Impact of state finance on macroeconomic stability of Ukraine

According to reports data of the International Institute of Management Development (IMD) and World Economic Forum (WEF), countries’ competitiveness tendencies were defined: rate of global competitiveness index remains lower than the rate, achieved before the global financial and economic crisis, non-linear distribution of benefits from economic growth between the EU countries, Ukrainian rating falling by macroeconomic stability by 21 points in 2017 in comparison with 2018. It is not unexpected that realization of countries’ policy concerning their competitiveness growth requires some cost. Thus, author supposes that it is important to study key aspects of state finance, which can have great impact on the international competitiveness and solve the country’s macroeconomic stability problem. This paper shows results of author’s own research, carried out using methodic tools of scientists Ahvaz Shahid Chamran University, Ahvaz, Iran Abdolmajid Ahangari and Aziz Arman. It is based on evaluation of instability time rows of four economic variables of inflation (TINF), the ratio of budget deficit on growth domestic product (GDP) (TBD), foreign debt on GDP (TFD) and exchange rate deviation from the previous period (TRO) and calculation of macroeconomic instability index on their base MIItn. Research showed that all variables of macroeconomic instability index MIItn have a positive correlation; therefore, subindex of inflation rate instability and subindex of exchange rate to the previous period have the largest impact on the macroeconomic instability index MIItn.

In spite of some differences in methodology, implemented to evaluate competitiveness of these two institutions, place of leading countries in both ratings is practically the same. Particularly, due to the international competitiveness indices, economies of Switzerland, United States, Singapore, Netherlands, Hong Kong SAR, Sweden and Finland are included to 10 best countries by both methodologies in 2017.
According to data (WEF, 2017(WEF, -2018(WEF, , 2009(WEF, -2010(WEF, , 2004(WEF, -2005, Switzerland is the largest competitive country among analyzed ones, starting from 2004-2005 competitiveness index of which was increased 0.37 points and was 5.86. Leading position of Switzerland in the global rating was provided, first of all, by factors of subindices А (institutes, infrastructure, macroeconomic stability, health protection and elementary education) and С (business sophistication, innovation) of global infrastructure (in 2017, subindex А was 6.39, and subindex С 5.86). At the same time, United States (6.01) had the best position by subindex in 2017, owing to improvement of the given subindex factor (higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market sizе).
Country managed to keep the second position among all other analyzed countries. On the other hand, maximum increase of the global competitiveness index has not reached its maximum rate, received in the precrisis period in Finland in 2005 (5.94).
New countries-members of EU have high potential and dynamic for competitiveness growth, especially economies of Poland, Lithuania, Bulgaria, positions of which were greatly improved in comparison with 2009. Poland improved its positions in rating by 10 places (+0.26 points), Lithuania by 18 places (+0.28 points), Bulgaria by 26 places (+0.44 points). It should be noted that in spite of progressive convergence of the mentioned countries, spreads with absolute indices of EU countries leaders (Netherlands (5.57), Germany (5.57), Sweden (5.53), United Kingdom (5.49), Finland (5.44)) are different, but newest countries-members of EU managed to increase competitiveness index rate. At the same time, in comparison with data in 2004-2005, the largest negative changes of the global competitiveness index were registered in Latvia (-0.03 points). However, in spite of index falling, Latviа (49 place in the rating) remains more competitive country than Bulgaria (50 place), Croatia (74 place), Romania (62 place). In such situation of non-linear distribution of benefits from the economic growth, the ideology base of the country's special policy is a problem to increase its competitiveness. As Oliver Cann, Head of Media Content, World Economic Forum Geneva mentioned, high level of the competitiveness in the country leads "…to growth, which leads to income levels and hopefully, at the risk of sounding simplistic, improved wellbeing" (Oliver Cann, 2017).
It is not unexpected that realization of the mentioned objectives in the country's policy concerning its competitiveness increase requires some cost. Ukrainian scientists Vladimir Zakharchenko, Sergei Zakharchenko in their work (Zakharchenko & Zakharchenko, 2016) distinguish state finance as main factors to form total competitiveness in the country. The authors focus their attention on the fact that the state finance evaluation, on the one hand, shows an impact on international competitiveness in the country, and, on the other hand, allows to define strategic direction to strengthen the competitive potential of state finance in the global financial and competitive space.

Literature review
Scientific and practical range of problems on issues to evaluate state finance and their impact on economic growth, macroeconomic stability of the countryare actively studied in the world and native scientific literature.
Particularly, these problems are studied in research of EU scientists, which show conception of state finance stability as a governmental ability to provide debt and expected cost financing (Consolidated, 2010). That is why, it is not by chance, the main economic criterion of EU countries convergence is a rule of state deficit relation to GDP, which has not be over 3% and relation of state debt to GDP, which has not to be over 60%. According to IMFprognostications till the end of 2020 level of Ukrainian state debt ratio to GDP will be 71.0%, that will not conform to the maximum allowed norms of ratio and will mean the constant loss of the Ukrainian financial system paying capacity (Request, 2015 The World Bank describes macroeconomic terms as stable ones "…when the inflation rate is low and predictable, real interest rates are appropriate, the real exchange rate is competitive and predictable public sector saving rates are compatible with the resource mobilization requirements of the program, and the balance of payments situation is perceived as viable" (World Bank, 1990).
Rozhko investigated state finance role to provide macroeconomic stability processes and formed the following position. The aim of the macroeconomic stability policy in the country is based on combination of the conventional monetary policy and tools to regulate, to create best automatic stabilizers of the fiscal policy to achieve stable level of production and stable inflation gap. Therefore, macroeconomic stability leads to shortening of the main macroeconomic indices fluctuation (amount of national product, rate of prices, employment and absence of terms for GDP stable growth) and their fall decrease (Rozhko, 2014).
The purpose of the research is to define impact of state finance on the macroeconomic stability of the country, which is based on some state finance economic indices instability evaluationand on calculation of country's macroeconomic instability index.

Key research findings
Within this research, in order to evaluate state finance impact on the macroeconomic stability of the country, one uses methods, suggested by scientists Ahvaz Shahid Chamran University, Ahvaz, Iran Abdolmajid Ahangari, Aziz Arman and Aziz Saki, who due to research (Rozhko, 2014) understand macroeconomic instability as accumulation of changes levels fluctuation consequence (deficit and surpluses) concerning four variables of inflation rate (TINF), the ratio of budget deficit on growth domestic product (GDP) (TBD), foreign debt on GDP (TFD) and the ratio of actual currency rate on nominate currency (TRO) as a result of macroeconomic management, in other words, instability is increase or decrease of the index rate, which characterizes tendencies of the management process change (Ahangari et al., 2014).
Тhus, instability index of each factor is calculated according to the formula: where index of variable instability; X treal value of the variable in the moment of time ; TX ttarget value of the X variable, depending on the concrete form of the process tendency change equation.
Equation of the tendency concerning variable X values changes is: wheretime; 0free member; 1 … regression coefficients; coefficient, which characterizes impact of various occasional factors on variable X values increase.
The total index of macroeconomic instability is calculated as an average value of four constituents of instability indices: where index of the macroeconomic instability; subindex of the inflation instability level; subindex of the factor concerning state deficit relation to GDP; subindex of factor concerning the external debt to GDP; subindex of instability of the ratio of actual currency rate on nominate currency. Sanjay Kalra (2012) distinguishes the following criteria in his report about international experience to calculate macroeconomic indicators and their use: indices have to consider countries specific nature, must have clear economic value, wide statistic scope and cyclic behavior. According to main requirements to select indices, we propose to use index of deviation of exchange rate to the previous period as a factor, which characterizes stability or instability of the exchange rate due to Maastricht criteria requirements.
Macroeconomic instability index ( ) has to be oriented to the zero value, at the same time, crisis situations or booms impact will cause its reduction or increase.
Results of the correlation matrix (Table 3) show that, on the one hand, macroeconomic instability index ( ) during 1996-2015 has a positive and essential correlation with subindex changes of inflation instability rate (0.924), subindex of instability factor of ratio concerning exchange rate relation to the previous period (0.917), and, on the other hand, has positive connections with subindex of instability of state deficit relation to GDP (0.128) and with subindex of instability of foreign debt to GDP (0.3788). Therefore, subindex of instability of exchange rate relation to the previous period has positive correlation with subindex of inflation rate instability (0.8820). It proves that there is almost 90% mentioned subindices fluctuation tendencies agreement. Although ratio between instability index of state deficit to GDP and macroeconomic instability index, is statistically large at the level of 13%. Evaluation of amplitude is low, that it is supposed to be economically insignificant. Total estimated results show that all variable models of macroeconomic instability index ( ) have a positive correlation, i.e., when one subindex is growing, macroeconomic instability index is increasing too ( ). Dependence of macroeconomic instability index change in Ukraine in 1995-2015 with proper values of GDP growth is shown in Fig. 1. The greatest fall of the macroeconomic instability index of Ukraine was observed in 1996 (8.96), when the GDP growth rate was -10%. In 1999, Ukrainian economies collapse rates in comparison with previous periods, in 1997 and in 1998 accordingly 3% and 1.9%, were stopped (0.2%) and macroeconomic instability index reached its maximum positive rate (7,51)   Data of the Table 4 justify inverse relation of mentioned factors. In other words, increase of the GDP growth leads to reduction of macroeconomic instability index. Thus, one can confirm that changes of macroeconomic instability index factors will be related to increase (decrease) of the economic growth in the long-term perspective.

Conclusion
Study of state finance impact on the country's macroeconomic stability, which is based on evaluation of instability time rows of four economic variables of inflation (TINF), the ratio of budget deficit on growth domestic product (GDP) (TBD), foreign debt on GDP (TFD) and exchange rate deviation from the previous period (TRO) and calculation of macroeconomic instability index justified non-linear changes of the mentioned index for Ukraine during 1996-2015, which correlates with results of Global Economic Forum, according to which Ukrainian rating by macroeconomic stability ratefell by 21 points, in comparison with 2008 (100 place).
Evaluation results of impact, made by four economic variables of inflation rate (TINF), the rate of budget deficit on GDP (TBD), foreign debt on GDP (TFD) and ratio of exchange rate deviation from previous period (TRO), based on macroeconomic instability index in Ukraine during 1996-2015, show that all variables have a positive correlation, i.e., increase of one subindex rate will lead to macroeconomic instability index MII tn growth. Therefore, the largest impact on the macroeconomic instability index is made by instability index of inflation rate and instability subindex of the exchange rate ratio to the previous period. That is why, prevention of the mentioned subindices negative macroeconomic tendencies is a necessary condition to provide macroeconomic stability, and thus, country's international competitiveness.
Further research requires investigations of the macroeconomic stability development in the country, taking into account optimal rate of subindices fluctuation.