Fiscal decentralization and macroeconomic stability: the experience of Ukraine’s economy

  • Received October 11, 2017;
    Accepted November 26, 2017;
    Published February 14, 2018
  • Author(s)
    Leonid Melnyk
    ORCID Researcher ID ,
    Lina Sineviciene
    ORCID ,
    Oleksii Lyulyov
    ORCID Researcher ID ,
    Tetyana Pimonenko
    ORCID Researcher ID ,
    Iryna Dehtyarova
    ORCID Researcher ID
  • DOI
    http://dx.doi.org/10.21511/ppm.16(1).2018.10
  • Article Info
    Volume 16 2018, Issue #1, pp. 105-114
  • TO CITE АНОТАЦІЯ
  • Cited by
    22 articles
  • 1766 Views
  • 313 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The main objective of this research is to study the role and impact of fiscal decentralization on the macroeconomic stability of the country. The paper analyzes and systematizes approaches to the definition of ‘macroeconomic stability’ concept. The key factors that impact macroeconomic stability are identified. In the framework of this research, the authors identify fiscal decentralization as one of the factors affecting macroeconomic stability. To determine the strength and statistical significance of the above mentioned relationship, the authors suggest presenting macroeconomic stability as a functional dependency between macroeconomic stability and the level of fiscal decentralization, which is described by the following variables: the growth rate of money supply, investment and openness of the economy, fiscal decentralization. In this case, it is suggested to determine the level of fiscal decentralization in three directions: expenditure decentralization, revenue decentralization and expenditure decentralization simultaneously.

view full abstract hide full abstract
    • Figure 1. Graphical interpretation of the analysis of macroeconomic stability of Ukraine for the period 2000–2015 (own calculations based on data from)
    • Table 1. Calculation of macroeconomic stability of Ukraine over the period 2000–2015 (our own calculations based on data from)
    • Table 2. Descriptive statistics of the main dependent and explanatory variables of the regression equation (based on our own calculations)
    • Table 3. Augmented Dickey-Fuller test statistics of dependent and explanatory variables of the regression equation (based on our own calculations)
    • Table 4. Results of impact assessment of fiscal decentralization on macroeconomic stability of Ukraine for the period 2000–2015 (based on our own calculations)
    • Ahangari, A., Arman, A., & Saki, A. (2014). The estimation of Iran’s macroeconomics instability index. Management Science Letters, 4(5), 871-882.
    • Akai, N., & Sakata, M. (2002). Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States. Journal of urban economics, 52(1), 93-108.
    • Bodman, P., Campbell, H., Heaton, K. A., & Hodge, A. (2009). Fiscal decentralization, macroeconomic conditions and economic growth in Australia (MRG @ UQ Discussion Paper, 26). University of Queensland, School of Economics.
    • Briguglio, L., Cordina, G., Farrugia, N., & Vella, S. (2009). Economic vulnerability and resilience: concepts and measurements. Oxford development studies, 37(3), 229-247.
    • Chigrin, O., & Pimonenko, T. (2014). The Ways of Corporate Sector Firms Financing for Sustainability of Performance. International Journal of Ecology & Development, 29(3), 1-13.
    • Dzomira, S. (2017). Governance and financial health risk in an emerging economy’s public sector. Public and Municipal Finance, 6(1), 83-87.
    • Easterly, W., & Kraay, A. (2000). Small states, small problems? Income, growth, and volatility in small states. World development, 28(11), 2013-2027.
    • Feltenstein, A., & Iwata, S. (2005). Decentralization and macroeconomic performance in China: regional autonomy has its costs. Journal of Development Economics, 76(2), 481-501.
    • Guarata, N., & Pagliacci, C. (2017). Understanding Financial Fluctuations and Their Relation to Macroeconomic Stability. Inter- American Development Bank.
    • Haghighi, H. K., Sameti, M., & Isfahani, R. D. (2012). The effect of macroeconomic instability on economic growth in Iran. Research in Applied Economics, 4(3), 39-61.
    • Hurduzeu, G., & Lazar, M. I. (2015). An assessment of economic stability under the new European economic governance. Management Dynamics in the Knowledge Economy, 3(2), 301.
    • Ionita, R. O. (2015). The Evolution of the Macroeconomic Stabilisation Pentagon In Romania, Czech Republic And Hungary. The Annals of the University of Oradea, 25(1), 733-741.
    • Iqbal, N., & Nawaz, S. (2010). Fiscal decentralization and macroeconomic stability: Theory and evidence from Pakistan.
    • Jalil, A. Z. A., Harun, M., & Mat, S. H. C. (2012). Decentralization and macroeconomic instability: The importance of political and institutional factors. Journal of Business and Policy Research, 7(1), 49-59.
    • Kmetová, O., Freňáková, M., & Pachta, M. (2017). Fiscal interest of the state and respecting the rights and legitimate interests of the taxable entities in case of refund of excess remission of value added tax. Investment Management and Financial Innovations, 14(2-1), 207-217.
    • King, D., & Ma, Y. (2001). Fiscal decentralization, central bank independence, and inflation. Economics Letters, 72(1), 95-98.
    • Kolodko, G. W. (1993). Stabilization, recession and growth in a postsocialist economy. MOCT-MOST: Economic Policy in Transitional Economies, 3(1), 3-38.
    • Kuroyanagi, M., Yano, J., Nakanishi, Y., Komatsu, M., Futamura, H., & Mihira, T. (1996). Macroeconomic Stabilization and Monetary Policy of Four Asian Countries Japan, Korea, Indonesia, and the Philippines-Targets, Effectiveness and Results. Economic Analysis, 145, 9-197 (in Japanese).
    • Leonov, S., Frolov, S. & Plastun, V. (2014). Potential of institutional investors and stock market development as an alternative to savings allocation of households. Economic Annals – XXI, 11-12, 65-68.
    • Lyulyov, O., & Shvindina, H. (2017). Stabilization pentagon model: application in the management at macro- and micro- levels. Problems and Perspectives in Management, 15(3), 42-52.
    • Makreshanska, S., & Petrevski, G. (2015). Fiscal Decentralization and Inflation in Central and Eastern Europe.
    • Martinez-Vazquez, J., & Macnab, R. M. (2006) Fiscal Decentralization, Macrostability and Growth. Hacienda Pública Española / Revista de Economía Pública, 179(4), 25-49.
    • Montiel, P., & Servén, L. (2006). Macroeconomic stability in developing countries: How much is enough? The World Bank Research Observer, 21(2), 151-178.
    • Neyapti, B. (2004). Fiscal decentralization, central bank independence and inflation: a panel investigation. Economics Letters, 82(2), 227-230.
    • Okonkwo, O. N., & Godslove, E. K. (2015). Fiscal Decentralization and Nigerian Macroeconomic Performance and Economic Stability. International Journal of Economics and Finance, 7(2), 113-121.
    • Polchanov, P. (2017). Coordination of state fiscal and monetary policy the in the context of post-conflict recovery. Accounting and Financial Control, 1(2), 19-28.
    • Slav’yuk, R., Shkvarchuk, I., & Kondrat, I. (2017). Financial market imbalance: reasons and peculiarities of occurrence in Ukraine. Investment Management and Financial Innovations, 14(1-1), 227-235.
    • Shah, A. (2006). Fiscal decentralization and macroeconomic management. International Tax and Public Finance, 13(4), 437-462.
    • Strategy of Sustainable Development “Ukraine – 2020” (2015).
    • Thornton, J. (2007). Fiscal decentralization and economic growth reconsidered. Journal of urban economics, 61(1), 64-70.
    • Treisman, D. (2000). Decentralization and inflation: commitment, collective action, or continuity? American Political Science Review, 94(4), 837-857.
    • Valigura, V., & Ambryk, L. (2016). Financial effects of fiscal decentralization in Ukraine. Svit finansiv, 2(47), 123-135.
    • Vasilyeva, T., Sysoyeva, L., & Vysochyna, A. (2016). Formalization of factors that are affecting stability of Ukraine banking system. Risk governance & control: financial markets & institutions, 6(4), 7-11.
    • World Bank (2017). World Development Indicators 2017, World Bank.
    • Zaman, C., & Drcelic, B. (2009). Macro-Stabilisation Issues in the Serbian Economy: Methodological Evaluation.
    • Žigman Ante, & Martina Jergović (2017). The impact of fiscal councils on the budgetary consolidation. Public and Municipal Finance, 6(1), 15-23.
    • Żuchowska, D. (2013). Assessment of the Central and Eastern Europe Economies in the Years 2007–2010 Based on the Model of the Macroeconomic Stabilization Pentagon. Equilibrium. Quarterly Journal of Economics and Economic Policy, 8(4), 49-64.
    • Yushko, I. (2016). The overall efficiency of the major banks in the global financial instability. Banks and Bank Systems, 11(4).
Related Articles

  • Positive contribution of the good corporate governance rating to stability and performance: evidence from Indonesia

    RR. Iramani , Muazaroh Muazaroh , Abdul MongidORCID doi: http://dx.doi.org/10.21511/ppm.16(2).2018.01
    Problems and Perspectives in Management Volume 16, 2018         Issue #2         pp. 1-11 Views: 3209 Downloads: 314 TO CITE АНОТАЦІЯ

    This paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.

  • Role of travel and tourism sector in the attainment of Vision 2030 in Saudi Arabia: An analytical study

    Anis AliORCID , Anas A. SalamehORCID doi: http://dx.doi.org/10.21511/ppm.19(2).2021.23
    Problems and Perspectives in Management Volume 19, 2021         Issue #2         pp. 276-290 Views: 2449 Downloads: 471 TO CITE АНОТАЦІЯ

    Tourism is the main service industry significantly developing in the world. It is recognized as the critical factor in economic improvement in various countries. Saudi Arabia is one of the oldest and most famous spots for pilgrimage tourism due to its Islamic heritage. The study analyzes data available on the websites of the Saudi government to specify the contribution of travel and tourism revenue to the economy and its trend, occupancy of residential, and transportation capacity. A tourism satisfaction questionnaire was administered online to get the responses of Saudi nationals and residents related to tourism infrastructure, facilities, and other tourism services in Saudi Arabia. Ranks and percentage analysis were applied to get the relational satisfaction of tourists. Index numbers, ratios, percentages, and coefficient of variations were applied to get the trend, yearly fluctuations, variations, weights, and contribution of tourism avenues. There is a positive but low degree correlation between tourism revenue and the GDP of Saudi Arabia for the period from 2010 to 2018. The results indicate either negative or negligibly positive revenue growth of the accommodation/hotel services, food services, and air transportation. Two-thirds of tourists are either strongly satisfied or satisfied with essential and other tourism services and facilities in Saudi Arabia. Apart from tourist satisfaction, the Saudi government may consider a variety of services as per the economic level of the targeted tourists, and softening of visiting visa procedures and fees to enhance tourism revenue of major contributors for the positive and progressive development to the economy.

    Acknowledgment
    The authors would like to thank the Deanship of Scientific Research, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia, for providing financial support to complete this project (Project No: 2020/02/16978).

  • Relationship between bank competition and stability: the case of the UK

    Alau Zhanbolatova , Sayabek ZiyadinORCID , Kairat Zhumanov , Almagul Jumabekova doi: http://dx.doi.org/10.21511/bbs.13(1).2018.10
    Banks and Bank Systems Volume 13, 2018         Issue #1         pp. 98-114 Views: 1841 Downloads: 365 TO CITE АНОТАЦІЯ

    There is no consensus in theoretical and empirical studies about the relationship between bank competition and stability. This research aims to investigate the relationship between bank competition and stability in the UK. The analysis has been done on a large sample of UK banks for the period 2004–2014. There is quite contrasting evidence on the bank competition and bank soundness relationship. A unified framework has been developed to assess how different factors may make it more likely that the data favor one theory over another. The results suggest that in some cases a U-shaped relationship exists between bank competition and stability. Therefore the conclusion is that in order to protect the bank from different risk exposures a moderate level of bank competition is needed.

Download Preview
Close
Problems and Perspectives in Management
Problems and Perspectives in Management