Foreign Investment Inflows Research Articles

Re-visiting the causal relationship between tourism and economic growth in India: specific to general modelling approach

PurposeTourism–economy relationship in India has been studied extensively in the past literature using a single equation approach. However, the present paper diverted from this trend and examined the tourism–economy relationship using the specific to general modelling approach over the 1990–2018 time period. The study also accounts for the influence of merchandise trade, capital formation, foreign investment inflows and inflation on economic growth to achieve the robustness of the coefficient estimates.Design/methodology/approachTo achieve the objective, the study utilised a specific to general modelling strategy. First, the regression equation includes only three core variables: gross domestic product (GDP), international tourist receipts and international tourist expenditures. Next, the authors include other control variables in the regression equation one by one, leading us to test five model types for investigating the cointegration among the variables. As for the estimation technique, the authors employed autoregressive distributed lag (ARDL) approach.FindingsThe paper's findings highlight that tourism receipts and expenditures exert a positively significant impact on economic growth. Moreover, including the additional independent variables does not substantially change the tourism and economic growth relationship. The existence of one-way causality from tourism expenditures to economic growth supports the tourism-led growth hypothesis. These findings highlight the rationale for intervention by the government and policymakers to promote tourism potential and facilities to accelerate the overall growth performance of the country. While the existence of one-way causal effect from economic growth to tourism revenues supports the growth-led tourism development hypothesis, implying that economic expansion is necessary for tourism development.Research limitations/implicationsThis research article tried to present a comprehensive picture of India's tourism–economy relationship. However, the present study is organised as an aggregate economy-level analysis. It assumed that the aggregate tourism sector is homogenous. However, different tourism sectors exert different levels of influence on the economy. The authors expect future research can take the disaggregated analysis of the tourism–economy relationship.Practical implicationsThis study provides valuable insights into the tourism-led growth hypothesis in India. The study highlights comprehensive intervention by the government and policymakers for accelerating tourism development to invigorate the overall growth performance of the country over the long run. The principal recommendation emerging from the present research is that the tourism growth potential can be depended upon to stimulate the economic performance of the Indian economy.Originality/valueThe present study diverted from the previous empirical studies by following a specific to general modelling strategy. First, the regression model includes only three core variables such as economic growth, tourism receipts and tourism expenditure. Next, the authors include other control variables in the regression equation one by one, leading us to test five model types for investigating the cointegrating relationship among the variables. GDP growth rate is used as a dependent variable in all five specifications. The idea is to expand the model to capture every feature of the data generating process.

Official visits and foreign direct investment

This paper examines the effect of official visits by U.S. Presidents and Secretaries of State on foreign direct investment inflows. The key difficulty in determining a causal effect is the issue of endogeneity. To address potential endogeneity, we use the Endogenous Treatment model (ETM). The estimation results provide evidence that the official visits of U.S. Presidents have a statistically significant positive effect on both foreign investment inflows from the U.S. and on total foreign direct investment inflows. This is robust even after the inclusion of other control variables identified by the literature as confounding factors for foreign direct investment. When we examine the effect of different types of visits, the results show that bilateral meetings during the official visits of U.S. Presidents have a statistically significant positive effect on both foreign investment inflows from the U.S. and total foreign direct investment. These results imply that the visits of U.S. Presidents offer a signal of the confidence of American administrations in the host country, which may in turn encourage American and non-American firms to invest in that country.

How Do Overseas Economic and Trade Cooperation Zones along the Belt and Road Affect the Economic Growth of Host Countries?

Based on the data of countries along the “One Belt and One Road” from 1998 to 2017, this paper uses the progressive Difference-in-Difference to analyze the impact of overseas economic and trade cooperation zones on the economic growth of host countries, which shows that the establishment of overseas economic and trade cooperation zones significantly promotes the economic development of host countries. Additionally, the specific mechanism of overseas economic and trade cooperation zones to promote the economic growth of the host country is analyzed using the mediating effect model, and the study shows that the overseas economic and trade cooperation zones can encourage the economic development of the host countries by attracting foreign investment inflows. Further heterogeneity analysis reveals that overseas economic and trade cooperation zones have stronger economic boosting effects on countries with lower income levels and poorer business systems. Different types of overseas economic and trade cooperation zones have other economic boosting effects on host countries. Among them, the economic impact of industrial, agricultural, and high-tech zones is significant, while the influence of logistics and comprehensive industrial zones is not yet significant. Finally, the paper carries out further discussion based on the above findings.

Fragility of FDI flows in sub-Saharan Africa region: does the paradox persist?

The circumstances of the SSA region regarding the inflow of foreign direct investment (FDI) present a puzzle. In spite of the high rate of return on investment, the inflow of foreign investments keeps eluding the region, and the COVID-19 pandemic even perplexes the flow fragility the more. What factors then determine FDI flows aside from return on investment? Could there be more persuasive relative cost complexes? The study aimed at testing the effects of determining factors that influence FDI flows and their impact on economic development, considering the COVID-19 period. The study used cross-country pooled data from 30 SSA countries collected between 2001 and 2020. The study utilized five panel estimation techniques, namely Pooled Regression, Fixed Effect (FE), Random Effect (RE), Panel Two-Stage Least Square and Differenced Generalized Moments of Method (DGMM). The study found that the inflow of FDI has significant positive impact on economic development in the sub-Saharan African region. It is also ascertained that the outflow of FDI, and political stability has an inverse relationship with economic development. The study recommends that governments of host economies should hence ensure an enabling framework for their economies, so as to improve infrastructure, political stability, and institutional quality, in order to sufficiently encourage the inflow of FDI into the SSA region and make the environment inviting, sustainable, and beneficial for foreign investors and host economies alike.

A Review of the Challenges of Nigeria-China Economic Relations in Contemporary times

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other related materials on the topic under study. Data collected are descriptively analyzed to underscore the challenges of the economic and trade relations between China and Nigeria. One of the major challenges is the present state of infrastructural facilities especially in the areas of power, rail network systems and communication in Nigeria which is very poor and if urgent steps are not taken to address these, it may get worse. Moreover, Nigeria rises up to these challenges, foreign investment inflow will continue to elude the country. Another challenge is the wide trade imbalance that continues to be in favour of China. On the whole, the Federal Ministry of Trade and Investment and sister agencies can learn from the trend of reform in China and create policies in such a manner that the economy of Nigeria becomes the focus of development. For instance, during the Chinese years of reform, foreign direct investment inflows to China were subjected to various rules and regulations including extensive plans on technological capacity building of Chinese, stringent local content requirements.

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other related materials on the topic under study. Data collected are descriptively analyzed to underscore the challenges of the economic and trade relations between China and Nigeria. One of the major challenges is the present state of infrastructural facilities especially in the areas of power, rail network systems and communication in Nigeria which is very poor and if urgent steps are not taken to address these, it may get worse. Moreover, Nigeria rises up to these challenges, foreign investment inflow will continue to elude the country. Another challenge is the wide trade imbalance that continues to be in favour of China. On the whole, the Federal Ministry of Trade and Investment and sister agencies can learn from the trend of reform in China and create policies in such a manner that the economy of Nigeria becomes the focus of development. For instance, during the Chinese years of reform, foreign direct investment inflows to China were subjected to various rules and regulations including extensive plans on technological capacity building of Chinese, stringent local content requirements.

ANALYSIS OF FOREIGN DIRECT INVESTMENT FLOW IN THE REPUBLIC OF KAZAKHSTAN BASED ON THE ACCELERATOR MODEL

Foreign direct investments play a vital role in the economy of the Republic of Kazakhstan. Nowadays, foreign direct investments are considered to be one of the key aspects in economic integration of countries through creation and facilitation of beneficial links between various countries and economies. The purpose of the paper is to analyze the flow of foreign direct investment in the economy of the Republic of Kazakhstan and its impact on the gross domestic product using the theory of the multiplier-accelerator. While conducting the research the following scientific methods were employed: comparative analysis, analysis and synthesis, content analysis, logical, statistical, and mathematical, graphic. As a result of the undertaken research the features of the applying the multiplier-accelerator model were studied. Based on the collection of statistical data on the inflow of foreign investment and GDP in the Republic of Kazakhstan in the period from 2005-2021, an accelerator line was built. The main findings obtained in the course of the study made it possible to assess the impact of the inflow of foreign direct investment on the volume of gross domestic product, determine the cumulative effect and determine promising directions for the development of investment activity in the Republic of Kazakhstan.

Analysis of the Short and Long-run Effects of Macroeconomic Variables on Foreign Direct Investment Inflows to Tanzania

This study assessed the effect of macroeconomic variables on foreign direct investment inflows to Tanzania for the period 1970-2021. To do this, the time series data were analysed by the Co-integration test for the long-run relationship and the ECM model for the short- and long-run effects. The co-integration test suggests that there is a long-run relationship between government expenditure, inflation rate, external debt, interest rate, exchange rate, and foreign investment inflows. The results of the ECM reveal that government expenditure has a significant positive effect on short and long-run FDI inflows, while the inflation rate has a negative and statistically significant effect on short and long-run FDI inflows. Moreover, the interest rate, exchange rate and external debt variables have a negligible effect on FDI inflows. On the other hand, the proxy variable for government regime and economic reforms before 2015 revealed a positive and statistically significant effect on FDI inflows at 1% in the short run and 10% in the long run, while it had a negative and statistically insignificant impact on FDI inflows after 2015. The study recommends that the government should adequately allocate resources to economic activities to stimulate macro variables, which will attract more FDI and enhance steady economic growth in the short and long-run. Keywords: Macroeconomic Variables, Effects, Foreign Direct Investment, Inflows and Outflows, Tanzania. DOI: 10.7176/JESD/14-2-02 Publication date: January 31 st 2023

ДИНАМІКА І СТРУКТУРА ГЛОБАЛЬНИХ ПОТОКІВ ПРЯМИХ ІНОЗЕМНИХ ІНВЕСТИЦІЙ

The article examines the inflow of foreign direct investment around the world, distinguishing different groups of countries. It was found that global FDI flows tend to increase in all regions of the world, despite the difficult year 2020 – the period of COVID-19, with a significant decrease in developed countries. The countries of Europe and North America contributed the most to the global decline in FDI: more than 100% and 46%, respectively. However, the decline was very uneven across regions, with Latin America and the Caribbean down 37%, Africa down 18% and developing Asia down 4%. FDI in countries with transition economies decreased by 77% compared to 2019 to $13 billion. USA. After a significant recovery in 2021, global foreign direct investment fell by 12% in 2022 to $1.3 trillion. The reason for this was the global crises that overlapped each other during a certain period of time. The decline was felt mainly in advanced economies, where FDI fell by 37% to $378 billion. We find that despite a slowdown in global FDI flows in 2022, new investment showed moderate growth. In the member countries of the Organization for Economic Cooperation and Development, FDI inflows fell by 26%, the main reason was the withdrawal of investments from Luxembourg (with the exception of Luxembourg, FDI flows in 27 European countries increased by 22%). However, this decline was partially offset by strong growth in Switzerland as well as the United Kingdom. Consequently, FDI flows to the United States decreased by 21% in 2022 and increased in other countries, including Australia, Italy and Sweden. If we single out some regions, we can conclude that the inflow of direct foreign investment to the G20 countries has decreased by 15%. While they increased by 7% in the G20 OECD countries, FDI fell by 38% in the non-OECD G20 countries, mainly due to declines in China and to a lesser extent in South Africa, compared to their peaks levels recorded in 2021. Foreign direct investment flows in Brazil increased by 68%. According to the UNCTAD World Investment Report 2023, most economies in the region have recovered FDI inflows and only a few have experienced a downturn. The largest recipients of foreign direct invest- ment in the first quarter of 2023 were the USA, Brazil and China. The main sources of FDI outflows around the world were the United States of America, Germany and China.

Političko okruženje kao faktor privlačenja stranih investicija u Srbiju

The purpose of the paper is to research the influence of political environment factors on the inflow of foreign investments in Serbia. Keeping in mind that many countries in Southeast Europe find themselves in a situation where foreign investments are a necessity and a need for whole economic development, this research focused on Serbia owing to its results in foreign investment attraction during a transition period. Primary data collected using a survey technique on 88 foreign companies that invested in Serbia from 2001 to 2019 were analysed using a quantitative methodology (ANOVA and t-test). The results indicate that the stability of the government and the rule of law are the most important conditions for foreign investors in Serbia. This research's originality is reflected in the primary data and research results obtained.

Diaspora policy in Ethiopia: institutional dimension

The article touches upon the new branch of Ethiopian public policy – diaspora politics. This sphere is considered through the prism of the evolution of key state institutions designed to regulate the contacts of Ethiopian citizens and state with compatriots living abroad. The modern Ethiopian diaspora is a complex phenomenon given its multi-ethnic and multi-religious, geographically unevenly distributed composition. Moreover, its representatives do not always have legal status in a receiving country. Despite this, in recent decades, the Ethiopian authorities have done a lot to establish a dialogue with the diaspora and attract its resources for the social and economic development of the country. The study examines the main objectives of Ethiopia’s diaspora policy, the development of a system of state institutions in this field, the influence of different Ethiopian identities on the contacts of the Ethiopian government with the diaspora, the role of the diaspora in the inflow of foreign investment into the country, the main problems and difficulties hampering the effective interaction between the Government and the Ethiopian diaspora abroad. Conclusions on possible prospects of diaspora policy of Ethiopia at the present stage have been drawn.

The Impact of the Dynamics of the Ruble Exchange Rate on the Inflow of Foreign Investments into the Russian Economy under the Conditions of Sanctions

The Impact of the Dynamics of the Ruble Exchange Rate on the Inflow of Foreign Investments into the Russian Economy under the Conditions of Sanctions

Prednosti za investiranje u Bosni i Hercegovini u odnosu na zemlje iz okruženja

In order to achieve economic progress in less developed countries, it is necessary to provide the necessary resources. Foreign investments very often represent the primary source of financing for certain world economies, and the struggle for financial resources, which are limited, is becoming greater. Many countries have a planned approach to this process, and make huge efforts to attract foreign investors. For this reason, it is necessary to systematically approach this research problem, and to create adequate strategies for attracting foreign investments. When it comes to Bosnia and Herzegovina and the surrounding countries, the competition to attract foreign investments between them is getting tougher. Each of the neighboring countries has its own competitive advantages, and with an adequate set of incentive measures, it can achieve a significant inflow of foreign investments. Unfortunately, of all the surrounding countries, Bosnia and Herzegovina has the lowest inflow of foreign investments, so it is necessary to define the competitive advantages of the business environment in Bosnia and Herzegovina.

Improvement of mechanisms of formation and implementation the state export policy in Ukraine

It was assessment the prospects for the application of an export-oriented growth strategy in Ukraine as the basis of the economic growth strategy based on the analysis of foreign practices and achieved economic results. It has been established that the effectiveness of the implementation of the export-oriented growth strategy in our country will be successful only with the active introduction of innovative technologies in the production of goods and services due to the inflow of direct foreign investments in export-oriented sectors of the economy. The draft plan of measures for the post-war recovery and development of Ukraine was analyzed. A number of measures necessary for the implementation of the export-oriented growth strategy were identified. The institutional, financial and resource support of export activity are analyzed. It has been established that the existing network of trade support institutions in Ukraine is not able to fully ensure the proper level of effective support for Ukrainian exporters on international markets. Furthermore, the mechanism of interaction and cooperation of state export support institutions, in particular the International Trade Council under the Cabinet of Ministers of Ukraine, with other institutions in the field of international trade and enterprises of the real sector of the economy is imperfect. It was noted that the realization of export entrepreneurial potential in Ukraine is held back today not only by global factors (pandemic, war etc.), but also by internal obstacles, among which, in particular, the absence of a strategic document in the export activity of the state - the Export Strategy of Ukraine, which would cover the main principles of export policy implementation during the war and during the post-war recovery period. It has been argued the necessity to updating and actualization the Export Strategy of Ukraine, which will determine the main directions of development of Ukraine's international trade and support of export-oriented enterprises, especially small and medium-sized businesses, taking into account new challenges and prospects. It was noted that state and non-state, including with the participation of international organizations, financial and non-financial support of export activities are important tools for financial and resource support of domestic exports today. It has been argued the necessity of introducing a mechanism of insurance of investments of domestic and foreign investors against military risks in Ukraine. Measures to increase the effectiveness of the consultative and advisory activities of the International Trade Council and the financial capacity of domestic exporters, including with the participation of the Export Credit Agency, was proposed.

Digital Economy of Northeastern Provinces of China: Modern Approaches to Regional Development

The article provides a general overview of the tasks of the Chinese leadership to develop the digital economy in the state, which were defined by the 14th Five-Year Development Plan and the decisions of the 20th Congress of the CPC. It describes the state of the digital economy within the northeastern provinces of the People’s Republic of China. It shows that digitalization opens up great opportunities for the development of the real economy of the region, business and service market, as well as the diversification of international relations of Heilongjiang, Jilin and Liaoning provinces with neighboring countries, that allows increasing the inflow of national and foreign investments into the economy of North-Eastern China. It is emphasized that digital technologies can be considered as a tool to approach the solution of socio-economic problems associated with the depopulation of the North-East of China, the aging and, consequently, the reduction of the working-age population. It is noted that obtaining the necessary result is possible following the policy aimed at achieving a balance between the digitalizationpace and the level of economic development in the Northeastern provinces of China.

ІНВЕСТИЦІЙНИЙ КЛІМАТ УКРАЇНИ В ПОВОЄННІЙ ВІДБУДОВІ

The article defines the importance of a favorable investment climate and the main prerequisites for attracting funds to the domestic economy in post-war reconstruction. Attention is focused on the results of investment impact on certain sectors of the economy, and which sectors require priority capital investments. The Index of Investment Attractiveness of our country and the problems affecting the formation of this Index have been analyzed. The directions of development of the investment climate in Ukraine during the war and in the post-war period have been highlighted. It has been found out about the creation of a unique electronic platform Advantage Ukraine for the purpose of attracting foreign investors to the Ukrainian economy, which collects more than 500 investment projects and opportunities in ten sectors of the economy. Among the possibilities that have been discussed are: the construction of "smart networks", the introduction of energy balancing capacities, gas extraction using advanced technologies, "green" metallurgy using direct recovery iron – these are things that can be implemented as a priority. The issue of guaranteeing the security of investments in war and post-war times remains the most painful issue today, which is one of the most restraining factors for investors. In addition, assumptions have been made about restoring the production potential of Ukraine's economy and creating a favorable business climate for attracting financial resources from abroad with the help of partner countries. The importance of restoring the inflows of direct foreign investments to overcome the consequences of Russian military aggression has been highlighted. The influence of macroeconomic factors on the investment activity of foreign investors has been outlined on the basis of a correlation-regression analysis of the influence of these factors on the inflow of foreign direct investment into the national economy. Directions for increasing the investment attractiveness of Ukraine's economy in modern conditions of development have been given. Based on the conducted research, ways of increasing the investment attractiveness of Ukraine in modern conditions have been proposed.

A model for foreign direct investment (FDI) promotion through standardized tax policies in Nigeria

This paper presents a model for promoting Foreign Direct Investment (FDI) in Nigeria through the implementation of standardized tax policies. The model seeks to address the inconsistencies in Nigeria’s tax framework that hinder the inflow of foreign investments. By proposing a streamlined, transparent, and investor-friendly tax regime, the model aims to attract and retain foreign investors while fostering economic growth. The model emphasizes the importance of harmonizing tax policies across federal, state, and local levels to eliminate discrepancies that create uncertainties for investors. It advocates for clear and consistent tax incentives tailored to sectors with high FDI potential, such as manufacturing, agriculture, and technology. Additionally, the model calls for the reduction of bureaucratic inefficiencies in tax administration, which often discourage foreign investors due to delays and lack of transparency. A key component of this model is the establishment of a centralized digital platform for tax registration and compliance. This system would streamline tax processes, ensuring clarity in tax obligations, reducing corruption, and improving ease of doing business. Furthermore, the model promotes the creation of bilateral tax treaties that protect foreign investors from double taxation, enhancing Nigeria’s global competitiveness as an FDI destination. The paper also underscores the role of tax reforms in promoting investor confidence, advocating for a consultative approach where investors, policymakers, and industry stakeholders collaborate to shape tax policies. By implementing this model, Nigeria could see a significant increase in FDI inflows, which would contribute to job creation, infrastructure development, and technology transfer, ultimately leading to long-term economic stability.

Forecast of the Impact of the Railway Container Transportation Market on the GDP of the Russian Federation

The relevance and practical significance of the is caused by pervasive impact of container transportation on the economy of the Russian Federation, which is reflected in the State strategy for the development of the transport industry. Expansion of the network of multimodal transport and logistics hubs for handling container cargo should increase their capacity, ensure the growth of transit cargo and the inflow of private Russian and foreign investments in rail transport. The purpose of the research is to develop a forecast for the rail container transportation market in the Russian Federation and estimate its impact on GDPusing mathematical and statistical tools based on publicly available information base. The research methodology included the following stages: industry analysis, identification of trends and their assessment; development of a regression model for market forecasting, taking into account the identified factors and information available in the public domain; assessment of the impacts of factors on GDP; taking into account the development risks of the rail container transportation market. Industry analysis, a systematic approach and graphical methods were used to refine the methodology for forecasting the container transportation market by rail in the Russian Federation. The article shows that the key factors influencing the forecast of the development of the rail container transportation market are: advantages over other modes of transport in speed, quality, convenience and cost of cargo delivery; growth of containerization cargo base; transit prospects for developed and developing countries. Based on the data of Rosstat and PJSC Russian Railways, the regression model was built for the dependence of the volume of the Russian Federation’s GDP on the dynamics of the rail container transportation market, which allowed to predict the increase of GDP by 2025 compared to 2022 by 20.4% due to the growth of the rail container market, in in particular, due to imports by 55.2%, due to exports by 77.8%, and transit through the Russian Federation by 101.3%. The practical significance of the study is to assess of industry trends and risks in the short and medium-term implementation of the development strategy for the transport industry of the Russian Federation, which allows to substantiate the investment attractiveness of the industry.

Sector Specific Determinants of Foreign Portfolio Investment Inflows in India: A Panel ARDL Approach

This article investigates the factors that influence foreign portfolio investment (FPI) inflows to various sectors in India from February 2012 to July 2020. We find evidence that in the short-run FPI inflows in India have a significant positive relationship with the index of industrial production (IIP), foreign direct investment (FDI) and market capitalization (MC) while a significant negative relationship with the US dollars exchange rate (DEXR) and real effective exchange rate (REER). The results of the panel autoregressive distributed lag (ARDL) approach show that sectoral FPI inflows to the various sector in India have a significant negative relationship with interest rate differential (IRD), MC and the US DEXR in the long run. However, in the long run, it has a significant positive relationship with international liquidity (IL) and REER. In addition, we observe that for all sectors the interest rate differential boosts FPI inflows in India except for new economy sectors. The policy prescription of the study points toward the creation of a conducive investment climate to encourage foreign portfolio investors.

Соціальні наслідки дефолтів

The article examines the social consequences that a probable default can have for the country’s population, as well as the essence of the concept of "default", types of defaults, their causes and consequences for the country’s economy in the short and long term. If a default occurs, it becomes necessary to reduce the budget deficit, i.e. to increase revenues or reduce expenditures. But if the economic situation is difficult, then you should not expect more income. Accordingly, the country reduces spending, which means a reduction in social or investment programs of the state. As a rule, these are capital expenditures that can be reduced relatively imperceptibly for the population. However, the consequences become noticeable in the following periods, as the infrastructure in the country deteriorates. To analyze the consequences of default, three countries - Argentina, Mexico and Russia - were considered. The social consequences of defaults for these countries are suggested to be interpreted by such indicators as the moderate poverty index, the unemployment rate, GDP per employed person, and the Gini coefficient. A comparison of indicators of the level of poverty, unemployment and labor productivity in the period before and after the default was made for these countries. The consequences of Russia’s technical default in 2022 and the impact of sanctions packages on the country’s economy as a result of a full-scale invasion of Ukraine are also analyzed. A state that has declared default will not be able to get new loans, and it loses the confidence of foreign investors. This will reduce the inflow of currency into the country, which will lead to the depreciation of the national currency. By the way, the currency reaching its peak values is a standard phenomenon for countries after the announcement of default. In addition, since the impossibility of obtaining new loans and attracting investments for business will make taxes the only source of filling the budget, social programs (in particular, subsidies), benefits and pensions will be the first to be cut. At the same time, the default is accompanied by sharp inflation, which makes the goods of domestic exporters more competitive. If the country, after announcing the default, was able to get out of the crisis, and even better – its economy shows growth, then the default can be considered successful. The main task of the default for a certain time is to reduce the tax burden. However, it is necessary to understand several important things. Since, after the declaration of default, the inflow of foreign investments will either stop completely or will be greatly reduced, the correct distribution of taxes as the only source of filling the state budget is very important. The exchange rate of the national currency begins to fall, because the inflow of investments decreases. At the same time, some investors who invested or were going to invest in private companies in this country are trying to withdraw their dividends or abandon their investments. That is, there is a decrease in the exchange rate and a decrease in economic growth.