Potential GDP and its factors assessment

The object of the study is the reserves of economic growth in the country on the example of Ukraine. One of the problems of such studies is the calculation of potential GDP, which is not observed, but is calculated on the basis of various methods. Also problematic is the choice of method/methods of calculating potential GDP and potential values of its factors. Any estimate of the potential value of a variable is based on one or more statistical relationships and therefore contains an element of uncertainty. In order to reduce uncertainty, 2 methods were used to determine the potential values of the components of GDP – the growth rate of employment, fixed capital and TFP (total factor productivity). The study used the methods of one-dimensional statistical filters Hodrick-Prescott and Baxter-King to estimate the potential values of GDP and the model of the production function to calculate potential GDP based on the potential values of its factors. The main reasons for the slowdown in Ukraine's GDP have been identified, the main of which is low capital productivity due to budget constraints. The second place in this ranking was taken by labor productivity, the last third – by TFP. Weak productivity and investment growth reinforced each other. Capital has the highest growth potential in Ukraine. Therefore, measures to stimulate capital investment, including in research and innovation and human capital, are important. Other factors that affect GDP through labor productivity and TFP are population aging, emigration, and tight lending conditions. To neutralize these factors, it is necessary to create new jobs, facilitate the conditions for obtaining loans by enterprises, stimulate advanced training and lifelong learning. The proposed approach to the separate calculation of potential values of GDP factors and their analysis find reserves for GDP growth. This provides the advantages of this method over other approaches.

NEUTRAL VALUE OF MONEY IN THE PRACTICE OF MONETARY REGULATION

The issue of estimating the level of neutral interest rates is a central issue for theoretical foundation of decision-making on interest rate policy in the practice of central banks. As a result of studying theoretical sources, research materials of international organizations and central banks, the factors of the neutral interest rate are systematized, the methods of its estimation are generalized, their advantages and disadvantages are revealed. Factors of the neutral rate are systematized according to the principle of their influence on the demand or supply of money in the economy. It has been established that there is no single generally accepted theoretical and methodological approach to determining the neutral rate in modern practice. A wide variation of methods with varying degrees of reliance on a theoretical basis (from purely mathematical filtration techniques to complex macroeconomic general equilibrium models) extends a field for new research. It is found that a key issue in neutral rate estimating models is the formalization of the relationship between the effects of external and internal factors, which is especially important for countries with a small open economy. Attention is paid to the method for estimating the neutral rate based on the rule of uncovered interest parity, which is used in the national practice of monetary regulation. Systemic shortcomings of this method are revealed on the basis of research of its theoretical bases and results of practical application in the conditions of the Ukrainian economy. The expediency of introducing into the practice of monetary regulation in Ukraine of alternative methodological toolkit for estimating the neutral rate based on the achievements of T. Laubach and J. Williams with adaptation to the open economy settings is justified, which would enhance the role of domestic factors, in particular changes in potential GDP and savings as important determinants of neutral value of money.

Formation of Long-Term Fiscal Sustainability of Kazakhstan Using the Rule Structural Budget Balance

The purpose of the study is to substantiate the potential of using the results of modeling potential GDP and estimating the output gap to comply with fiscal rules that are adequate for the corresponding economic cycle of the economy of Kazakhstan. The methods of economic, statistical, graphical, system, functional analysis, economic and mathematical modeling are applied. To achieve this goal, the analysis of Kazakhstan’s fiscal stability was carried out based on the assessment of Kazakhstan’s potential GDP and the calculation of output gaps, which were carried out based on the dynamic series method of the reported real GDP in 2005 prices for 1991-2019 using the Hodrick-Prescott filter (CP) using the EViews 10 econometric package. The current mechanism for using the output gap indicator in Kazakhstan’s fiscal policy does not have sufficient flexibility. For a timely response of the budget system to changes in the economic situation in the country or abroad, considering the output gap, it is important to introduce an automatic adjustment system that can eliminate contradictions and inconsistencies when making macroeconomic policy decisions by the main regulator and the government of the country. To do this, there is a need to revise the existing fiscal policy based on building a system of new budget rules on countercyclical principles. The proposed alternative fiscal model with the introduction of the rule on the structural balance of the budget is aimed at ensuring long-term fiscal stability, which does not allow for a pro-cyclical policy.

Problems of estimating the neutral interest rate: conclusions for Ukraine

Estimation of the actual and projected level of the neutral interest rate is a central issue in the application of modern monetary theory in the practical context of monetary policy. Views on the role and key drivers of neutral interest rates have evolved over time in parallel with the development of the theory of capital, money, credit and economic growth. Therefore, the paper is aimed at generalizing methods for assessing the neutral interest rate for open economies with emerging markets and formulating recommendations for improving the existing methodological tools for estimating the neutral rate in Ukraine. To achieve this goal, theoretical sources, advisory and research materials of international organizations, central banks and statistical databases were analyzed. It is established that the key issue of the current discussion about the tools for estimating the level of neutral interest rates in countries with small open economies is the relationship between the effects of external and internal factors. The paper identifies the advantages and disadvantages of the method for estimating the level of the neutral rate on the basis of uncovered interest parity rule used by the National Bank of Ukraine within the semi-structural macroeconomic model. The expediency of methodological tools introducing into the practice of monetary regulation of Ukraine for estimating the neutral rate of Ukraine based on the Laubach-Williams approach has been proved with adaptation to the conditions of an open economy, which will consider сinternal factors of economic development – changes in potential GDP and savings.