Economic Policy Recommendations Research Articles

Knowledge for Evidence-based Economic Policy: Supply and Demand

Based on the idea of a positive relationship between the growth of scientific economic knowledge and economic development, through the prism of the types of discourse in which Russian researchers are involved, the issue of barriers to building an effective system of economic science management, which is necessary for evidence-based economic policy, is discussed. It is necessary for evidence-based economic policy. The first type of discourse is intradisciplinary and is associated with the interaction of various research programs. The second and third types of discourse – internal and external - have a geographical dimensionand reflect the target audience and the research agenda. Some principles are formulated on the basis of which an effective system of management of Russian economic science in terms of the content of ongoing research can be built. The features, comparative advantages and failures of the Coasean approach in economic research are noted in the context of developing recommendations for economic policy in the light of the interaction of competence centers with government bodies.

An Islamic critique of rival economic systems’ theories of interest

PurposeThis paper aims to contribute an Islamic critique of various competing economic system’s theories of interest, which have evolved within the distinct ideological frameworks of distinct rival economic systems and religions from the point of view of discovering potential effective Islamic economic solutions of the interest-driven modern economic, financial and banking and debt crises and the related problems of inflation, extreme, wealth inequalities and extreme poverty.Design/methodology/approachThis historical research paper portrays the chronological evolution of competing narratives and theories of interest in realms of religions, philosophies and rival economic systems for contributing their comparative review and critique from an Islamic point of view in light of the pertinent literature of multidisciplinary history of religions, philosophies and economic thought. It develops an Islamic critique of theories of interest in light of interactions among history of religious thought on interest, history of economic thought on interest and economic theories of interest and the interest-driven economic crises for highlighting potential Islamic interest-free solutions of the modern economic crises in the framework of the Islamic political economy. In light of an Islamic critique of various competing theories of interest, the paper presents pertinent economic policy recommendations for the governments of the countries of the contemporary Muslim world.FindingsThe interest-free Islamic economic, as well as banking theories and models, offer the potential practical exploitation-free and injustice-free humanitarian solutions of the contemporary persisting macroeconomic crises (national, regional and global economic crises, financial crises, debt crises and banking crisis). Current Islamic discourses on interest and interest-free Islamic banking have effectively promoted the popularity and growth of global Islamic banking industry in the Muslim world in the 21st century.Practical implicationsKeeping in view a general universal consensus of the Islamic jurists on the elimination of interest of all types from the economy, it is recommended for the Governments of the Muslim countries to implement a consensus-based Islamic banking model, which uses only the Islamic juristic consensus-based Islamic modes of banking and finance – Musharikah, Mudharabah and Al-Qardh Al-Hassan (interest-free loan) – for precluding the possibilities of emergence of controversies about the prospective Riba-free Islamic economic and banking system. Litmus test of the practical success of the interest-free Islamic universal economic and banking system is the successful elimination of all forms of Riba (interest) and all possibilities of its involvement in extractive and exploitative activities in letter and spirit.Originality/valueThis research paper contributes a comprehensive logical and objective critique of various competing prominent theories of interest from an Islamic economic point of view and highlights their pertinent practical macroeconomic problems-cum-consequences as well as the potential Islamic macroeconomic policy responses in the form of interest-free Islamic banking/monetary/fiscal policies.

On capital, saving, and investment in the twenty-first century: a reply to Hein

With our book Saving and Investment in the Twenty-First Century: The Great Divergence (published as open access), we present a comprehensive theoretical explanation as well as empirical evidence for the phenomenon of low interest rates observed in the OECD countries and China and make various economic policy recommendations based on it. We have developed a new capital-theoretical approach to address these important issues. In what follows, we will discuss some of the more critical parts of Eckhard Hein’s otherwise very sympathetic review of our book.

READING KEYNES’S POLICY PAPERS THROUGH THE PRISM OF HISTREATISE ON PROBABILITY: INFORMATION, EXPECTATIONS, AND REVISION OF PROBABILITIES IN ECONOMIC POLICY

When scholars investigate the legacy of John Maynard Keynes’sTreatise on Probability(1921) for the development of Keynes’s thinking, the attention usually focuses on the connections among Keynes’s probability theory, his conception of decision-making under uncertainty, and the theory of the functioning of the macroeconomic system that derives from it—through the marginal efficiency of capital, the preference for liquidity, and the self-referential functioning of financial markets. By contrast, this paper aims to investigate the connections between Keynes’s probability theory, on the one hand, and his economic policy recommendations, on the other. It concentrates on the policy recommendations defended by Keynes during the Great Depression but also after theGeneral Theory.Keynes’s economic policy can be understood as a framework for decision-making in situations of uncertainty: fiscal policy aims to induce private agents to change their “rational” probability statements, while monetary policy aims to allow more weight to these statements.

Improving educational resilience in the OECD countries: Two convergent paths

While equality of opportunity in education has been studied, the literature mainly focuses on academic performance and its determinants. Thus, to help fill this gap, this paper identifies the factors that contribute to improving equality of opportunity and the policies that should be implemented to achieve it. This work is novel in various ways. First, it defines student resilience in a new way using multilevel models applied to two groups of countries. Second, it analyses the determinants of equality of opportunity in the OECD and makes economic policy recommendations. Using the PISA waves from 2003 to 2018, our results show that uniform economic policies should not be pursued across all OECD countries. While countries in the relatively poor group need economic policies that boost per student expenditure, countries in the richer group should prioritise human capital via teacher salary. In other words, in the richer countries, it is not the level of expenditure that matters but how it is spent. Our results also demonstrate the importance of soft skills for the equality of opportunity of students in all cases. Thus, we recommend designing education policies aimed at developing these skills.

Кластерная политика и инновационная активность промышленных предприятий

The purpose of the article is to assess the possibility of using cluster policy in Russia’s industry as an instrument for developing dynamic competition (encouraging innovation activity). Drawing on the results of a detailed systematic review of the cluster theory, the author identifies the reason for its weak operationality: an implicit premise on entrepreneur’s passive role in the innovation process. He then attempts to remove this premise by explaining the motives of company's behavior through a modified product variety model which is tested on empirical data from the U.S. and Russia. The results of testing show that at similar level of economic activity the geographical concentration of industrial enterprises in a cluster contributes to the intensification of innovation processes. A relatively more competitive behavior of firms in a cluster is explained through the theory of industrial markets and new institutional economic theory. The analysis concludes with valuable recommendations for economic policy.

Кластерная политика и инновационная активность промышленных предприятий

The purpose of the article is to assess the possibility of using cluster policy in Russia’s industry as an instrument for developing dynamic competition (encouraging innovation activity). Drawing on the results of a detailed systematic review of the cluster theory, the author identifies the reason for its weak operationality: an implicit premise on entrepreneur’s passive role in the innovation process. He then attempts to remove this premise by explaining the motives of company's behavior through a modified product variety model which is tested on empirical data from the U.S. and Russia. The results of testing show that at similar level of economic activity the geographical concentration of industrial enterprises in a cluster contributes to the intensification of innovation processes. A relatively more competitive behavior of firms in a cluster is explained through the theory of industrial markets and new institutional economic theory. The analysis concludes with valuable recommendations for economic policy.

Participation, Unemployment, and Wages

AbstractThe HILDA Survey data have substantially deepened our understanding of the Australian labour force. In this article, we highlight key insights relating to: (1) labour force participation; (2) unemployment; and (3) wages. Using the panel structure of the data, along with the breadth of questions asked, researchers have been able to overcome econometric challenges and better understand how the Australian labour market operates. Much attention has also been directed towards understanding persistent labour market disadvantage and the long‐lasting impact it can have. Together, these studies provide a plethora of useful recommendations for shaping future social and economic policy.

Les effets DU systeme « mobile money » sur LA croissance economique: LE cas des pays DE LA cemac

This paper studies the effect of the « Mobile Money » on the CEMAC economic growth. One of the poorest regions in Africa with the real growth rate of 1,6% registered those five years, and which is generally negative. the theoretical view, we have used two models which are: The quantitative theory of money and the endogenous growth theory to show that the use of the « Mobile Money » has a positive impact on the economic growth. The econometric analysis carried out using a panel model made it possible to show that the use of the « Mobile Money » is positively and significantly correlated with the economic growth rate of the CEMAC countries. Thus, an increase of 10% of the use ratio of the « Mobile Money » could lead to an increase in the economic growth rate of 1,87 point of percentage. From this result rise some economic policy recommendations, including the need for States to facilitate access to mobile phones by poor rural populations by investing more in the field and by granting tax incentives to operators in the sector.

Macroeconomic Perspective on Urban Sprawl: A Multidimensional Approach in Poland

There are important relationships between the urban sprawl process and economic growth. They are usually expressed through spatial relations and changes taking place in the local, regional and national economy. The temporal and spatial dimension, including dispersed location, are the determinants of development and economic growth. Therefore, the urban sprawl phenomenon and the related location, hypothetically conditioning economic growth, should be subject to macroeconomic research. The article examines how urban sprawl affects the national budget and national economic growth. Unlike many studies where urban sprawl is studied by scattering the population around cities, we undertake more complex examination using buildings’ location. Urban sprawl, as we understand it, is a spontaneous spread of buildings around cities. To assess the spontaneity, we use a grid of squares with a side of 500 m. The squares are used to calculate the morphological indicators of urban sprawl. Therefore, quantified urban sprawl is one side of the equation; on the other side are macroeconomic variables. In this way, we examine the relationship between urban sprawl and the national budget and economic growth of Poland. The conclusions obtained are, e.g., urban sprawl does not have a negative effect on the national economy and the budget. This is a different conclusion from those thus far. There are also different conclusions on the regional level. Based on the research results, we formulate recommendations for national economic policy and spatial policy.

THE RULE OF LAW AND INFLATION IN THE MIDDLE-INCOME COUNTRIES

The article analyzes the relationship between compliance with the rule of law and inflation. Annual data for the period of 2013—2019 of the Rule of Law Index from the non-governmental organization World Justice Project (WJP) for 40 countries of Central and Eastern Europe, the former Soviet Union, Asia and Latin America were used. By means of cross-section estimates and panel data using a random effects model (RE), the dependence of inflation on individual WJP sub-indices was empirically estimated, taking into account a wide analytical spectrum of different aspects of the rule of law. Recently, the issue of the rule of law is increasingly used in economic research. First of all, it concerns the dependence of transaction funds and trust on legal factors, which has a direct impact on the funds of production and inflation, as emphasized by the representatives of the new institutional school (New Institutional Economics). Instead, Neoclassical economics economists mainly analyze the influence of the rule of law mechanisms on the formation of trust in such institutions as the independent central bank or the state administrative apparatus. There is no lack of empirical evidence that the anti-inflationary influence of the central bank significantly depends on the concomitant conditions of compliance with the rule of law. Keynesian economics experts state that the importance of legal and regulatory norms increases significantly with a low interest rate (Zero Lower Bound — ZLB), which has been the case recently in most industrialized countries. Since the academic interpretation of the rule of law is quite broad, it is of practical interest to study the relevant macroeconomic effects in terms of such individual components as the system of counterbalances and checks for government, the fight against corruption, maintenance of law and order, efficiency of regulatory mechanisms, etc. The study showed that there is no reason to deny the anti-inflationary impact of the rule of law in general and in terms of individual components, but the obtained empirical estimates may be vulnerable to data aggregation and differ in terms of individual groups of countries. If we use the general index of the rule of law of the WJP, the anti-inflationary effect can be traced both for the general sample of 40 countries, and separately for both subgroups of countries: 1) Central and Eastern Europe (CEE) and the former Soviet Union, 2) Asia and Latin America. The use of WJP sub-indices shows an anti-inflationary effect for the general sample of countries and subgroups of CEE countries and the former Soviet Union (with a few exceptions), but the corresponding effect is completely lost for the countries of Asia and Latin America (it can mean that only complex simultaneous introduction of all components of the rule of law is anti-inflationary). This feature draws attention to the possibility of erroneous use of panel data estimates for large groups of countries that may not meet certain regional characteristics and incline to erroneous recommendations for economic policy. Among other results, weak signs of accelerating inflation have been observed over time in the CEE countries and the former Soviet Union, but not in Asia and Latin America. Also in these countries, inflation does not depend on GDP dynamics. In contrast, in the CEE and former Soviet Union countries, on average, each percentage point of GDP growth (lag per year) is marked by a 0.3-percentage-point decrease in inflation.

Analysis of the Economic Impact of the US Presidential Candidates on the United States and China

In order to analyze the possible impact of the election of different candidates in the U.S. general election on the U.S. economy and the Chinese economy, and put forward economic countermeasures and policy recommendations in related fields in China, this paper applies two models, Time Series Model and BP Neural Network.

Narušení toků přímých zahraničních investic v důsledku krize covid-19 a management obnovy ekonomiky

The paper describes the responses of national economics to the spread of pandemic COVID- 19 in year 2020. As a result of economic and social interconnectedness and dependency of countries, the actions are mutually influential in a great extend. The economic impacts are analysed from macroeconomic perspective, demonstrating the effects on important economic indicators. Due to the crucial role of investment, the paper focuses on disruptions of foreign direct investment flows and consequent changes, especially in the European Union. Based on analysis of data from UNCTAD, OECD, Czech Statistical Office and Czech National Bank, the aim is to provide prognosis of future development of foreign direct investment in case of Czech economy. Three scenarios are constructed with forecasting 15%, 37% and 60% drop in foreign direct investment inflow. The paper highlights the significant relevance of investment incentives in attracting the investors and investment promotion agencies in general in terms of avoiding divestment. The main factor that determines the final fluctuation of the variable (the state of foreign direct investment in individual years) is the health situation and the related restrictions on business activities. The presented results lead to a discussion of recommendations for economic policy concerning the support of business activities.

Современная денежная теория (ММТ): новая парадигма или набор рекомендаций для макроэкономической политики? (Modern Monetary Theory (MMT): New Paradigm or a Set of Recommendations for Macroeconomic Policy?)

The authors examine the essential theoretical components of MMT, its policy recommendations and reasons for gaining popularity in advanced economies. Fundamental features of MMT are concerned, namely the specifics of modern fiat monetary systems’ functioning, stock-flow consistent modeling, and the role of government and private sector in the creation of aggregate demand. The necessity to separate methodology and ideology of MMT for distinguishing between its theoretical presumptions and macroeconomic recipes is emphasized. It is claimed that economic policy recommendations of MMT do not follow directly from the overall correct description of fiat monetary system. In particular, the applicability of MMT to the Russian economy, as well to other emerging economies, is analyzed. These economies are offered to rethink their policies using the principles of monetarily sovereign government. Their policymakers need to shift priorities from balancing the budget to decreasing the dependence on capital flows and foreign trade. MMT-style options of stimulating economic growth and reaching the “genuine” full employment are in the epicenter of current macroeconomic debates in academia and the political sphere. The paper discusses the main critical arguments against MMT which appeared in Russian economics journals. It is stated that the existing critique is not enough for “debunking” MMT, but at the same time several weak points have not been taken into account

GOVERNMENT INTERVENTION IN THE SPACE SECTOR: POLICY RECOMMENDATIONS FOR TURKEY

After Russia launched the first satellite, Sputnik I, into Earth orbit in 1957, Space Race started between the US and Russia. Both governments allocated huge budgets for space missions until the second half of the 1970s. But space research didn’t remain limited to the two countries over the years; some other countries established their space agencies and started engaging in space activities. At first, NASA was at the center of the US civilian space sector; it coordinated the market purchasing from aerospace firms. But later it changed its strategy and began to collaborate with private space companies in certain space missions using Public Private Partnership method in particular. Some other space agencies also adopted this method. This change has helped to increase investments and has encouraged start-ups to get into the market. Today, the global space economy has reached a significant size along with the increasing number of companies and diversified production. So the governments have intervened in the market not only to correct market failures, which provide a rationale for government intervention but also to create the market. In this context, this study discusses the need for government intervention in the market to create a private space sector in the light of the NASA and ESA experiences, and develops economic policy recommendations for Turkey examining the Decree that has established the Turkish Space Agency formally.

Peter Colander & Craig Freedman, Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism

Abstract. Classical Economists preserved a firewall between their understanding of social conditions, their role in scientific theories, and policy advocacy. However, contemporary Neoclassical and Welfare economics have abandoned economics objectivity. Colander and Freedman indicate that it is time for the profession to rebuild the firewall between economic analysis and policy recommendations and return economics to its classical roots. Keywords. Welfare economics, Neoclassical economics, Economics objectivity. JEL. C92, E20, J00, J01, J08.

Fire lines as fault lines: increased trade barriers during the COVID-19 pandemic further shatter the global food system.

In this opinion piece, we highlight that trade barriers established during COVID-19 as “fire lines” to prevent cross-border transmission of the pandemic could become “fault lines” that demolish the global food system. We review restrictions on both international agricultural exports and imports, especially unilateral border controls such as import refusals and alerts, in previous epidemics and arising with two novel features amid COVID-19. Institutional causes to pervasive trade barriers in epidemics that are embedded in the WHO-WTO coordination scheme have been discussed. In the meantime, discussions on potential economic outcomes and policy recommendations have been provided.

Zasoby i strumienie w kontekście analizy kointegracyjnej

Przedmiot badań: Zasoby i strumienie – kluczowe kategorie ekonomiczne rozpatrywane są w kontekście ich roli w mechanizmie zależności kointegracyjnych, w szczególności w dochodze­niu do równowagi w gospodarce.
 Cel badawczy: Celem analizy było powiązanie jedno- i wielowymiarowej analizy kointegra­cyjnej z podstawowymi mechanizmami makroekonomicznymi, pokazanie różnic wybranych doktryn ekonomicznych w świetle stopnia zintegrowania zmiennych, a także rodzaju zależno­ści makroekonomicznych w różnych horyzontach czasowych. Tym samym celem badawczym było dowiedzenie, że do weryfikacji większości założeń, np. hipotezy o neutralności pieniądza w długim okresie, warunkiem koniecznym (ale niewystarczającym) jest analiza kointegracyjna. Kolejnym celem jest pewne uporządkowanie wiedzy z pogranicza zaawansowanych metod sta­tystycznych oraz teorii ekonomii, zwłaszcza w tych obszarach, gdy na styku tych subdyscyplin dochodzi do nieporozumień.
 Metoda badawcza: Analiza kointegracyjna dla zmiennych I(1) oraz I(2) przeprowadzona została zarówno na podstawie prostych równań dynamiki, jak i modeli VECM stosowanych w ujęciu wielowymiarowym. Omówiono różnicę między rolą zasobów i strumieni w mechanizmie osiąga­nia równowagi w gospodarce. Te kwestie – stosunkowo proste w systemie I(1) poważnie kompli­kują się w przypadku obecności trendów stochastycznych I(2).
 Wyniki: Trzeci rodzaj kategorii ekonomicznych zwany akcelerantami został wprowadzony w celu lepszego rozróżnienia długo-, średnio- i krótkookresowych zależności w systemie I(2). Nawet prosta analiza integracji dostarcza istotnych zaleceń dla polityki gospodarczej. Połączenie analizy integracyjnej z makroekonomicznym podejściem zasób-strumień-akceleranta może być dodatkowym narzędziem testowania o tyle ważnym, że klasyczne testy stacjonarności procesów generujących zmienne mają niską moc. Właściwe wyznaczenie stopnia integracji (stopnia nie­stacjonarności) takich procesów jest z kolei niezbędne w celu choćby uniknięcia identyfikacji tzw. regresji pozornych, a te z kolei są już asumptem do błędnych decyzji na każdym szcze­blu gospodarki. Szczególnie ważne są jednak wskazania wynikające z powiązania rozważań zasobowo-strumieniowych z wielowymiarową analizą kointegracyjną. Połączenie tych kwestii możliwością dekompozycji procesów osiągania zrównoważenia w gospodarce na horyzont krótkookresowy, cykliczny i długofalowy powinno należeć do kanonu podejmowania decyzji ekonomicznych. Istotnym uzupełnieniem powinna być tu analiza źródeł szoków wytrącających system ze stanu równowagi oraz ocena czasu oddziaływania takich szoków.

The science and technology imperative for Russia's competitiveness during the conceptualization of the Fourth Industrial Revolution (Industry 4.0)

Subject. The article discusses the state and potential of S&T development in Russia in terms of the competitiveness of the national economy at the dawn of the fourth industrial revolution. Objectives. The research is aimed to examine Russia's position in the Global Competitiveness Index, considering the way countries worldwide prepare for the fourth industrial revolution. We also determine Russia's part in the global economy and international division of labor. The article also formulates the issue of S&T development so as to outline recommendations for the national economic policy. Methods. The research employs the new methodology of the World Economic Forum during the rise of Industrie 4.0. Other tools include the microsystems analysis, statistical, historical and comparative methods. Results. Considering the low innovative activity of entities and relatively low R&D costs, we still emphasize the resource-based profile of Russia's foreign trade. We substantiate the possibility of increasing the global competitiveness of the national economy and imperative nature of S&T development in the country concurrently with the fourth industrial revolution. Conclusions. Despite the slugging innovative activity and insufficient labor productivity for technological business, Russia's economy continues to climb the Global Competitiveness Index. There are respective conditions for information technology and creation of the large national market in Russia. Thus, Industrie 4.0 clears new horizons for Russia to change its positions in the international division of labor. The State should contribute to the development of the national S&T potential, increase innovation investment, and undertake active measures to prevent social issues and overcome the regressing integration of Russia into the global microsystem.

Rethinking the economics of water: an assessment

AbstractWater is rising on the policy agenda as population growth and climate change intensify scarcity, shocks, and access inequalities. The conventional economic policy recommendations—privatization, pricing, and property rights—have struggled due to a failure to account adequately for the politics of water and the associated distributional conflicts. We identify distinctive social and physical characteristics of water supply and demand, and explore their implications for three central areas of water policy: financing infrastructure, pricing, and property rights reform. Growing dependence on groundwater and non-networked water supplies exacerbates these challenges and reinforces the need to rethink the economics of water and tackle the political challenges head on. Meeting the water sustainable development goals would require institutional and technological innovations to supply, allocate, and manage water, as well as a sustained political and financial commitment to address those who might be left behind.