Effects Of Macroeconomic Policies Research Articles

Growing with inequality: a DSGE model with heterogeneous human capital and endogenous economic growth

ABSTRACT We try to explain the simultaneous increases in economic growth and income inequality in China with a heterogeneous endogenous growth-based DSGE model. It is found that: First, our model can simulate the positive correlation between economic growth and income inequality in China. China’s economic development has created better conditions and incentives for the accumulation of human capital of workers with high initial human capital, thus stimulating them to contribute more to economic growth, but this widens the income inequality simultaneously. Second, the change in economic growth and the change in income inequality also exhibit a positive correlation under the influence of various policy shock. Any shock that raises economic growth, such as different types of technology shock and investment shock (after 8 quarters), will correspondingly widen income inequality. Conversely, any shock that reduces economic growth, such as fiscal spending shock, interest rate shock and investment shock (before 8 quarters) will correspondingly reduce income inequality. Third, the government’s preference for workers with high initial human capital in the implementation of macroeconomic policies determines the positive correlation between the change in economic growth and in income inequality. Workers with high initial human capital are central to the effectiveness of macroeconomic policies.

Habits, Rule-of-thumb Consumption and Useful Public Consumption in Sub-Sahara Africa: Theory and New Evidence

Abstract Aggregate consumption behaviour of private agents is central in the mediation and effectiveness of macroeconomic policies, and it is therefore of first-order importance. In this paper, I derive and estimate a structural consumption model for a panel of 34 sub-Sahara African (SSA) countries from 1960 to 2018 to provide new evidence on three important aggregate consumption behaviours—habit formation, rule-of-thumb consumption behaviour and the complementarity of government consumption in private utility. The following key findings emerge. (1) There is evidence of habit formation in aggregate consumption. (2) Approximately 38% of consumers follow the rule-of-thumb of consuming their current income suggesting a deviation from the permanent income hypothesis in SSA. However, this rule-of-thumb consumption behaviour in the data is driven by the period before the mobile banking/money era that emerged post-2000s. (3) Public consumption complements private consumption in an Edgeworth–Pareto sense. This suggests that expansionary fiscal policies involving increases in government consumption can be an effective vehicle in stimulating aggregate demand via a positive marginal utility channel. These findings are robust to demographic factors and stable under different model assumptions.

Foreign Aid, Domestic Savings and Investment: Implications for Nigeria

The study examined the implications of foreign aid on domestic savings and investments in Nigeria. The scope of the study covered a period from 1987 to 2019. The hypotheses were tested using the E-view statistical software adopting the Ordinary Least Square (OLS) method on the regression models adopted. The signs and significance of the regression coefficients and the probability were relied upon in explaining the nature and influence of the independent variable on the dependent variable as to determine both magnitude and direction of impact. In the analysis we relied on the following statistical tools; Correlation Coefficient (R), Coefficient of Determination (R2), probability and the student (t) test. The hypotheses were tested at 0.05 (5%) level of significance. Results of the findings revealed that: Foreign aid had positive and significant impact on Gross Domestic Product (GDP), Foreign aid had positive and significant impact on domestic savings and Foreign aid had positive and significant impact on domestic investment in Nigeria within the period under review. The study concluded that, the contribution of foreign aid to growth can be magnified if Nigeria focuses on implementing effective macroeconomic policies. It is therefore recommended that, policies that strengthen the state and its institutions such as institutional development, human capital development, investment targeting, diversification of the Nigerian economy, a stable and trust worthy political environment, monitoring and evaluation on the use of aid funds and other aid-friendly domestic policies should be promoted

The Effect of Fragility on Labour Market Employment and Wages in the Philippines

Fragility refers to weak regional institutions that fail to respond to specific risks and needs of the community. The article aims to measure fragility and its effects on labour market employment and wages. The observed non-work-related migration is used to derive annual fragility indices for regions that are then incorporated into standard labour market employment and Mincer wage equations. The estimates indicate higher employment but lower wages in fragile regions. Under weak institutions, workers will decide to engage in alternative low-paying work arrangements in anticipation of conflict, environmental or income shocks. Furthermore, biases on effects of macroeconomic policies can be noted in regression estimates that do not control for fragility.

TVAR-MODELS OF FINANCIAL SECURITY INDICATORS FOR MACROECONOMIC SYSTEMS: IMPACT ASSESSMENT OF ENERGY “SHOCK”

The break of connections in economic systems results in imbalance and a theoretical possibility of a threat for their development. This raises the issue of finding an effective mechanism for economic security in general and financial security in particular, which are important elements of how macroeconomic components work. The purpose of the study is to develop models that allow assessing the impact of an energy “shock” on financial security indicators, to identify the threshold values of exogenous variables at which the “shock” has a destructive influence on the level of financial security and can lead to the financial system destabilization. The work uses a branched structure of scientific methods which consist of theoretical and empirical research of the financial security for macroeconomic systems. The main results of this work are devoted to the consideration of the problem of how to design effective mechanisms for ensuring financial security under the conditions of exogenous “shocks” of the global economy. It considers the concept of “shock” and gives the examples of the impact of “shocks” on macroeconomic indicators. The work highlights the energy “shock” as dominant for the analysis and formation of an effective macroeconomic stability policy. The information area of research features is substantiated, including BRENT oil price data and indicators of monetary and currency security, such as the rate of inflation and the exchange rate. Emphasis on subsystems of monetary credit and currency security is made due to the importance of these channels of crisis infection in order to ensure financial security. The value of the lag in the model is substantiated with the help of information criteria; evaluation and testing of the quality of the model have been carried out; system stability has been assessed based on the impulse response function, the TVAR model has been developed. The areas of change of the exogenous variable reflecting the statistically significant impact of the energy “shock” on the rate of inflation are analyzed. Thus, the obtained results made it possible to identify the regimes of energy security, which become a channel of infection of the financial sphere and a significant increase in the level of inflation. Practical significance includes the versatility and applicability of the evaluation approach for research due to the ability to use the entire algorithm as a complete ensemble of models. The results of this material can be used in the formation of government financial security policies and reactions to destabilizing external influences.

REGULATION OF THE SOCIO-ECONOMIC ACTIVITY OF EMPLOYMENT PROCESSES IN UKRAINE

The article considers the essence and importance of factors of socio-economic activity that affect the employment processes of the region and the country. An analysis of publications on related issues reflects the study of employment processes. Understanding the systemic nature of the labor market and employment as its integral part of the market system of management is outlined—differentiated indicators of socio-economic activity that affect work in certain forms: regulated, unbalanced. The goals and strategies of the regulation mechanism of employment processes as the influence of socio-economic factors are specified. The objectives of the study are outlined. It is the regulation of employment as a process considered in two ways. The first of them is manifested in support of a regulated form of work by introducing active actions to improve the level of vocational training, skills, and abilities. As for the second direction, it adds the causes of unemployment in essence. Effective macroeconomic policies are considered, ensuring regulatory, social, stabilizing, and distributive functions of economic growth, achieving optimal proportions in the distribution of the working population in intersectoral proportions, the possibility of labor mobility, and migration. Several principles have been developed that determine the impact of socio-economic activity in the region: balance and systematics, balance and structure, indicativeness; long-term orientation, adaptability, flexibility, rationality, efficiency, democracy, and freedom of economic activity of subjects in the labor market; social manifestations of adaptation and psychological support when changing jobs; ensuring the right of every employee to fair working conditions. Recommendations are theoretical and methodological and designed to increase employment in the region and the country.
 An essential component of the employment process should be given to the resource provision of the region, which should include quantitative and qualitative characteristics of the labor potential of the area. Quantitative attributes of labor resources include the working-age population, its gender, the number of employed and unemployed. Qualitative characteristics are manifested in the qualification level of education, conditions of providing the people with the necessary benefits, intersectoral structure of labor resources, moral and spiritual level of the population, creativity, needs for labor mobility, and available incentives and motives for work.

Crisis Effectiveness of Government Business Support in the Conditions of the Coronavirus Pandemic: an Empirical Analysis

Purpose: the main goal is to improve the methodology for assessing the effectiveness of state crisis business support based on the analysis of the experience of foreign countries.Methods: the information base of the study is data from the IMF, the World Bank and the OECD. The study was conducted on the basis of methods of logical and comparative analysis (induction, deduction, comparative studies) using statistical data processing tools. The theoretical basis of the research is the theory of bankruptcy of companies of the scientific school of the Financial University «Crisis Management».Results: the approaches to assessing the effectiveness of macroeconomic policy based on the theory and practice of governments of developed countries have been studied, a methodology for analyzing the crisis component of such a policy has been developed, including the definition of efficiency criteria, and proposals for improving crisis policy in the context of the coronavirus pandemic have been formulated. The effectiveness of using the rehabilitation potential of bankruptcy procedures on the example of some countries to restore the economy in a crisis is proved.Conclusions and Relevance: the crisis caused by the coronavirus pandemic differs from all previous economic crises, including significant amounts of state support for business. At the same time there is no strict correlation between the volumes of such support and losses in the economy. Despite the projected rates of economic growth in the coming years, some crisis factors have been ignored by the states (the high level of debt burden, the existence of zombie companies). The imposed moratorium on bankruptcy has postponed the problem of accumulated debts, which will subsequently negatively affect the pace of economic growth in the world as a whole. Existing studies have not confirmed the effectiveness of this business support measure.Assessment of the effectiveness of state support for crisis business, along with macroeconomic effects, should include crisis, due to the rehabilitation potential of the institution of bankruptcy. Existing scientific studies do not analyze the contribution of the insolvency regime to economic growth. According to the results of the study, the inefficiency of state support for crisis business from the point of view of crisis management has been established.

Обеспечение национальной экономической безопасности: сценарии выхода из коронакризиса

Introduction. The COVID-19 pandemic has become a trigger mechanism for the deployment of a global economic crisis that has engulfed all countries of the world. The aim of the study is to analyze the consequences of the COVID-19 pandemic as a global threat to the world’s largest economies. Theoretical analysis. Within the framework of the basic AD-AS model, variants L, V, N, W were modeled and possible scenarios for overcoming the crisis were considered. Empirical analysis. Anti-crisis measures and the main indicators of the economic security of China, the United States, Germany and Russia are analyzed. Based on international statistics, forecasts have been made to overcome the economic crisis caused by the coronavirus. Conclusion. It is concluded that ensuring national economic security depends on the scenario conditions for economic recovery, on the effectiveness of macroeconomic policy and risk management at the global level.

ЭКОНОМИКА КАЗАХСТАНА: ИТОГИ НЕПРОСТОГО ТРИДЦАТИЛЕТИЯ

The problems of the development of the economy of the Republic of Kazakhstan over the past 30 years are considered. Comparisons are made of the development indicators of the republic with other republics of the former USSR, primarily with the Russian Federation. The socio-economic aspect of the multi-vector policy of the Republic of Kazakhstan, carried out by it since independence, is analyzed. The reasons for the economic success of Kazakhstan in comparison with other states that were previously part of the USSR are determined: the pragmatism of the economic policy of the republic, the rejection of an economically unjustified break in economic ties with the Russian Federation, an effective macroeconomic and investment policy. The successful economic projects implemented in the republic are considered. A comparison is made of some of the main development institutions in Kazakhstan and Russia. Much attention is paid to the development of education and scientific and technical potential. It is proposed to intensify scientific and technical ties in the field of high technologies between the Republic of Kazakhstan and the Russian Federation.

Institutional threshold in the nexus between financial openness and TFP in Africa: A dynamic panel analysis

The challenge of “growth without development” in most developing countries particularly in the African region has brought to fore the discussion of the effects of macroeconomic policies on the key determinants of growth, namely Total Factor Productivity (TFP). This study investigated the threshold or sustainable level of institutional development necessary for financial openness to stimulate TFP growth by employing a Dynamic Panel Threshold Model (DPTM) for the panel of 28 selected African countries from 1996 to 2019. The findings showed that there exists a threshold or sustainable level of institutional development (4.73 out of 10-points scale) which African countries must attain to reap the full benefits of financial openness in terms of TFP growth because the quality of institutions in most African countries are pervasively weak and poorly developed to checkmate excesses, corruptions and political interferences in the financial markets. Therefore, the study recommended that there should be a deliberate attempt by relevant authorities to block all inherent loopholes in the institutional settings of African countries which give room for shady dealings in the financial markets, to ensure institutional environments (political, legal, regulatory, and economic institutions) are healthy enough to absorb the negative influence or the risks associated with financial openness that may hinder growth and development in the long-run by hindering TFP growth. • Interconnectedness of the world economy has moved financial openness to the limelight of academic discourse. • TFP describes the variable that accounts for change in output that does not depend on factor inputs such as labour and capital. • Financial openness is the integration of the financial activities and transactions into global financial markets. • Benefits of financial openness cannot be internalized to improve TFP without good quality institutions. • Threshold or sustainable level of institutional development in Africa. • Dynamic Panel Threshold Model (DPTM) proposed by Seo and Shin (2016) and used by Seo et al. (2019)

Monetary Policy and Stock Market Liquidity in Emerging Market Economies

In the era of globalization, the financial systems of all countries have faced severe challenges and their negative impacts such as overheated economy, high inflation, stock market crash, financial crisis, and other financial collapses. It has raised significant concerns influencing the effects of macroeconomic policies and responses of the financial system of each country all over the world even in normal times and turbulent times in various respects. And stock markets in emerging market economies are no exceptions. Indeed, it is proven by more and more studies that have been implemented to assess stock market liquidity in emerging market economies in different periods and the impacts of certain macroeconomic drivers on monetary policy. This study aimed to systematically review the literature on monetary policy and stock market liquidity measures and how monetary policy affects stock market liquidity. The study summarized the essential findings and approaches in the extant literature. Numerous reputable academic databases were used via a systematic methodology of literature review. Generally, this study sheds light on the crucial macroeconomic role of monetary policy as a potential determinant of stock market liquidity in different timelines. Recommendations and theoretical discussions given by researchers provide an overall review of the relationship between monetary policy and stock market liquidity in emerging market economies.

The Families’ Behavior in Consuming Imported Goods and its Relationship to the Trade Deficit in the Iraqi Economy

The Iraqi families ’behaviors in consuming imported goods have affected the treatment or reduction of the severe imbalance between the trade balance deficit and the government budget deficit. furthermore, these consumer behaviors have become an obstacle to the effectiveness of macroeconomic policies (monetary, financial, and commercial) in treating the problem of depletion of foreign reserves and the ineffectiveness of the interest rate and exchange activating bank credit and the prevailing of current spending over investment. Thus decreasing the tax base and the inflexibility of government revenue sources and commodity dumping, and the continuing impact of these economic imbalances (which were created by the accumulation of ineffective economic policies and programs) has led to the inefficiency of treatment and targeted and measures to find solutions to these imbalances and then Activating the local economy. That requires understanding household behaviors in consuming imported goods and identifying the factors affecting these consumer behaviors, which required a survey of (1000) families that included several realistic and hypothetical indicators to determine the general trend and understand these behaviors and then come out with conclusions that contribute to treating the imbalances Economical at its root.

Globalization of capital, erosion of economic policy sovereignty, and the lessons from John Maynard Keynes

This article observes that current macroeconomic policy modeling, centered on domestic agents or agencies, fails to recognize the role that global investors play in determining the space for effective domestic macroeconomic policies, and argues that these actors must be brought to the center of macro analysis if one wants to understand how policies work in the global financial context. The article describes the key features of global investors, discusses their power to determine the prices at which public-sector liabilities (money and debt) trade in the international markets, and considers how this power affects the effectiveness of macroeconomic policies by national governments. As a result, no government is truly sovereign in a globalized world, and every government is subject to an intertemporal budget constraint (IBC), although, of course, not all governments are born equal and not all IBCs are equally binding: government IBCs are elastic, endogenous to global investor decisions, and yet ineluctable. The article concludes that choosing the correct country policy stance in today's financial global context would benefit from revisiting some of the key policy lessons that John Maynard Keynes left with us, considering his deep knowledge of global financial markets and how they affect country economies.

Negative interest rate policy (NIRP): history and arguments for and against

The paper deals with the history and the main pro and con arguments of an unconventional monetary policy used by a central bank or another monetary authority that falls out of line with traditional measures. Until recently, the introduction of negative interest rates was unthinkable in the economic practice. From the point of view of economists, there is no unified opinion on this unconventional monetary policy, and there are different attitudes and policies of central banks. Thus, this paper contains not only arguments for, but also arguments against, and compares the two opposing views on the negative interest rate policy. There is a debate on effective macroeconomic policy instruments and some pitfalls can be observed also at the scientific level.

The impact of stock market development on economic growth: A GMM approach

This study investigated the impact of stock market development (SMD) on economic growth (EG) among emerging markets and developing economies (EMDEs) in Asia. The data sample includes eight Asian EMDEs (China, Indonesia, India, Sri Lanka, Malaysia, the Philippines, Thailand, and Vietnam) from 2008 to 2019. These countries share several similarities, so this ensures reliability of the results. Regarding the analysis, the generalized method of moments (GMM) is used for the estimation. The results show that SMD exerts a positive impact on EG. This finding confirms the importance of SMD in improving efficient capital accumulation and allocation, and also allows investors to reduce risks and increase liquidity, which will boost EG. Further, the significant influence of domestic credit (DC), control of corruption (CC), and inflation (INF) on EG is also highlighted. These findings are valuable empirical evidence that greatly contributes to reinforcing the suitability of classical economic growth theories, especially the theory of endogenous growth. They are also essential to EMDEs in Asia. Accordingly, the EMDEs should develop effective policies to improve the stock market’s scale, which contributes substantially to the development of EG. Moreover, these economies need to pursue many appropriate policies in sync, such as stimulating SMD, improving governance effectiveness and implementing effective macroeconomic policies. Acknowledgment This study was funded by the Industrial University of Ho Chi Minh City (IUH), Vietnam (grant number: 21/1TCNH01).

Do macroeconomic uncertainty and financial development cause environmental degradation? Evidence from an emerging economy

PurposeThe main purpose of this paper is to empirically investigate the effect of macroeconomic uncertainty on environmental degradation in India over the period 1971–2016. Additionally, this paper considers the role of financial development, energy consumption intensity and economic growth in explaining the variation of environmental degradation in India.Design/methodology/approachThe authors applied the power generalized autoregressive conditional heteroskedasticity model to measure inflation volatility and used it as a proxy for macroeconomic uncertainty. From a methodological perspective, the authors employ the autoregressive distributive lag bound testing model to establish the long-run equilibrium association between the variables. The Toda–Yamamoto causality approach has been used to examine the direction of causality between the variables.FindingsFindings suggest that macroeconomic uncertainty exerts a positive effect on carbon emissions, indicating that higher inflation volatility, as a proxy for macroeconomic uncertainty, hinders India's environmental quality. Financial development, economic growth and energy consumption intensity have also adversely impacted environmental quality.Practical implicationsThe negative association between macroeconomic uncertainty and environmental degradation calls for some stringent policy actions. While formulating policies to promote growth and maintain stability, policymakers and government stakeholders should take into account the environmental effects of macroeconomic policies. There is a need to implement more environmental-friendly technologies in the financial sector that could reduce carbon emission.Originality/valueTo the best of the authors' knowledge, this study is the first that considers the role of macroeconomic uncertainty along with financial development and energy intensity in an emerging economy like India.

Economic policy uncertainty: Persistence and cross-country linkages

This paper provides new evidence on the stochastic behaviour of the EPU (Economic Policy Uncertainty (EPU) index constructed by Baker et al. (2016) in six of the biggest economies (Canada, France, Japan, US, Ireland, and Sweden), and also on cross-country linkages, over the period from January 1985 to October 2019. For this purpose, it uses fractional integration/cointegration methods to measure the degree of persistence of the EPU and whether there exists a long-run equilibrium relationship linking the individual indices. This framework is much more general than the standard approaches based on the I(0)/I(1) dichotomy since it allows for fractional values of the integration/cointegration parameter and therefore does not impose restrictive assumptions on the dynamic behaviour of the individual series and their linkages. EPU is found to be in most cases a non-stationary, mean-reverting series which is characterised by long memory. Several breaks are also detected in each country. Finally, there is very little evidence of cross-country linkages. Our analysis provides fresh insights into the degree of persistence and the transmission of EPU shocks and has implications both for investors having to make risk management decisions and choose investment strategies and policymakers having to design effective macroeconomic policies.

Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

INFLUENCE OF ECONOMIC SPACE IMBALANCES ON THE FUNCTIONING OF THE ENTERPRISE FINANCIAL MECHANISM

The purpose of this article is to analyse the nature of imbalances in the economic space, as the problem of impact on the functioning of the financial mechanism of the enterprise is especially relevant for Ukraine, because the results of the domestic financial sector are unbalanced. At the same time, a significant impact is reflected in the functioning of the financial mechanism of the enterprise, expanding its functional load. The instability of economic conditions in Ukraine significantly affects the financial and economic activities of economic entities, which causes non-fulfilment of their planned tasks for the development of their own business. To ensure the successful operation, enterprises must assess the imbalances of the economic space, which are precursors to the development of crisis processes that can have a devastating effect. Methodology. In the course of the research it has been found that the financial mechanism of the enterprise is subject to influence both at the level of the enterprise itself and at the level of economic space. It is determined that the main source of information on the imbalance of the economic space is the balance of payments. Balance of payments is the ratio between the amount of cash received by the country from abroad and the amount of payments abroad during a certain period (year, quarter, month). The main component of the balance of payments is the current account, and the most important item is the balance of goods (trade balance). Its condition determines the state of the balance of payments as a whole, and its dynamics demonstrates the effectiveness of macroeconomic policy. The positive balance of trade indicates an increase in demand for goods and services of the country. The negative balance indicates the low competitiveness of the country’s goods abroad. In the case when the value of exports exceeds the value of imports, a trade surplus is formed. If the value of imports exceeds the value of exports, then there is a trade deficit. The financial account of the balance of payments reflects the sale and repayment of financial claims of one country to another. All financial transactions are classified into three groups: direct investment, portfolio investment, and other investments. The dynamics of the financial account during the study period is negative. This indicator was affected by the crisis in the economy, as well as imperfect legislative support for foreign investors in Ukraine. Results. Theoretical information and structure of the balance of payments are presented, balance of payments articles are analysed, the dynamics of the balance of payments of Ukraine is outlined. The main feature of 2015-2019 is the strengthening of globalization. The intensification of relations between the countries leads to a stronger integration of the whole economy, which in turn creates additional risks associated with the transmission of possible crises in the chain. Value/originality. It is established that the functioning of the financial mechanism of the enterprise is considered under the influence of many factors of the system, in particular economic space. The generation of these imbalances leads to an increase in the vulnerability of the financial mechanism, violating the stability, which is manifested in the inability to resist changes in the situation. By assessing the imbalances of the economic space on the basis of macroeconomic and monetary indicators obtained during the monitoring, economic entities will be able to counteract shocks in the event of a change in the situation.

The impact of remittances on household savings in the Baltics

Proper understanding and monitoring of household savings are crucial to effective macroeconomic policies targeted at balanced and sustainable economic growth. Remittances, as a financial flow of foreign capital, can create a vital part of private savings. This paper is aimed at identifying whether remittances contribute to household savings in the Baltics along with other macroeconomic variables in a post-crisis period, during which the relative smoothing and convergence of economic development of the Baltic countries after the sharp financial distress in 2009 can be observed. The following methods of panel data regression analysis were employed: fixed effects and OLS. The results of the econometric analysis based on both fixed effects and OLS methods reveal that remittances are an essential driver of savings in the Baltics in the long run. Savings in the Baltics are not significantly influenced in the short term by sharp economic fluctuations, but are dependent on demographic factors and foreign capital, which can bring instability in economic development and financial flows of the region. AcknowledgmentThis research was funded by Vega research project no. 1/0037/20: “New challenges and solutions for employment growth in changing socio-economic conditions”, and VEGA research project no. 1/0287/19 “Integration of immigrants in EU countries from the point of view of migration policies”.