Economic growth of Ukrainian regions and determinants of financial resilience: Modeling the causal nexus
-
DOIhttp://dx.doi.org/10.21511/ppm.21(4).2023.31
-
Article InfoVolume 21 2023, Issue #4, pp. 398-414
- 313 Views
-
119 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
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”).
- Keywords
-
JEL Classification (Paper profile tab)О18, R12, F36
-
References53
-
Tables6
-
Figures0
-
- 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
-
- Abdelmoneim, Z., & Yasser, M. (2023). The impact of bank performance and economic growth on bank profitability: CAMEL model application in middle-income countries. Banks and Bank Systems, 18(3), 205-220.
- Aghion, Ph., & Howitt, P. (2009). The economics of growth. The MIT Press.
- Attor, C., Jibril, A.B., & Chovancová, M. (2022). Does brand personality mediate the link between social media usage and customer buying decisions on telecommunication’s products and services? Evidence from Ghana. Innovative Marketing, 18(3), 84-98.
- Bushashe, M.A., & Bayiley, Y.T. (2023). The effect of fiscal decentralization on economic growth in sub-national governments of Ethiopia: A two-step system general methods of moments (GMM) approach. Public and Municipal Finance, 12(2), 32-42.
- Cornwall, J. L. (2023, October 27). Economic growth. Encyclopaedia Britannica.
- Falk, M. (2007). R&D spending in the high-tech sector and economic growth. Research in Economics, 61(3), 140-147.
- Farhat, C. (2023). Determinants of banking sector development in developing and emerging economies: Unveiling the role of economic growth, trade openness, and financial liberalization. Banks and Bank Systems, 18(3), 177-191.
- Francke, P., Mukherji, J., Bhagoo-Ramrattan, V., & MacDonald, S. (2023, September 21). What is holding back the region’s economic growth? Latin America Advisor.
- Fuente-Mella, de la H., Vallina-Hernandez, A. M., & Fuentes-Solís, R. (2020). Stochastic analysis of the economic growth of OECD countries. Economic Research-Ekonomska Istraživanja, 33(1), 2189-2202.
- Galor, O., & Moav, O. (2002). Natural selection and the origin of economic growth. Quarterly Journal of Economics, 117(4), 1133-1191.
- Galor, O., & Weil, D. N. (2000). Population, technology, and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review, 90(4), 806-828.
- Gascon, C. S., & Walstrum, T. (2023, August 1). Understanding Patterns in U.S. Regional Economic Growth. Federal Reserve Bank of St. Louis.
- Goel, R. J., Payne, J. E., & Ram, R. (2008). R&D expenditures and U.S. economic growth: A disaggregated approach. Journal of Policy Modeling, 30(2), 237-250.
- Ilyash, O., Smoliar, L., Lupak, R., Duliaba, N., Dzhadan, I., Kohut, M., & Radov, D. (2021). Multidimensional analysis and forecasting the relationship between indicators of industrial-technological development and the level of economic security. Eastern-European Journal of Enterprise Technologies, 5(13(113)), 14-25.
- Jones, C. I. (2016). Chapter 1 – The Facts of Economic Growth. In J. B. Taylor & H. Uhlig (Eds.), Handbook of Macroeconomics (pp. 3-69). Elsevier.
- Kaneva, T., Karpenko, M., Nasibova, O., Tabenska, J., & Tomniuk, T. (2023). Fiscal decentralization influence on public services efficiency and economic growth. Financial and Credit Activity Problems of Theory and Practice, 5(52), 68-78.
- Khan, U., & Khan, A.M. (2023). An analysis of the effects of oil and non-oil export shocks on the Saudi economy. Investment Management and Financial Innovations, 20(1), 127-137.
- Khayati, A., & Terzi, C. (2023). The effects of the informal economy on the relationship between financial development and economic growth. Investment Management and Financial Innovations, 20(3), 321-331.
- Krajcsik, Z. (2015). A review of the economic growth and development theories (Working Papers 13). Faculty of Economics, University of Miskolc.
- Lichtenberg, F. R. (1993). R&D investment and international productivity differences (NBER Working Papers 4161). National Bureau of Economic Research, Inc.
- Lupak, R., Boiko, R., Kunytska-Iliash, M., & Vasyltsiv, T. (2021). State management of import dependency and state’s economic security ensuring: New analysis to evaluating and strategizing. Accounting, 7(4), 855-864.
- Madsen, J., & Strulik, H. (2023). Testing unified growth theory: Technological progress and the child quantity-quality tradeoff. Quantitative Economics, 14(1), 235-275.
- Makarenko, I., Plastun, A., Petrushenko, Y., Vorontsova, A., & Alwasiak, S. (2021). SDG 4 and SDG 8 in the knowledge economy: A meta-analysis in the context of post-COVID-19 recovery. Knowledge and Performance Management, 5(1), 50-67.
- Melnyk, L., Matsenko, O., Kubatko, O., Korneyev, M., & Tulyakov, O. (2022). Additive economy and new horizons of innovative business development. Problems and Perspectives in Management, 20(2), 175-185.
- Mewes, L., & Broekel, T. (2022). Technological complexity and economic growth of regions. Research Policy, 51(8), 104156.
- Nayak, S., & Sahoo, D. (2022). Regional economic growth in India: Convergence or divergence? Competitiveness Review, 32(1), 155-178.
- Okoyeuzu, C. R., & Ukpere, W. I. (2022). Dynamics of biodiversity loss and financial system stability nexus in developing countries. Environmental Economics, 13(1), 79-88.
- Panigrahi, S. (2023). Are cryptocurrencies a threat to financial stability and economic growth of India? Evidence from the cointegration approach. Investment Management and Financial Innovations, 20(2), 307-320.
- Park, W. G. (1995). International spillovers of R&D investment and OECD economic growth. Economic Inquiry, 33(4), 571-591.
- Patrinos, H. A. (1994). Notes on education and economic growth: Theory and evidence (English) (Human resources development and operations policy working paper no. HRO 39). Washington: World Bank Group.
- Piętak, Ł. (2014). Review of theories and models of economic growth. Comparative Economic Research. Central and Eastern Europe, 17(1), 45-60.
- Polyakov, M., Khanin, I., Shevchenko, G., Bilozubenko, V., & Korneyev, M. (2023). Determining the key factors of the innovation gap between EU countries. Problems and Perspectives in Management, 21(3), 316-329.
- Renelt, D. (1991). Economic growth: A review of the theoretical and empirical literature (Policy Research Working Paper Series 678). The World Bank.
- Romer, P. M. (1990). Endogenous technological change. The Journal of Political Economy, 98(5), S71-S102.
- Rushchyshyn, N., Mulska, O., Nikolchuk, Yu., Rushchyshyn, M., & Vasyltsiv, T. (2021). The impact of banking sector development on economic growth: Comparative analysis of Ukraine and some EU countries. Investment Management and Financial Innovations, 18(2), 193-208.
- Sala-i-Martin, E. (2001). La apertura y la flexibilidad son ingredients importantes del crecimiento económico [Openness and flexibility are important ingredients important ingredients of economic growth]. FMI Boletin. Fondo Monetario Internacional, 30(16), 267-269. (In Spanish).
- Sayef, B. (2021). Do researchers affect economic growth? (MPRA Paper No. 108788). Munich Personal RePEc Archive.
- Sconosciuto, L. (2023, September 27). Economic growth in eastern EBRD regions outpacing that of emerging Europe. European Bank for Reconstruction and Development.
- Shkolnyk, I., Kozmenko, S., Kozmenko, O., Orlov, V., & Shukairi, F. (2021). Modeling of the financial system’s stability on the example of Ukraine. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(2), 377-411.
- Solow, R. M. (1957). Technical change and the aggregate production function. The Review of Economics and Statistics, 39(3), 312-320.
- Spiezia, V., & Weiler, S. (2007). Understanding regional growth. Review of Regional Studies, 37(3), 344-366.
- Storonyanska, I., Melnyk, M., Benovska, L., Sytnyk, N., & Zakhidna, O. (2021). Economic activity vs generation of local budgets’ revenues: Regional disparities in COVID-19 instability. Public and Municipal Finance, 10(1), 94-105.
- Tagiyeva, N., Babashirinova, E., Agabekova, G., Damirov, Y., & Ismayilova, G. (2023). Interdependence of the banking system development and the economic growth in the context of digitalization: Case study of Azerbaijan and its key trading partners. Banks and Bank Systems, 18(3), 147-163.
- Ulku, H. (2004). R&D, innovation, and economic growth: An empirical analysis (IMF Working Paper WP/04/185). International Monetary Fund.
- Vasyltsiv, T., Mulska, O., Hrabynska, I., Ivaniuk, U., & Shopska, Y. (2023). Financial and economic security of agricultural business: specifics, analysis methodology, and measures of stabilization. Agricultural and Resource Economics: International Scientific E-Journal, 9(2), 88-110.
- Vdovyn, M. L., Danyliuk, L. H., Lelyk, L. I., Berezyak, I. M., & Melnyk, O. M. (2015). Models and methods of assessing economic risks in various functional spheres of business (248 p.). Lviv.
- Voznyak, H., Kaplenko, H., Koval, V., Druhova, V., & Mulska, O. (2023). Financial self-sufficiency of Ukrainian territorial communities and local economic development: Modeling the causal relationship. Public and Municipal Finance, 12(2), 17-31.
- Voznyak, H., Mulska, O., Kaplenko, H., Sorokovyi, D., & Patytska, K. (2023). Financial determinants of ensuring the resilience of Ukrainian regions. Investment Management and Financial Innovations, 20(4), 83-98.
- Voznyak, H., Mulska, O., Patytska, Kh., & Radelytskyy, Y. (2022). Financial imbalances and their impact on the development of Ukrainian regions in economic instability. Financial and Credit Activity Problems of Theory and Practice, 1(42), 240-249.
- Wang, C., Zhang, X., Ghadimi, P., Liu, Q., Lim, M. K., & Stanley, H. E. (2019). The impact of regional financial development on economic growth in Beijing-Tianjin-Hebei region: A spatial econometric analysis. Physica A: Statistical Mechanics and its Applications, 521, 635-648.
- Wang, E. C. (2007). R&D efficiency and economic performance: A cross country analysis using the stochastic frontier approach. Journal of Policy Modelling, 29(2), 345-360.
- Yuli, S. B. C., & Rofik, M. (2023). Implications of Sharia-compliant financing trade-offs on unemployment and growth. Public and Municipal Finance, 12(1), 100-109.
- Ziky, M., & El-Abdellaoui, L. (2023). Can sustainable development goals go hand in hand with economic growth? Evidence from Morocco. Problems and Perspectives in Management, 21(3), 656-670.