weakening of the regulatory impact of fiscal and monetary policy instruments on the development of the national economy. Against this background, the financial and economic processes undergrounding is a major challenge and a top priority problem for Ukraine today. The article aims to determine the financial levers to restrict economy’s undergrounding and justify measures to reduce the risk of undergrounding by certain monetary and budgetary parameters regulation. The research methodological basis is the methods of scientific abstraction, induction, deduction, generalization, logical method. For analytical calculations there are used coefficient analysis, mathematical methods, including correlation analysis, comparison and grouping methods, synthesis, tabular and graphical methods. The Ukraine underground economy is selected as the study object example with this methods’ system using. Therefore the study, based on the calculation of the Fechner correlation coefficient, has revealed the presence, closeness and direction of the relationship between monetary indicators (values of changes in monetary aggregates M0, M2 and M3, CPI, changes in the official hryvnia rate to the US dollar), budgetary parameters (changes in intergovernmental transfers, changes in external public debt, taking into account inflation) and the underground economy level. Thus, according to the results of the analysis, the main directions of the relevant regulatory bodies influence on the national economy unshadowing have been determined.

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    • Figure 1. Integral indicator of the underground economy level in Ukraine (in % of official GDP) and the rate of real GDP growth / decline (in % to the previous year)
    • Figure 2. Dynamics of the underground economy level calculated by individual methods, % of official GDP, 2010–2018
    • Figure 3. The impact of changes in transfers to local budgets adjusted for inflation on the underground economy level during 2008–2018
    • Figure 4. The impact of inflation-adjusted public external debt on the underground economy level during 2008–2018
    • Figure 5. The impact of changes in the official hryvnia exchange rate to the US dollar on the underground economy level during 2008–2018
    • Figure 6. The relationship between the change in the monetary aggregate M2 and the underground economy level during 2008–2018
    • Figure 7. Relationship between changes in the M2 monetary aggregate and changes in the official hryvnia exchange rate to the US dollar during 2008–2018
    • Table 1. Macroeconomic indicators affecting the informal economy level
    • Table 2. Adapted data on macroeconomic indicators affecting the level of the underground economy
    • Table 3. Signs of deviations from the averages of macroeconomic indicators affecting the underground economy level
    • Conceptualization
      Oleg Pidkhomnyi
    • Formal Analysis
      Oleg Pidkhomnyi
    • Methodology
      Oleg Pidkhomnyi
    • Supervision
      Oleg Pidkhomnyi
    • Visualization
      Oleg Pidkhomnyi
    • Data curation
      Mariya Rubakha
    • Investigation
      Mariya Rubakha
    • Project administration
      Mariya Rubakha
    • Validation
      Mariya Rubakha
    • Writing – original draft
      Mariya Rubakha
    • Writing – review & editing
      Mariya Rubakha