Macroeconomic Instability Research Articles

Public spending, monetary policy and macroeconomic instability

AbstractWe analyze sunspot‐driven fluctuations in a standard neoclassical growth model with money holdings and public spending. In our economy, money is needed for transaction purpose, while public spending is financed through a flat income tax. Public spending includes an incompressible component and a variable part, and the latter exerts positive externalities on private utility or production. Our theoretical results show that the composition of public spending and externalities have important effects on local stability properties. First, in the absence of externalities, there is a unique steady state, and local indeterminacy depends on the interplay between the share of the cash‐in‐advance constraint and the intertemporal elasticity of substitution of consumption. Second, in the presence of externalities, multiple equilibria might emerge under weak enough production externality, while uniqueness of the steady state prevails under strong production or under consumption externality. We further show that weak production/consumption externality or strong consumption externality could generate local (in)determinacy of the steady state depending on the share of the cash‐in‐advance constraint while strong production externality generates local determinacy of the steady state. Finally, based on numerical examples, we show that an increase in the variable public spending and the income tax rate exert a local stabilizing effect while externalities promote locally the likelihood of local indeterminacy.

Financial sustainability of a Ukrainian university due to the COVID-19 pandemic: A calculative approach

In 2020, due to the COVID-19 pandemic, university funding in Ukraine suffered significant losses due to unprecedented quarantine measures. The challenge for universities is to diversify funding sources, develop effective approaches to minimize existing and prevent future threats to ensure their financial stabilization (sustainability) in the post-pandemic period. The paper aims to consider financial sustainability of a university (the case of Taras Shevchenko National University of Kyiv) due to COVID-19 using the objective calculative approach on the statistical sample of data for 2011–2020. The tasks for achieving the aim are seen in determining, using regression methods, the number of lost receipts from general and special funds in the short and medium term, which will maintain a constant value of receipts at constant assets. The main idea of the paper is that financial sustainability is considered as a condition, and stabilization is considered as a process towards stability/sustainability. The modeling approach reveals a fragile list of factors for the future preventing measures of the University to sustain. It is estimated that the University’s top management should consider financial strategy in dollar terms only. The challenge is that funding in hryvnia seems to be quite increasing and linear, but indeed, funding of the University is non-linear and has a quite intensive downward trend. Thus, for the financial sustainability strategy, this fact should be crucial.The results indicate the need for a significant increase in university funding to mitigate the impact of macroeconomic instability due to various crises, including the COVID-19 pandemic. AcknowledgmentThe study is carried out under the grant funded from the National Research Fund of Ukraine within the competition Science for Human Security and Society, topic 2020.01/0265.

Стратегическое региональное планирование: новые вызовы и проблемы

The article discusses the problems of using strategic regional planning in a changing external environment and macroeconomic instability. The directions of creating adaptation mechanisms that can make strategic planning in the regions flexible and meet modern requirements and solve the problems of improving the quality of life of the population, growing the Russian economy and ensuring the security of the country are indicated.

Methodical approaches to optimizing the insurance company portfolio of services

The article is devoted to the generalization of methodological approaches to the optimization of the insurance company portfolio of services and the development of an algorithm for optimizing the insurance company's services portfolio. Insurance market of Ukraine is in a state of transformation, which is associated with changes in the institutional conditions of insurance, changes in the priorities of policyholders, macroeconomic instability, the spread of the COVID-19 pandemic. Institutional changes in the insurance market of Ukraine and macroeconomic instability have led to the "cleansing" of the insurance market and the exit of insurance companies that do not ensure transparency, solvency and efficiency. In the three quarters of 2021, 41 insurance companies left the Ukrainian insurance market, ie one in five insurance companies ceased operations. The relevance of optimizing the insurance company's portfolio of services is proved, which is due to the need for insurance companies to review their own portfolios to ensure financial stability, solvency and efficiency in a competitive insurance market of Ukraine. It is proposed to consider the optimization of the insurance company's portfolio of services as a set of interconnected and consecutive stages that are consistent and logical, as well as adaptive to modern realities of the insurance market of Ukraine, aimed at achieving profitability and maximizing the value of the insurance company. The first five stages of optimizing the insurance company's portfolio should be considered the most important, as it provides for determining the methodological principles of optimizing the insurance portfolio. Substantiation of the type of insurance company's portfolio and justification of the list of criteria for optimizing the insurance company's portfolio are interrelated stages that determine the individual basic parameters of the optimized portfolio for the insurance company depending on the chosen type of portfolio. Calculations for the optimization of the insurance company's portfolio of services involve the implementation of economic and mathematical modeling of the structure of the insurance services portfolio and the definition of its targets. Following a certain period of time, the insurance company must assess the effectiveness of achieving the optimal portfolio of services of the insurance company and the impact on key performance indicators of the insurance company, including net financial result and value of the insurance company, the presence of deviations of actual and optimal indicators. Keywords: insurance, insurance company, insurance company portfolio, optimization, Markovic model, insurance market of Ukraine.

PRACTICAL ASPECTS OF APPLICATION OF CRM-SYSTEMS IN ACTIVITIES OF TOURIST ENTERPRISES

The role and importance of information systems, in particular CRM, in the conditions of macroeconomic instability and digitalization of the economy are considered. The peculiarities of CRM-systems application in tourism activity are determined, which create preconditions for corporate software for marketing, sales, customer service, content management and operations, allow timely notification of customers, offer the most favorable conditions and control all business processes of tourism. It is proved that CRM is a special approach to the tourism business, in which the first priority of the company is the customer and meet his needs. The main tasks that allow tourism companies to solve using CRM, in particular the formation of customer base, automation of business processes, improving the efficiency of personnel management, sales management and the formation of analytics. The main marketing tasks that CRMs solve with the help of CRM are identified, their content is determined and it depends on the benefits that the tourism business and customers receive. It is determined that the main indicators of CRM-system efficiency include: stability of appeals and resale; sales performance; profitability of transactions; number of sales, revenue; percentage of customer retention; costs associated with sales and advertising campaigns; efficiency of interaction with clients; consumer commitment to the brand. The practice of application of CRM-systems by tourist enterprises is considered on a concrete example. The necessity of using CRM-systems by tourist enterprises is substantiated. It has been proven that CRM is a relevant platform for all business units, used to build effective interaction of enterprises with their customers and meet all their needs. These systems create real preconditions for the application of customer-oriented approach by tourism enterprises, contribute to the formation of their stable long-term position in the market.

THEORETICAL FUNDAMENTALS OF STRATEGY AND STRATEGIC MANAGEMENT IN BANKING SPHERE

The article investigates the theoretical foundations of strategy formation. The role of strategic planning in ensuring the sustainable development of the modern banking system in conditions of increased competition is determined. The aim of the article is the substantiation of the theoretical foundations of strategy and strategic management, taking into account the specifics of banking activities, as well as to search for modern strategic management mechanisms of banking institutions for ensure their effective operation. Theoretical approaches to the definition of the of «strategy» concept by representatives of conceptual, practical, systemic, integrated approaches are analyzed. Based on the generalization of scientific concepts and definitions, the essence and main task of the strategy are investigated. The peculiarities of the strategy modern interpretation in the banking institutions activities are considered, taking into account macroeconomic instability and fast-paced changes in the external environment. The main types of strategies that are used in the strategic management of banking structures are determined: financial, marketing, information technology, personnel management strategy. The concept of «strategic management» is generalized, its place and role in the development of banking institutions are determined. The constituent elements of the bank’s strategic management system are considered and the peculiarities of the modern strategic management of the banking system are determined. It is substantiated that exactly the strategy is a key element of the bank’s strategic management system in the conditions of market economy transformation. The newest methodological concept of the strategic management of banking institutions is considered. It is determined that the majority of Ukrainian banks do not use modern forms and methods of management at the strategic level. It is proposed to introduce modern strategic management mechanisms into the banking institutions activities to improve their efficiency in the process of banking system digitalization.

Modern trends in unemployment

Unemployment is an integral part of a market economy. This means that the inevitable feature of a market economy is the existence of a certain level of unemployment, despite the fact that unemployment is one of the visible indicators of macroeconomic instability in the country. Unemployment causes macroeconomic instability precisely when the level of actual unemployment exceeds the set natural limit.

Selected Macroeconomic Determinants of Economic Growth in Kenya: A Co-integration Approach

Kenya’s GDP performance is constrained by high level of fiscal deficits, interest rates, and fluctuating exchange rates. Consequently, the economy has been characterized by sluggish cycles of low economic growth with policymakers revising their policies. Potential increase in economic growth level is central for Kenya to address macroeconomic instability. Supplementary evidence available indicates divergent views on the relationship between selected macroeconomic variables and economic growth. This study sought to determine the effect of selected macroeconomic drivers on economic growth. The study was anchored on Endogenous growth theory. Anchored in the philosophical paradigm of positivism, the study adopted an explanatory research design and relied on secondary data from the Kenya Bureau of statistics with the data spanning from 1990 to 2020. The study employed bound test to test for long run relationship and Autoregressive Distributed Lag model (ARDL) in the empirical analysis to evaluate the relationship among the variables. The data was subjected to stationarity test using Augmented Dickey Fuller (ADF) test . The long run ARDL results indicated that the coefficients of; exchange rate , and lending interest rate significantly affected economic growth. T he findings of this study will be useful in fiscal and monetary policy formulation, it inform the government on ways of finding possible solution to the economic growth challenges. The study submits that policymakers in CBK ought to adopt policies that maintain and keep stability in exchange rate, determine effective lending interest rates and maintain a level of fiscal deficit commensurate to economic growth in Kenya.

РАЗВИТИЕ ПРАКТИЧЕСКИХ ПОДХОДОВ К ИСПОЛЬЗОВАНИЮ СТРАТЕГИЙ РОСТА В ДЕЯТЕЛЬНОСТИ КОМПАНИЙ В СТРАТЕГИЧЕСКОЙ ПЕРСПЕКТИВЕ

The willingness of market-leading companies to have sustainable growth over the past few decades has been significantly complicated by the increasing level of uncertainty of the overall impact of environmental factors in all spheres of economic activity. Macroeconomic instability, sharp fluctuations in the raw material markets, intense industries’ competition, political instability, the multidirectional dynamics of social processes, unpredictable natural and climatic cataclysms of global proportion - all these have significantly impact that complicate the possibilities of forming market development strategies, based on traditional planning approaches that take into account mainly retrospective dynamics. Moreover, the economic instability of the last decade, caused by environments, has shown to significant part of international companies the instability of the chosen strategies for the development of the firm. The dilemma of choosing the direction of strategy is relevant for most companies of Russian and foreign business – managers face the question of choosing the direction of the corporate strategy development of the company, taking into account all the components of the business portfolio. The author studies the evolutionary development of the theory of strategic growth, presents a variety of approaches to the classification of organizational growth strategies, identifies their similarities and contradictions, and give arguments for the traditional growth strategies classification. Strategies of intensive growth, vertical integration, and diversification are attractive for development, but at the same time require certain efforts and resources. In the course of the study, the author conducted research to identify and choose the most optimal growth strategy when the company reach a certain level of stability for dynamic development, identified the basic criteria for choosing the strategic vector of the company's development.

Moderating Effect of Political Instability on ICT and Economic Growth Nexus in Kenya: ARDL Bound - Co-Integration Approach

The government has attempted to target specific macroeconomic factors in order to stimulate economic growth in Kenya through monetary and fiscal policies. Despite these efforts, Kenya's GDP growth is hampered by high interest rates and high interest rate volatility. Kenya's ability to address macroeconomic instability hinges on its ability to increase economic growth. Auxiliary evidence shows that perspectives on the relationship between ICT and economic growth are segmented. The goal of this study was to determine the impact of ICT on economic growth in Kenya, as well as the moderating effect of political instability on the relationship. The research was based on Solow's theory of growth. An explanatory research design was used, with data spanning from 1990-2020 obtained from Kenya Bureau of Statistics. In the empirical analysis, the study used the bound test to test for a long-run relationship and the Autoregressive Distributed Lag model (ARDL) to evaluate the relationship between the variables. The data was subjected to an Augmented Dickey Fuller (ADF) test to determine stationarity.The long run ARDL results indicated that the coefficients of; ICT rate were insignificant . However with the introduction of political instability as the moderator ICT was significant and positively affected economic growth. Political instability moderated the relationship between ICT ( and economic growth. As a result, promoting effective governance should help to improve political stability. The findings of this study will help the government figure out how to address the problem of low economic growth. According to the study, the government should invest in the ICT sector to improve its accessibility and affordability. Additionally, the government should work to improve political stability and good governance by gradually establishing institutions that uphold the rule of law and provide security.

The new post‐covid long term looks much like the old one

▪ We have become more optimistic that the long‐term damage to the world economy from the coronavirus crisis will be less than we originally anticipated, especially because of the rapid rebound of output and financial markets. Our baseline forecasts now estimate the level of world GDP being reduced by less than 1% over the long‐term – a considerable upgrade from a year ago. ▪ Key positives are the fast recovery in output, employment, and asset prices, which have rebounded from 2020's troughs far faster than after the global financial crisis. Early evidence also suggests much less financial ‘scarring’ than after the GFC – the trajectories of bad loans, firm failures, and bank credit standards are much more favourable. ▪ But the rate of long‐term world growth will be low as all the pre‐pandemic drags on growth resurface. After two very strong years in 2021 and 2022, we forecast that world growth will then be modest, averaging 2.7% per year to 2030 – below the long‐term average of the last forty years and lower than in 2011–2019. ▪ Key drivers of long‐term growth – demographic trends, capital stock growth, and total factor productivity growth, will all remain subdued. Growth faces headwinds from structural factors like high public and private debt, a loss of dynamism in the advanced economies, and slower growth in emerging markets. ▪ The pandemic also adds some new downside risks. Some financial scars from the pandemic may emerge later, sustained disruption to supply chains is possible, firms and households may be more cautious, and governments may react to high public debt with excessive austerity. Macroeconomic instability in emerging markets may also further weaken trend growth there.

Rethinking inequality in the 21st century – inequality and household balance sheet composition in financialized economies

This paper analyses the impact of household wealth heterogeneity on inequality and macroeconomic stability in financialized economies. Based on the case of the USA since the 1980s it argues that transformation of financial sector operations has generated inequality by influencing gains from wealth ownership and leverage levels across the income distribution. Securitization and the subprime lending expansion have led to the emergence of a new class of leveraged homeowners, experiencing large increases in wealth prior to the Great Recession, followed by substantial losses after the crisis. Simultaneously, capitalists have diversified their asset portfolios while earning the highest and fastest-growing wages in the economy when employed as financial sector executives. In this light, the paper proposes a new conceptualization of households in macroeconomic models, defined by balance sheet composition rather than income sources alone. To inform this taxonomy, inequality and leverage indicators are simulated in a stock-flow consistent model calibrated to US data with three classes of households distinguished by their wealth composition, and a securitized financial sector. The proposed framework is found to produce more empirically accurate levels of income inequality and greater macroeconomic instability than the two-class division and establishes an equalizing effect of housing for wealth distribution.

MONETARY MEASURES AND CURRENCY REGULATION DURING MACROECONOMIC INSTABILITY AND WORLD UNCERTAINTY

This study is devoted to the comparative analysis of the rules of foreign exchange regulation and control, as well as monetary measures implemented in developed counties during 2003-2020. Accordingly, the purpose is to compare currency restrictions imposed as a response to several economic, political and epidemiological situations and determine their relevance. The study consists of three main parts. The first section highlights the evolution of the monetary policies of different countries during the rapid global economic growth (2003-2007) and key monetary novation before and after the 2008-2009 great recession (macroprudential approach to monetary regulation). The second section describes the world post-crisis monetary system in terms of foreign exchange regimes. Finally, in the third section, the main focus is directed on the period of the COVID-19 crisis and, eventually, key monetary policy measures imposed in the leading economic areas as a reaction to macroeconomic instability and world uncertainty. The practical implications of this study are noteworthy to consider as the problem is outlined in three aspects: 1) evolutionary (with a step-by-step analysis of economic events from 2003 to 2020); 2) instrumental (with analysis of the tools of monetary, macroprudential and monetary policy); 3) country (in the context of world uncertainty). In most cases, the results show that countries produce shocks that transferred to the rest of the world (spillbacks effect). Also, in a financially integrated world, macroprudential policies are valuable and essential because instability becomes a key defect of the modern market system. That is why monetary policy, especially after the crisis, is critical in stabilizing macroeconomic fluctuations.

Examining the FDI–Growth Nexus in BRICS: Panel Data Evidence

The purpose of this article is to examine the relationship between foreign direct investment (FDI) and economic growth in Brazil, Russia, India, China and South Africa (BRICS) economies, which are considered to be the fastest-growing economies and dominant players in the global investment landscape. In order to assess the relationship between the dependent variable (economic growth) and explanatory variables (FDI inflows and other growth determinants), we analyse a 32-year panel data starting from 1987 to 2018 using feasible generalised least squares (FGLS) method. The article found a significant positive FDI impact on economic growth in BRICS. However, exports, human capital and inflation (macroeconomic instability) exert a negative impact on economic growth of BRICS, whereas domestic investments exert a positive impact on growth. JEL Codes: F21, F43, C23, O47

EXAMINING THE NEXUS BETWEEN INSTITUTIONAL QUALITY AND STOCK MARKET DEVELOPMENT: EVIDENCE FROM GHANA

While the link between stock market development and overall economic growth is well discussed, the empirical evidence on what motivates the development of stock markets is still scanty necessitating further research efforts. In this study, how institutional quality affects stock market development in Ghana is examined relying on quarterly data spanning from 1995Q1-2015Q4 using a composite index of stock market development. Applying the Autoregressive Distributed Lag (ARDL) method, the results posit a significant short and long-run effect of institutional quality on stock market development. Controlling for macroeconomic factors, a long-term significant impact of foreign direct investment inflows, banking sector growth, and income level on the growth of Ghana’s stock market is observed. It is further documented that regardless of the time period, domestic macroeconomic instability proxied by inflation does not matter for stock market growth. According to the main findings, it is recommended in the study that continual efforts must be made to enhance the quality of institutions. Particularly, policies geared towards improving regulatory quality and control of corruption are imperative for reducing unethical practices in the stock market.

Interlinkages among Terrorism, Macroeconomic Instability, Political Instability, and Economic Growth in Pakistan

This study attempts to establish the relationship between three types of instabilities and economic growth. Political instability, macroeconomic instability, terrorism, and economic growth are analyzed for the period of 1970 to 2019 in Pakistan. The study constructs the indices of the above-mentioned variables by adding some new variables. Results show that terrorism, political instability, macroeconomic instability, and GDP per capita have long-run associations. GDP per capita and political instability is positively related to terrorism. It indicates that political instable environment paves the way for terrorists to achieve their targets in Pakistan. However, the positive association of GDP per capita to terrorism is due to uneven income distribution pattern. It stimulates deprived groups to become a part of violent activities. Furthermore, results show that macroeconomic performance of a country has no significant effect on terrorist activities but persistent poor performance increases the probability of terrorism. Therefore, in the long-run, macroeconomic instability has positive influence on terrorism. Causality relationships indicate no link between political instability and macroeconomic instability. However, terrorism causes both political and macroeconomic instability in Pakistan.

Conflict and conciliation: industrial relations in an industrialising Hong Kong, ca. 1946-1960

ABSTRACT This article focuses on a long-standing riddle: what explains the quiescence of Hong Kong workers? Building on a literature written by social historians, industrial relations experts and social scientists, and using qualitative and quantitative data created by governments, the article discusses the effects of the de-radicalization of the working class; acute macroeconomic instability; ‘paternalistic’ and discriminatory labour management strategies; and interventions by the colonial state in industrial relations – most notably voluntary conciliation. The article argues that Hong Kong’s dominant decentralised system of industrial relations was supported by a conciliation-based approach nurtured by the Labour Department of the colonial administration. It also notes similarities between Hong Kong’s conciliation-based approach and that which emerged in 1940s Britain. New evidence on the effectiveness of conciliation qualifies the hitherto dominant thesis that British colonial administrations in Asia repressed labor activism.

КРЕАТИВНАЯ ИНДУСТРИЯ И СОВРЕМЕННАЯ АГРАРНАЯ ЭКОНОМИКА

The article deals with the problem of developing the creative nature of agricultural labor and agricultural production in general. The features of agricultural labor and its value bases in the conditions of macroeconomic instability, uncertainty and risks are revealed. The analysis of the value bases takes into account the problems of labor in the agricultural sector, for the solution of which the authors have developed recommendations that have proven themselves in practice and are well-established in theory. The role and importance of practice-oriented and humanitarian education in the development of creative (subjective) abilities of the employee's personality are revealed. A critical analysis of the state of development of questions of creativity in modern science is given. The article substantiates the thesis about the need to strengthen the role of humanitarian education in the training of creative specialists based on the use of foresight-program training as an effective interactive technology.

Determinants of linkages between foreign direct investment firms and domestic firms in Vietnam

Foreign direct investment (FDI) is an important sector of many developing economies in general and of Vietnam in particular. In Vietnam, the FDI sector contributed up to 27.7% of the average economic growth rate of 6.0% per year from 2010 to 2018. Besides this contribution, operations of FDI in Vietnam reveal many limitations, the most noticeable of which is the weak linkage between FDI and Vietnamese firms. This article examines determinants of FDI-domestic firms linkage in Vietnam. This research looks at all three types of linkage, including horizontal linkage, vertical linkage, and supply-backward linkage. Factors that have a positive impact on linkages are provincial economic growth, firms’ technology level, regional factors, being located in industrial zones, and operating in the manufacturing sector. Macroeconomic instability has a negative impact on linkage. The quality of economic governance, as measured by the Provincial Competitiveness Index, is important for attracting FDI, but does not affect linkages.

Macroeconomic instability of economic development in the theory of J.M. Keynes

Macroeconomic instability of economic development in the theory of J.M. Keynes