General Economic Theory Research Articles

Hedging instruments to ensure the economic security of economic entities: Methodological background. Part 1

Subject. This article discusses the use of hedging instruments in the process of minimizing the risks of changes in market conditions and their impact on the economic security of economic entities. Objectives. The article aims to define hedging as a process of minimizing market risks and their distribution among participants in market transactions and describe the impact of hedging on the valuation of financial accounting items. Methods. For the study, we used the provisions of general economic theories of positive and normative economics, theories of accounting and analysis, theories of finance, the concept of sustainable development of the organization and the concept of constructive obligation. Results. The article defines the method of special accounting for hedging instruments, the use of which makes it possible to reliably reflect in the Statement of Financial Position of the organization the impact of the risk of changes in market conditions and their minimization when allocating these risks among the participants of an exchange transaction in the financial market. Conclusions. Derivative financial instruments are subject to financial accounting and reporting, and the special hedge accounting method is a business model for the use of hedging instruments that includes elements of hedging.

The Paradigmal Transition in General Economic Theory: The Role of Education (The Bulgarian Case)

The Paradigmal Transition in General Economic Theory: The Role of Education (The Bulgarian Case)

Editorial

The Journal Scientific Research World Economy EconConnections - Professionals On Line, plays an essential role as the main platform for the dissemination of theoretical and empirical research in a wide range of disciplines within the field of economics and related areas. Enveloping a wide range of topics, it stands as the primary channel for the exploration of general economic theory, political economy, business economics, industrial economics, labor economics, urban and rural economics, development economics, technological economics, tourism economics, transportation economics, macroeconomics, microeconomics, quantitative economics, resources and environmental economics, economic history and demography, as well as international trade, exchange rates, finance , accounting and insurance.

Methodological bases for balanced development of the food supply of the population

A retrospective analysis of the economic theories of marginal utility, general economic equilibrium, spatial economics, production factors, and organization theory was carried out from the position of forming the methodological basis for the emergence of the theory of balanced development of food supply for the population. The substantive aspects of the critical concepts of the identified theories are detailed in their influence on the formation and formation of the methodology for food supply to the population, including maintaining a balanced and equilibrium state in the conditions of continuous influence of external factors on food systems. For each identified theory, provisions have been established that determine the relationship with the methodology of the area under study. It has been established that the emergence of the theory and methods of balanced development of food supply for the population is a natural stage in the evolution of economic science in the context of increasing the role and importance of man in the modern economy. The methodological grounds identified are the need to achieve and maintain a balanced human diet, ensure coordination and maintain a balance of social and economic interests of consumers and food producers, ensure a balanced state of food production and consumption, maintain a balance of resource capabilities and future food needs of people, prevent the emergence of imbalances in the food sector. The work results can be used to develop new conceptual frameworks for developing the domestic agro-industrial complex and allow us to form a more holistic and detailed understanding of the specifics and features of achieving balanced agri-food sector development.

Do FDI and foreign remittance inflows affect the unemployment rate? A new insight

This study aims to investigate the impact of FDI and foreign remittances on unemployment from 1991 to 2020 from Bangladesh's perspective. With the use of EViews 10 version, this study used the ARDL technique to capture the long-run and short-run estimations. The study utilized the unemployment rate as a dependent variable and foreign direct investment (FDI) and foreign remittances as independent factors. The remaining factors include exchange rate, GDP growth, exports, and inflation rate; these are controllable variables. The results of the research show that FDI and foreign remittance have a positive and statistically significant association with unemployment rate in Bangladesh, both in the long run and in the short term. Thus, according to the findings, FDI and foreign remittances are creating more unemployment in Bangladesh. Unlike the general economic theory, which states that the bidirectional relationship of FDI with the unemployment rate, as well as foreign remittances with the unemployment rate, is inverse, these research outcomes basically suggest that FDI and foreign remittance inflows are displacing domestic labor with, perhaps, a low-cost, highly skilled overseas workforce, and also indicate that there might be an increasing trend in the brown-field investment sector. For policy implications, this investigation lends support to the theory that Bangladesh should focus more and more on skilled development policies for domestic workers and create a sound environment for foreign investors in order to reduce the country's unemployment rate.

Theoretical aspects of studies on agricultural economics and agrarian issues

This article contains a theoretical proposal for classifying the agrarian economic theory as a separate school of heterodox economic thought, encompassing more than a dozen research streams. In this sense, it fills a gap in the general economic theory, in which, so far, the agrarian economic thought is not considered a separate school of economics. The study proves that for the development of agrarian economics, it is not necessary to adopt the monistic, reductive, and consolidative approach that characterises mainstream economics. We treat agricultural economics as a pluralistic science, taking into account different viewpoints and research paradigms of development, from industrial to sustainable. Raising the need to integrate agrarian thought, the study points to the designations of the substantive distinctiveness of agricultural economics, including the immobility of the land factor, the price and income specificity of food demand, and the compulsion to consume food. The considerations are supplemented by a conceptualisation of the studied issue concerning the situation in Poland, presented in the form of a case study.

A new grey relational analysis model of cross-sequences

PurposeThe purpose of this paper is to explore a new approach to solve the problem of positive and negative offset in the calculation process of integral elements, then propose a series of new grey relational degree model for cross sequences.Design/methodology/approachThe definitions of cross sequences and area elements have been proposed at first. Then the concept of difference degree between sequences has been put forward. Based on the definition of difference degree between sequences, various modified grey relational degree models for cross sequences have been proposed to solve the measurement problem of cross sequence correlation relationships.Findings(1) The new definition of cross sequences; (2) The area element; (3) Various modified grey relational degree models for cross sequences based on the definition of difference degree between sequences.Practical implicationsThe grey relational analysis model of cross sequences is a difficult problem in grey relational analysis. The new model proposed in this article can effectively avoid the calculation deviation of grey relational analysis model for cross sequences, and reasonably measure the correlation between cross sequences. The new model was used to analyse the food consumer price index in Shaanxi Province, clarifying the relationship between different types of food consumer price indices, some interesting results that are not completely consistent with general economic theory were obtained.Originality/valueThe new definition of cross sequences, the area element and various modified grey relational degree models for cross sequences were proposed.

Conceptual framework for integrated reporting: Analyzing the content of general provisions

Subject. The article considers the content of conceptual foundations of integrated reporting aimed at assessing the value of business. Objectives. We focus on proving the expediency and necessity to present integrated reporting for financial capital providers and other users interested in business valuation. Methods. The methodology of the research rests on recognition of the need to integrate information contained primarily in financial and management reporting, which are based on general economic theories of positive and normative economics, accounting theory and analysis, theory of finance, and the concept of sustainable development of the organization. Results. The orientation of integrated reporting on assessment of business value and its elements (capital) presents a more objective and reliable picture of the financial situation of the organization compared to traditional financial statements focused on financial results of the organization. Conclusions. The significance of the conducted research is determined by proving the need to develop a business accounting model that allows for the integration of information contained in financial and management reporting, reporting on sustainable development of the organization, and other types of reporting, enabling to generate integrated reporting on a cost basis that reflects the assessment of the value of business as a whole.

Marketing policy of farms in Ukraine

Unequal conditions for the functioning of farms as a part of agricultural sector require strategic thinking and marketing orientation from farmers. The limited use of marketing tools in the management activities of farmers is associated with insufficiently adapted marketing provision for the specifics of farming. The aim of the article is to substantiate the marketing provision of the strategic development of farming based on a rational combination of optimal elements of modification models of the marketing mix. The theoretical and methodolo­gical basis of the research was made up of the fundamental positions of the general economic theory, the system-structural analysis of econo­mic processes, the results of the scientists’ work on the researched issues. Monographic, abstract-logical, graphic methods, analysis and synthesis, analogy, theory of rational choice, methods of points, expert evaluations, combi­ning, analytical hierarchy, and statistical proces­sing of information were used in the research process. Prerequisites of the marketing type of farm management are determined. Based on the generalization of the problems of farming in modern conditions, the expediency of using strategic marketing tools in the process of its activity is argued. The meaning and significance of marketing provision in the development of farming is revealed. A model of the farm marketing complex has been created. The marketing support of farming is substantiated, within which examples of the use of strategic tools are given. Farms that use strategic marketing have the advantages of successful adaptation to the market, different from their competitors. The application of reasonable marketing provision for the development of farming on the basis of a marketing mix adapted to the specifics of farming expands its possibilities and strategic horizons as a progressive business form.

Editorial

The Journal Scientific Research World Economy EconConnections - Professionals On Line, plays an essential role as the main platform for the dissemination of theoretical and empirical research in a wide range of disciplines within the field of economics and related areas. Enveloping a wide range of topics, it stands as the primary channel for the exploration of general economic theory, political economy, business economics, industrial economics, labor economics, urban and rural economics, development economics, technological economics, tourism economics, transportation economics, macroeconomics, microeconomics, quantitative economics, resources and environmental economics, economic history and demography, as well as international trade, exchange rates, finance , accounting and insurance.

The impact of non-performing loans on bank lending behavior before and amid COVID-19 Pandemic

The main objective of this study is to assess the impact of non-performing loans on bank lending behavior before and amid the COVID-19 pandemic. To do this research we have chosen fifteen private commercial banks in Bangladesh and data were taken from the year 2012 to the year 2021. Credit growth as a component of bank lending behavior was selected as the dependent variable and independent variables are non-performing loans to total loans, provision for loan losses to total loans, gross domestic product (GDP) rate, inflation rate, unemployment rate, total loans to total customer deposit, total equity to total asset, tier 1 ratio, growth of customer deposits, the dummy variables are used for incorporating the effect of covid-19. The paper suggests that NPL to total loan, provision for loan losses to total loan, total equity to total asset, and dummy variables (effect of covid-19 on NPL) are found statistically significant and inversely related to credit growth. Another three variables namely total loan to total deposit, deposit growth, and inflation variables are statistically significant and positively related to credit growth. All of the significant variables are consistent with general economic theory except the case for total equity to the total asset. To reduce non-performing loans, the banks may concentrate on improving corporate governance, maintaining strong loan review, thoroughly reviewing the KYC form, must ensure safety principles before approving a loan, collecting information from the CIB, accepting adequate collateral, examining the five C’s, name lending and connected party lending should be strictly prohibited which are quite related with behavioral and judgmental issues, would be a matter of further research.

The competitive strategy profile of Ukrainian inland water transport: economic justification

Purpose. The work aims to build a profile of the competitive strategy of inland water transport of Ukraine and its economic justification. Methodology. The theoretical and methodological basis of the study was the fundamental scientific principles of general economic theory and transport economics, works by domestic and foreign scientists in the field of competitive strategies, economic justification of competitive strategy profiles, and sustainable economic development. We used methods such as “SNW”, “SPACE”, and “ADL” to solve the tasks of our research. The information base of the study consists of: collected, processed, and summarized primary materials of economic research, official statistics, monographs, and scientific and analytical articles of domestic and foreign authors. Findings. The work determines the economic essence of the competitive strategy profile. The profile of the Ukrainian inland water transport competitive strategy was constructed. The profile by the method of “SNW” was analyzed and economically justified by the “SPACE” and “ADL” methods. In the context of European integration, a system of strategic recommendations for the Ukrainian inland water transport competitive strategy formation was proposed. Originality. In this work, the methodological approach to building a profile of competitive strategy of inland water transport of Ukraine was further developed, which, in contrast to existing methods, includes critical elements of competitive potential, such as natural resource, production, labor, institutional, innovation and investment ones. This allows a comprehensive assessment of the results of economic threats and dangers in its use. The proposed system of recommendations for forming a competitive strategy, which will allow positioning Ukraine’s inland water transport in the European market of transport services in terms of European integration. Practical value. The presented results of the study can be used to improve the management system of Ukrainian inland waterway transport, in particular, in the part of selecting the most appropriate models of financing costs for the implementation of competitive strategies of water transport in Ukraine in the conditions of structural changes in the macro-environment in the context of overcoming the consequences of military aggression in the period of post-war recovery of Ukraine.

BANKING SYSTEM OF UKRAINE: CURRENT CHALLENGES AND DEVELOPMENT TRENDS

Introduction. The domestic economy has been operating under conditions of military terror for more than a month, and the stability and predictability of the functioning of the national banking system are of great importance here. Work in the conditions of martial law became to some extent a stress test for Ukrainian banks. In today's conditions, an effective process of verifying the reliability of banks is of critical importance for the financial stability of both business and the population. Methods. The theoretical and methodological basis of the research is the fundamental provisions of general economic theories, general theories of development. In order to achieve the set goal, the methods of analysis, synthesis and generalization are applied in the article, in particular to determine the directions of development of the banking system. A systematic method was used to substantiate the proposals regarding the prospects for the development of banks in the conditions of military aggression. Series of dynamics, average values, comparison, graphic methods are used in the evaluation of the dynamics of loans; estimates of the amount of loans, rates of increase in the assets of the banking system and the authorized capital of banks. The results. The peculiarities of the development of the banking system of Ukraine at the current stage are considered. The impact of the military-political crisis on the work of the banking sector of the economy is determined. The rates and reasons for growth in the volume of assets of the banking system of Ukraine were assessed. The specific weight of banking assets in the country's GDP over the past five years has been analyzed. The causes and extent of the decrease in the authorized capital of banks have been studied. It has been proven that lending is the area of banking business that suffered the most from military aggression. The development trends of the Ukrainian banking system in the conditions of the military-political crisis are determined. The complex of anti-crisis measures applied by bank management was evaluated. A retrospective assessment of subjective and objective factors influencing the functioning of the banking system was carried out and the prospects for its development were outlined. Discussion. The obtained results of the research can be used for further scientific developments regarding the restoration of the banking system of Ukraine in the conditions of military aggression with the help of state support of credit programs for enterprises in important spheres of the national economy. Keywords: banking, management, commercial bank, the National Bank of Ukraine, financial crisis, regulatory capital, the banking sector.

International practice of state support for the commercialization of innovative technologies

The article considers the main mechanisms and features of the formation and functioning of the system of commercialization of intellectual property objects used in foreign countries. The article summarizes the issues of the emergence of intellectual property rights in some countries of Europe and Asia, and studies the ways of commercialization of innovative technologies in the United States. The relevance of the research topic is due to the fact that such a system of state support for innovations stimulates an increase in the demand of participants in the process of commercialization of IPOs in bringing developments to the point of profit. Today, innovation and intellectual property form the basis for creating an innovative economy. To support economic growth, not only in a limited number of countries, but also around the world, they adhere to policies that regulate innovation. The purpose of the study is that it is necessary to consider the international experience of state support for the commercialization of innovative technologies and adopt it for the development of mechanisms for promoting innovative technologies in the intellectual property market of the Republic of Kazakhstan. The scientific and practical significance of the article suggests the identification and correction of acute problems in the Kazakh infrastructure of state incentives for the development of innovative business. The methodological basis of the study was the tools of general economic theory, supplemented by other general scientific methods and methods of quantitative analysis of empirical data and modern methods of system analysis. The main result of this study is the identification of problems in the field of commercialization of intellectual property and innovative technologies in the Republic of Kazakhstan, and the implementation of an effective system of state support for the development of innovative business.

The Knowledge Encapsulation Phenomenon and Its Role in The Construction of a Knowledge Trasnfer Cost Theory

The paper offers a general foundation for the currently fragmented economic studies on knowledge. We argue that such a foundation can be found in the frequently ignored phenomenon of knowledge encapsulation, coined by Harold Demsetz. Knowledge encapsulation refers to a situation under which economic agents are incentivized to compress the costly full knowledge it into incomplete knowledge algorithms. To prove the potential of placing such a phenomenon at the core of a general theory of knowledge, we identify the full knowledge elements and analyze the cost minimizing effects that encapsulation has on them. We then study a wide spectrum of knowledge encapsulation mechanisms, from instructions and superstitions to institutions and outsourcing. We demonstrate that each of these mechanisms can substantially decrease the full knowledge costs without causing a corresponding increase in costs of using incomplete knowledge. These results confirm the universality and the broad scope of knowledge encapsulation phenomenon and allow us to tentatively recommend its application in the general economic theory of knowledge. We further note that the Demsetzian approach may re-orientate the focus of knowledge studies in economics from the process of knowledge creation to its transfer.

Proference: Behavioural Mix Between Propensity and Preference on Financial Market

The origin of economic preference is still disputable inside general economic theory and, especially, inside microeconomics (more specifically, regarding financial market functioning). The invariant vs. adjustable nature, or the objective vs. subjective character of the economic preference are within the core of conceptual, methodological, and instrumental debates and controversies. The paper enters this polemic with a new proposal, namely a model which builds, for the behaviour on financial market, the concept of propensity (coined by Karl Popper), from the objective/invariant side, and the concept of preference, as a behavioural mix which could be named as proference. To this end, the normative framework of society, viewed as a cultural geodesic will is aimed at to give the relative stability to the preference which, in turn, will act in an adaptive way on the cultural geodesic, in an evolutionary circular causality. Therefore, a new mechanism of financial market functioning – which could be named as Proference-Based Market Hypothesis (PBMH) – is proposed and (in its essential features) discussed. The main findings of the research are: a) although the economic preference is, generally, idiosincratic, however it is (necessarily) anchored to a quasi-objectified (not objective!) pillar, namely, to the cultural geodesic of the society as a whole; b) any economic preference is adaptive, and its adaptivity is so that it enters a co-evolution process with the cultural geodesic; c) in fact, on the financial market we always meet the preference, never we meet neither the propensity (that is, the cultural geodesic per se), nor the preference (that is, the idiosyncrasy per se); d) the concept of preference should be taken over by the financial theory and introduced into the logical and quantitative models of the financial market.

Smith or Malthus? A Sea‐Change in the Concept of a Population

AbstractThis two‐part article offers a critical appreciation of Malthus's political economy of population to mark the bi‐centenary of his Principles of Political Economy (1820). His general economic theory emerged after the first four editions of his famous Essay, in three steps: (1) a rapidly produced series of essays on tariffs, rents, and capital mal‐distribution (1814–1815); (2) consequent revision of the economic basis of the Essay (1817); and (3) formal statement in the Principles. His main economic writings thus belong to a later, more mature period of his work, and their evolution is of particular interest for demography on three counts. One is that his rethinking was stimulated directly by the need to rectify serious deficiencies he had come to recognize in the Essay. Second, this makes his later thought of more direct interest to today's study of population and development. Third, all three steps began in, and were sustained by, dialogue with Adam Smith's Wealth of Nations. The dialogue led to further thinking beyond the Essay, with major innovative developments. Comparison to the Smithian baseline shows (1) that the familiar stereotype of Malthus as prophet of population‐laden disaster is seriously incomplete; and (2) capital distribution replaces population distribution as a mechanism of growth, inducing a radical change in the concept of population.

Economic texts as a reflection of the social reality of the transition period in Latvia and Russia

The goal of the study is to compare the reflection of Latvias and Russias transition to the market economy in economic texts. The object of the research is Latvian and Russian textbooks on economics (N = 61) of three generations (1990s, 2000s and 2010s) in the Daugavpils University library. The first such textbooks were published in 1993, and the last ones - in 2015. Although the starting point of the analysis is the translation of Samuelsons textbook (1964), which is beyond the time scope of the research, this book is necessary for a deeper analysis of the textbooks on economics. The research was conducted with the descriptive analysis and case study method applied in the framework of the linguistic discourse analysis based on Webers methodology of cultural determinism. The results of the research showed that in the 1990s, the economic discourse of the USA was actively borrowed in Latvia and Russia; however, the business culture of the USA differs significantly from the business culture of our countries. The linguistic discourse analysis allowed to reveal the conceptual challenges of the contemporary economic science in Latvia and Russia: despite as if the existence of some general economic theory, in reality even basic economic processes are often explained in different conceptual systems depending on the beliefs of the economic texts authors. Considering the social-economic transformations in the past thirty years and earlier periods, the authors emphasize the special importance of critical thinking in the creation, translation and perception of economic texts. This is especially important since there are no reasons to believe that in the 1990s, the cultural component of the economic discourse of Latvia and Russia changed significantly to the market-oriented. Today readers of economic texts have difficulties in their critical assessment, especially of those texts whose authors use emotional terminology.

An experimental study of capacity remuneration mechanisms in the electricity industry

After electricity liberalization, the “energy-only market” design lacks effective incentives to invest in new capacity. Across the world, capacity remuneration mechanisms have been taking hold as an alternative to the energy-only market to ensure adequate power generation capacity. The way these designs are characterized reflects the insight from general economic theory on market power and strategic behavior. Indeed, Europe is heading toward a patchwork of different, uncoordinated national mechanisms. In practice, design choices are driven by national policies, needs and constraints. In addition, they are progressively converging toward a market-based mechanism with a forward period and market power mitigation. In this paper, we investigate their efficiency properties in terms of new investments, the reduction in unserved energy frequency and the energy prices of a generic capacity remuneration mechanism that is impervious to the so-called forward capacity market. The results from laboratory experiments confirm that this mechanism gives better incentives to invest in new capacity than the energy-only market alone and provides an empirical understanding of the investment decision process. The forward capacity market contributes to lower energy market prices in peak demand and extra-high peak demand periods and average energy costs if we consider the social cost of unserved energy.

Relationship between education and economic growth

The purpose of this research is to examine the relationship between educational attainment and economic growth in Albania. This research analyses how educational opportunities contribute to Albania’s economic growth via the use of empirical data. Additionally, it examines the relationship between education and economic development in Albania. Using general economic theory as a starting point, this study analyses some of the potential implications for Albanian economic and educational policy. By stimulating technological innovation and boosting capital and labor productivity, education expenditure increases the economy’s revenue. Using statistical analysis, empirical research attempts to ascertain the true causal effect of educational and training quality on individual salaries, firm profitability, and the economy as a whole. The results suggest that education may be a critical factor in Albania’s long-term economic growth, making it a critical component of the country’s economic strategy. According to the study’s results, the government and private sector should collaborate to improve education quality via public-private partnerships. The impact of education on economic development and its relationship is portrayed in this study since it should be a primary goal of policymakers.