Macroeconomic Dynamics Research Articles

International Trade, Immigration and Macroeconomic Dynamics

International Trade, Immigration and Macroeconomic Dynamics

ECB-(RE)BASE: Heterogeneity in Expectation Formation and Macroeconomic Dynamics

ECB-(RE)BASE: Heterogeneity in Expectation Formation and Macroeconomic Dynamics

International Trade and Macroeconomic Dynamics with Sanctions

International Trade and Macroeconomic Dynamics with Sanctions

Вплив ринку будівельних матеріалів на економічне зростання в умовах війни: порівняльний макро- та мікроаналіз

The aim of the article is to identify the features of the development of both the global and the national market of construction materials in the context of uncertainty caused by the COVID-19 pandemic and russian armed aggression. Research methods: statistical analysis, logical modeling, graphical analysis, comparative analysis, unity of logical and historical approaches. The dynamics of the Ukrainian cement market is determined by a combination of internal and external factors. Domestic consumption of cement is determined by the volume of domestic production minus exports, taking into account imports, and is formed by the total domestic demand for cement. The study of the factors of formation of the volumes of foreign economic operations with cement involves taking into account the structure of exports and imports in the context of the multiplicity of prices of foreign economic contracts. The carried out analysis showed that in the structure of import contracts there is a strong spread of the average contract price in the context of individual countries. Conversely, the structure of export contracts does not show such a variety of prices. The available data on the price component of foreign economic contracts, regrettably, do not allow to carry out a factor analysis and identify factors influencing a significant price spread in the structure of import contracts for the purchase of cement. The originality of the article lies in the combination of macro- and micro-levels of analysis of the construction materials market (on the example of the cement market) and the identification of the relationship between the dynamics of the cement market and the general macroeconomic dynamics in relation to the conditions of wartime and post-war renascence of the Ukrainian economy. The shortcomings of statistical sources for studying the market of construction materials, which affect the possibilities of its proper analysis, are also identified.

Fiscal Policy in a DSGE Model of a Resource-Rich Emerging Economy: The Nigerian Experience

This paper examines the role of fiscal policy in driving macroeconomic dynamics in a resource-rich emerging economy like Nigeria. Specifically, the paper investigates the macroeconomic implications of fiscal policy using a small open economy dynamic stochastic general equilibrium model that features oil in the fiscal rule. The model is estimated via Bayesian methods using data covering the period 2010Q1- 2021Q1. The results show that the feedback coefficient of output in the fiscal rules is mainly negative, indicating a counter-cyclical fiscal stance. Also, increased oil revenue leads to a rise in government consumption, investment and transfer payments. Further evidence indicates that government spending and transfer payments rose in response to increased debt. We also show that fiscal shocks are highly persistent and that government spending on consumption and investment, tax instruments and transfer are expansionary.

МЕХАНИЗМЫ НАЛОГООБЛОЖЕНИЯ В УСЛОВИЯХ ЭКОНОМИЧЕСКОЙ ЦИКЛИЧНОСТИ

The article is devoted to the disclosure of the essence of the system of formation and implementation of taxation mechanisms in conditions of economic cyclicity. In conditions of economic cyclicity, it is necessary to adapt tax regulation measures to macroeconomic dynamics, thereby ensuring a positive impact of taxation mechanisms on the socio-economic development of the country. It is important to reveal the economic essence of tax regulation aimed at ensuring the most optimal ratios between the relevant elements of tax architectonics. There is a need to improve the system of formation and implementation of taxation mechanisms in the context of economic cycles, provisions on strengthening the fiscal security of the state as an instrument for ensuring sustainable development of the country, methodological foundations for assessing the effectiveness of fiscal policy in the context of economic transformations.

Формирование и оценка потенциала развития преференциальных территорий России

Considering the new reality in Russia, research needs to identify and use additional factors to ensure economic growth. The spatial factor plays an important role in enhancing the sustainability of economic development and increasing macroeconomic dynamics. The study examines the formation and assesses the development potential of Russian preferential territories, of which there are currently more than 860. The research methodology is based on the principles of spatial development, synergetic economics and institutional theories. Methods of comparative, statistical, structural, and SWOT analysis are used. It is hypothesised that the use of the development potential of preferential territories (in this case, priority development areas (PDAs) of single-industry towns) will increase their technological advancement. As of 2024, 110 Russian territories, including 84 single-industry towns, have the priority development area status. The opportunities and development risks of Russian preferential territories were analysed using SWOT. An institutional-synergetic approach to the formation of PDAs was utilised to create a methodology for determining development potentials. The performed assessment of the potential of 9 priority development areas in single-industry towns revealed the presence of technologically advanced institutions only in three of them (Naberezhnye Chelny, Tolyatti and Nevinnomyssk). Six PDAs have resources, development institutions, and infrastructure corresponding to the current technological development level of the territory. Three PDAs can rely on the strategic potential of their regions (characterised by a high or average quality of life and investment attractiveness). The study offered recommendations for adjusting territorial development strategies, taking into account the socio-economic potential of priority areas for their transition to the next technological level. The findings can be used for updating the Spatial Development Strategy of the Russian Federation and adjusting the performance indicators of preferential territories.

Trade, Foreign Capital, and Productive Capacity Nexus: The Moderating Role of Institutions

International trade and foreign capital inflows are considered significant determinants of economic growth. However, despite being the largest recipients of these inflows, South Asian economies fail to achieve sustainable economic development due to rapid changes in macroeconomic dynamics and political instability. The purpose of the study is to examine the impact of trade openness (TRD), foreign direct investment (FDI), and international remittances (REM) on the productive capacity (PC) of South Asian economies, with a focus on the moderating effects of the institutional quality (INQ) on the aforementioned relations. The study uses the sample of four South Asian countries namely: Bangladesh, India, Pakistan, and Sri Lanka for the period from 2000 to 2022. The empirical results show that TRD, REM, and INQ exhibit positive and statistically significant effects on PC. The results highlight the significance of international trade, foreign capital inflows, and INQ in determining the PC of South Asian economies. Notably, the findings indicate that FDI has no impact on the PC of the sample economies. Surprisingly, INQ negatively moderates the relationship between REM and PC. Furthermore, INQ positively moderates the impact of TRD on PC. However, INQ does not moderate the effect of FDI on PC in the sample countries. The conclusion section discusses the policy and practical implications of the study, as well as its limitations.

Advanced Technology Investment, Transfer, Export and Import: Determinants or Predictors of Economic Growth and Inflation Fluctuations?

Investments, scientific patents, export and import of high-tech goods and services stimulate the country’s technological development, contribute to economic growth, job creation, the formation of a qualified workforce, and the maintenance of social living standards of the population. At the same time, the ecosystem supporting technological innovation is largely dependent on macroeconomic stability in the country, inflationary fluctuations, etc. Based on this, the article examines systemic interrelationships between the factors of technological development (export and import of computer, information, telecommunications and other high-tech goods and services, investments in advanced research and technologies, volumes of transfer of rights to new technological developments, as well as general the level of coverage of the population by information technologies and innovativeness of the country) and macroeconomic development (gross domestic and national product, inflation rate). The research was carried out using the method of Principal component analysis, canonical analysis, panel regression modeling on the data of 11 countries with developed economies for 2011 and 2021 (World Bank and WIPO statistical databases). From 14 indicators of technological development, the 8 most relevant ones were selected using the method of Principal component analysis; by means of canonical analysis, it was found that 32.503% (in 2011) and 37.557% (in 2021) of their variation is due to changes in the studied macroeconomic indicators. On the other hand, the change in macroeconomic indicators by 46.497% (in 2011) and 38.739% (in 2021) is caused by the variation of indicators of investment, transfer, export and import of advanced technologies. Thus, macroeconomic dynamics depend much more on technological development, and not vice versa. Based on the conducted panel regression modeling, a statistically significant dependence of the inflation index on the share of the population that is Internet users and the country’s place in the Global Innovation Index was revealed. GDP per capita was found to be dependent on the share of exports of high-tech goods and services, the share of exports of goods in the field of information and communication technologies, the share of the population that are Internet users, the country’s place in the Global Innovation Index. State investments in research and technological development turned out to be dependent on the inflation index, the share of imports of computer, information and other services, the share of exports of goods in the field of information and communication technologies, the share of the population that are Internet users, and the country’s place in the Global Innovation Index.

Changes in the human resources market as a key factor of political decisions

The human resources market is a derivative of the key market for goods and services, the growth of which ensures economic growth in the country. However, it is efficient human resources that enable rational use of natural potential, ensure capital reproduction and new technologies creation. Changes in the labor market can fundamentally transform socio-economic ecosystem and affect the level of political stability in the country. For example, in the 2010s, imbalance in the United Kingdom human resources market provoked political instability that forced the government to withdraw from the European Union. The purpose of the research is to identify impact of the labor market on political decisions on the example of the United Kingdom, to determine causes of disequilibrium in the human resources market, to highlight stages of the European Union and stages of Great Britain’s exit from it, and to present the results of Brexit at the level of the economy and the labor market. The article relies on historical-logical and comparative methods of research, comparison of macroeconomic indicators dynamics on the basis of a systematic approach. Statistical data of the World Bank and the Office for National Statistics allow us to confirm mutual influence of the labor market and the policy of the country’s government.

The Research of Comparative Characteristics and Functional Features of the Co-integration of Technological Innovations and business Activity and their Impact on the Formation of Macroeconomic Dynamics

The subject of the study is the causal relationship between the co-integration of technological innovations and business activity, and their impact on the formation of macroeconomic dynamics in the short and long-term. The purpose of the paper is to propose a comprehensive approach to determining the conditions for the co-integration of technological innovations and business activity for their subsequent stimulation of economic growth. The practical examination of the impact of changes in the dynamics of complex indicators of creative development and commercial activity on economic growth is the research’s scientific contribution and novelty. Using vector error correction models, modular root testing models and other econometric methods, the author demonstrated that both business activity and innovation stimulate economic growth in the long-term. In the short-term, there are strong causal relationships, but they are not always homogeneous. The main conclusion is the fact that the results obtained by the author confirm the correctness of using the approach of determining the order of integration and the presence/absence of co-integration between indicators of innovative development, business activity and economic growth. The summary results confirm the existence of a close long-term equilibrium relationship between innovation, business activity and economic growth.

Non-linear model of the macroeconomic system dynamics: multiplier-accelerator

The article discusses one of the classic problems of macroeconomic dynamics, on which the neo-Keynesian theory of growth is based, so that the interaction between the multiplier and the accelerator. A new approach was proposed to develop a mathematical model of the dynamics of the mutual multiplier, which indicates the marginal propensity to save as a result of the GDP growth, and the accelerator, which reflects the growth of capital of the national income in the multiplier. The model is based on the hypothesis of non-linear dependence of the consumption on the amount of profit. This assumes that consumption growth is limited, i.e., a saturation effect occurs. In addition, the model took into account the delayed reaction of the accelerator to the influence of the multiplier. Under building the model, the considered processes were considered continuous in time. This made it possible to provide the mathematical model ”accelerator - multiplier” as a system of two differential equations of the first order. The application of the developed model to the analysis of the dynamic properties of the macroeconomic system makes it possible to evaluate the parameters at which the ”multiplier-accelerator” system enters a critical state. It has been proven that the conditions for the occurrence of self-oscillations depend on the critical value of the accelerator power. The presence of a two-fold limit cycle with corresponding ”soft” and ”hard” modes of birth (death) of the limit cycle was also founded. The applied usefulness of the model is that the choice of management decisions taking into account these results allow us preventing the occurrence of bifurcations and disasters in the process of evolution of the macroeconomic systems.

Уніфікація показників для контролю за різними формами монопольної влади

The paper demonstrates the necessity and possibility to unify the controlling indicators for different types of monopoly (monopolistic competition, oligopoly, natural monopoly) in order to increase efficiency of the monopoly control. Especially this concerns the complex types of monopoly from the point of view of its control, for example, oligopoly. The complexity of this type of monopoly control is associated with the actual inevitability of the appearance of tacit pricing coordination among the oligopoly participants. And the problem is not so much in admitting that the very fact of such a coordination is difficult to prove as in defining the harm it causes to the market and the entire economy. This paper shows the possibility to use the quantitative indexes of monopoly control proposed based on author’s CMI-model of macroeconomic dynamics, to apply these indexes for various types of monopoly. A distinctive feature of this model is the possibility to calculate the vector of “natural” prices for any sector (i.e., the prices that correspond to the state of perfect competition even if it is impossible to reach this state in the existing markets). And the comparison of the actual market price with the “natural” one allows us to control a monopoly using the price indexes alone. In turn, it allows us to perform a monopoly control at various hierarchical levels of the economic system (a firm, an economic sector and economy as a whole). Such a control enables us to calculate the degrees of the monopoly impact both on the entire economy, and on its various sectors. Quantitative values of these degrees can be used as evidence in antitrust litigations and for choice of corresponding instruments to “punish” the monopoly for such abuses. The paper reveals the mechanism of use of the proposed formulas for determination of the monopolistic power and degree of its impact on economy and various economic sectors for the cases of oligopoly and natural monopoly. Also, this paper demonstrates the mechanism of the influence of antimonopoly policy on the configuration of business cycle and on economic growth rate (when other policies are neutral). This opens up the possibility to combine the antitrust policy with the anticyclical and fiscal ones, because, under recession, increased monopolistic power in an individual sector may help the whole economy get out of the crisis.

Demographics’ Impact on Economic Growth in Central Europe and the Baltic States

Abstract To ensure sustainable development and public welfare, the complex impact of demographic factors on macroeconomic dynamics should be investigated properly. Moreover, a few of the Sustainable Development Goals are interconnected robustly with demographic issues. There are some trends (e.g., substantial increase in longevity, rapidly lowered fertility, etc.) common for most advanced and emerging market economies. We examined the impact of selected socio-demographic factors on the real GDP per capita growth rates in a sample of the Baltic states and the Central European countries that have experienced economic transformations in the 1990s and either entered or declared their intentions to join the European Union in the future. We investigated general demographic dynamics in the region from 1960 to 2021. Due to the data availability, our special attention was focused primarily on the highlighted countries’ socio-demographic and macroeconomic variables from 2000 to 2021. We suggested that there was a certain interdependence between the working age population stratum specific weight, the elderly demographic dependency ratio, public healthcare spending, gross capital formation, and the real GDP per capita growth rates. In addition, we propose the main priorities for social and demographic policy in the field of well-being improvement. The potential ways to enhance the model – regarding healthcare, education, and the general profile of fiscal policy – have been disclosed as well.

European Macroeconomic Dynamics on Financial Markets and Economic Policy: A Cross Country Study for Spillover Effects

Abstract What is the direction and extent of the spillover effects of sovereign bond yields in the European Union and which countries are transmitters and receivers of these effects? The motivation for this research is related to the need to better understand the interconnectedness of European Union sovereign bond markets in the context of rising budget deficits and public debt, as well as recent financial and sovereign debt crises, which have highlighted the importance of bond market interdependencies. The main objective of the paper is to investigate the direction and magnitude of the spillover effects of sovereign bond yields in the European Union and to identify the states that act as transmitters and receivers of these effects. The data used in the analysis include the evolution of the bond markets of the euro area member states and non-monetary union states, to allow comparison and assessment of their interconnectivity. To analyse the interconnectedness of bond markets, methods which provide a suitable analysis framework to assess volatility propagation between countries were used. The research results highlight that most of the contagion effects are concentrated in the peripheral countries, such as Romania, Portugal, Lithuania and Ireland, and the central countries act as transmitters of these effects.

Stock Returns and Risks: An Empirical Assessment Using Modified CAPM Approach

Modern portfolio theory assists stakeholders in financial markets to optimize their portfolios to attain expected return at a specified level of risk and uncertainty. However, the conventional capital asset pricing model (CAPM), proposed by Sharpe (1964) and Lintner (1965), fails to accurately estimate the expected rate of return of stock equities due to the presence of external uncertainties, and rapid changes in macroeconomic dynamics. Therefore, this study has adopted a modified CAPM that incorporates additional factors besides beta to more accurately estimate the expected return of stock equities. It highlights these exposures by using time-varying beta CAPM, applied to the cement industry of Pakistan for the period from January 2016 to March 2022. The results show that the expected rate of return is very much close to risk free rate of return in the cement industry of Pakistan. Furthermore, the findings of the study confirm that the prediction of expected rate of return depends on variations in estimation techniques and data availability. Additionally, by introducing the concept of a reference portfolio and a market portfolio, the modified CAPM represents an improvement over conventional method. Moreover, by breaking down the beta deviations into long-term and short-term components, this new method allows for precise computation and simplifies the prediction of expected returns in both equity and portfolio investments. The findings of this study will be beneficial for investors, financial analyst, and portfolio-managers in the decision-making about portfolio investments.

Decomposing India's Trade Ratio: 1980–2021

ABSTRACTExternal trade balance is a critical constraint in the macroeconomic dynamics of a developing economy. Typically, external adjustment is said to occur through changes in the real exchange rate, and implicitly in the terms of trade. This article decomposes India's merchandise trade ratio into three parts, namely, change in terms of trade, relative expenditure growth and relative import intensity over the period 1980‒2021. It finds that terms of trade contribute little to the evolution of India's trade ratio since the 1990s. Instead, falling relative expenditure growth due to India growing faster than its trade partners, and rising relative import intensity due to a reduction in India's reliance on imports relative to its partners explain a large share of the change in the trade ratio post‐1991. Devaluations have not contributed to the improvement in the trade ratio while export growth and reduced domestic intensity have been critical.

Exploring the Impact of Industrialization on Social Mobility in Rural Com-munities: Towards Inclusive and Sustainable Economic Transformation

This research explores the complex interplay between industrialization and social mobility, unraveling the intricate dynamics that shape the socio-economic trajectories of individuals and communities, with a particular focus on rural areas. Employing a mixed-methods approach, quantitative analyses illuminate macro-level trends, while qualitative narratives capture the lived experiences of individuals amidst economic transformations. Findings reveal a positive correlation between technological adoption and educational attainment, emphasizing the pivotal role of skills development in the face of industrialization. The negative correlation observed between industrial employment and income inequality underscores the potential for inclusive economic structures in regions with a significant rural workforce. Through regression analyses, the study identifies the percentage contribution of the industrial sector to GDP as a significant predictor of occupational mobility, shedding light on the macro-economic factors shaping employment dynamics. Infrastructure development emerges as a strong predictor of educational attainment, emphasizing the importance of a supportive environment for learning. Qualitative narratives highlight the agency of individuals in navigating challenges, emphasizing the transformative impact of vocational training programs and the role of community support networks in mitigating the effects of urbanization. Moderating factors, including government policies, technological inclusivity, and access to resources, add layers of complexity to the relationship between industrialization and social mobility. The study extends the discourse by emphasizing the unique challenges and opportunities within rural communities, challenging an urban-centric perspective. It contributes to a nuanced understanding of the conditions shaping social mobility and calls for tailored policies that recognize the diversity of experiences within the broader context of industrialization

Macroeconomic dynamics in a finite world based on thermodynamic potential

This paper presents a conceptual model describing the medium and long term co-evolution of natural and socio-economic subsystems of Earth. An economy is viewed as an out-of-equilibrium dissipative structure that can only be maintained with a flow of energy and matter. The distinctive approach emphasized here consists in capturing the economic impact of natural ecosystems’ depletion by human activities via a pinch of thermodynamic potentials. This viewpoint allows: (i) the full-blown integration of a limited quantity of primary resources into a non-linear macrodynamics that is stock-flow consistent both in terms of matter-energy and economic transactions; (ii) the inclusion of natural and forced recycling; (iii) the inclusion of a friction term which reflects the impossibility to produce (and recycle)goods and services without exuding energy and matter wastes, and (iv) the computation of the anthropically produced entropy as a function of metabolizing intensity and frictions. Analysis and numerical computations confirm the role played by intensity and frictions as key factors for sustainability by contrast with real gdp growth—as well as the interplay between resource scarcity, income inequality, and inflation. A more egalitarian society with moderate inflation turns out to be more sustainable than an unequal society with low inflation. Our approach is flexible enough to allow for various economic models to be embedded into our thermodynamic framework. Finally, we propose the open source EcoDyco software as a first complete realization implementing economic dynamics in a multi-resource environment.

Brazilian macroeconomic dynamics redux: Shocks, frictions, and unemployment in SAMBA model

This paper documents the recent changes in the structure and estimation procedures of the SAMBA model, providing a complete description of the decision problems that each economic agent faces, the first order conditions that solve those problems, and the new techniques employed to estimate the model. This updated version of the model incorporates new features, such as involuntary unemployment, imported goods in the consumption bundle and a new identified vector auto-regressive process for the rest of the world. Reflecting these changes, the set of observables was expanded to include, for instance, participation rates in the labor market and an exogenous measure of output gap. In face of increased complexity and the large number of observables, the model was estimated using Sequential Monte Carlo (SMC) methods, allowing for a smaller sensitivity to the choice of priors.