Fiscal decentralization and macroeconomic stability: the experience of Ukraine’s economy

Leonid Melnyk,Iryna Dehtyarova,Oleksii Lyulyov,Tetyana Pimonenko,Lina Sineviciene

doi:10.21511/ppm.16(1).2018.10

Leonid Melnyk, Iryna Dehtyarova + Show 3 more

Open Access

https://doi.org/10.21511/ppm.16(1).2018.10

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Abstract

The main objective of this research is to study the role and impact of fiscal decentralization on the macroeconomic stability of the country. The paper analyzes and systematizes approaches to the definition of ‘macroeconomic stability’ concept. The key factors that impact macroeconomic stability are identified. In the framework of this research, the authors identify fiscal decentralization as one of the factors affecting macroeconomic stability. To determine the strength and statistical significance of the above mentioned relationship, the authors suggest presenting macroeconomic stability as a functional dependency between macroeconomic stability and the level of fiscal decentralization, which is described by the following variables: the growth rate of money supply, investment and openness of the economy, fiscal decentralization. In this case, it is suggested to determine the level of fiscal decentralization in three directions: expenditure decentralization, revenue decentralization and expenditure decentralization simultaneously.

Highlights

European integration processes, functioning in a changing environment, uncertainty and inconsistency of government decisions cause socio-ecological and economic conflicts and contradictions in all spheres of economic activity
The current study analyzes the relationship between fiscal decentralization and macroeconomic stability in Ukraine for the period 2000–2015
The results of the empirical analysis of the constructed regression equations, which are based on the study of independent random variables impact: the growth rate of money supply, investment and openness of the economy, fiscal decentralization and dependent macroeconomic stability variable, showed that the accuracy of the findings increases, when we use the indicator of macroeconomic stability of the country as an integral indicator, which characterizes the main goals of macroeconomic policy of the state: high rates of production development, full employment, slowdown in inflation, external payments balance, stable exchange rate of the national currency, etc

Summary

Introduction

European integration processes, functioning in a changing environment, uncertainty and inconsistency of government decisions cause socio-ecological and economic conflicts and contradictions in all spheres of economic activity. This leads to imbalances and instability in the national economy. It should be noted that one of the priority goals of Sustainable Development Strategy “Ukraine – 2020” is to ensure national macroeconomic stability, which in turn will form the basis for further sustainable growth of the country. The Strategy aims to achieve these goals by implementing a number of reforms, including decentralization reforms. Decentralization policy is aimed at moving away from the centralized governance model, ensuring effective local self-government and building an effective regional government system in Ukraine, implementation of The European Charter of Local Self-Government, the principles of subsidiarity, universal and financial self-sufficiency of local authorities (Strategy, 2015)

Objectives

Conclusion