Optimization of macroeconomic policy and stabilization of cyclical economic dynamics

This paper demonstrates that, despite the current mandate of monetary policy, its final goal (at least for central banks of developed countries) is the control of three main macroeconomic variables — economic growth, employment and inflation, — regardless on actual mandate for this policy. However, the priorities of realization of the final goal may face the imperfection of macroeconomic models and rules of monetary policy, which will make it impossible to control all three macroeconomic variables at the same time. The article proposes a new instrument for monetary policy — aggregate cumulative market imperfection — to optimize macroeconomic variables and stabilize cyclical economic dynamics. The author demonstrates the main competitive advantages of this instrument of monetary policy as compared with typical models of macroeconomic dynamics and simple rules of monetary policy (Simons, Friedman, and Taylor rules). In particular, this instrument is valid for any combination of market conditions, for any economy and for any moment of real time. It can be used simultaneously as: 1) a target of monetary policy; 2) a simple rule of monetary policy correction in the short-run; 3) a reaction function to evaluate a backward connection between the regulator’s actions and the effect of these actions on current economic situation; and 4) an instrument to stabilize cyclical economic dynamics; 5) an instrument to forecast starting (ending) point of recessions and shift in macroeconomic trends. If we can hold the aggregate cumulative market imperfection within a given optimal interval with the help of government regulations (i.e. to target this indicator only) using all possible instruments both of monetary, and (if necessary) of other kinds of regulation policy, we will be able to optimize all three main macroeconomic variables. Optimality of these variables means providing maximum economic growth and employment under comfortable inflation for any combination of market conditions and for any moment of calendar time, which will at the same time stabilize cyclical economic dynamics. In doing so, we will not target each of these three variables separately, that is, it is practically impossible to determine quantitatively their optimal values as they change permanently over time together with the constant change of current combination of market conditions.

Methods and models of estimating energy transition on the example of Zhytomyr united territorial community

The paper presents results of scenario modelling and assessment of energy transition to 2050 in the Zhytomyr territorial community (TC), which provides for a switching from fossil carbon based energy resources in the current TC energy system functioning to 100% use of renewable energy sources (RES) which meets all energy demands and supports the Sustainable Development of TC in accordance with the relevant UN goals. For this purpose, the optimizational economic and mathematical TIMES-Zhytomyr model (no analogues in Ukraine), based on the TIMES-Ukraine model, was developed. It includes 647 energy technologies that are currently available or may be presented in the coming years in Ukrainian market. For the development of the TIMES-Zhytomyr model, a low-available local energy statistics was processed. As a result, the first energy balance by the form of the International Energy Agency for the large Ukrainian city and the basic energy-technological system of Zhytomyr TC were developed. Using the TIMES-Zhytomyr model, based on foreign and Ukrainian experience, for the first time, four scenarios of Zhytomyr TC energy system development were designed and modelled, covering all economic sectors and household sector (population). The first one is the Baseline scenario, which displays the possible dynamics of the energy system development without a purposeful energy efficiency policy, the development of RES, etc. Three other scenarios are aimed at studying TC’s transition capabilities by 2050 to 100% renewable energy and environmentally friendly technologies use. The results of modelling confirmed that the available renewable energy resource and technological potential allows Zhytomyr TC to perform the energy transition to 2050 in an economically feasible and socially acceptable way, significantly reducing energy and carbon intensity of the local economy, substantially eliminating GHG emissions, increasing the welfare of citizens and creating at least 10 thousand new workplaces. It will also significantly contribute to Zhytomyr TC to reach at least 10 of the 17 UN Sustainable Development Goals. The research results presented, due to a significant novelty and large-scale relevance of the task, are essential in both the theoretical and practical significance. They can be used by scientists for their research and by authorities and experts for development of local, regional or national level strategies, plans or programs of economic, energy, transport, climate and ecology scope. It can also be considered as one of the first steps in preparation of a comprehensive strategy for the Zhytomyr TC development to achieve climate neutrality in accordance with the current objectives of the European Union.

Multipolarity of the world trade: challenges and "corridor of opportunities" for Ukraine

The paper discusses trends of the world trade development towards multipolarity that is caused by the increasing impact of “newly emerged” leaders, in particular China, and weakening of the domination of “traditional” transatlantic leaders. The development of multipolarity in the world trade is supported by the processes of trade regionalization, especially by signing of megaregional trade agreements on the base of the current balance of power in the world trade. The details of the regional trade agreements concluded by the world trade leaders – USA, EU and China are described. The academic discussion on the role of Regional Comprehensive Economic Partnership (RCEP) leads to the conclusions that creation of RCEP will induce the creation of a new world trade pole in Asia and the Pacific region during the next decades, where China will play a leading role. The future of the World Trade Organization and the WTO fundamental principle of multilateral trade relations is the most controversial issue in connection with the development of multipolarity of the world trade. Challenges that were faced by the WTO due to trade digitalization, COVID-19 pandemic and climate changes are analyzed, alongside with sources and causes of the WTO crisis. The spreading of economic patriotism (nationalism) trend that manifests itself in trade as a policy of protectionism is discussed in the context of the transition to multipolarity in the world trade . The development of multipolarity in the world trade is followed by the processes that must be considered in the shaping of Ukrainian trade policy. The ability of Ukraine to get its “space for maneuver”, which will allow to increase the country’s economic potential in the framework of the new world trade configuration, depends upon this country’s trade policy that is grounded on the analysis of risks and opportunities in the trade relations with “major players” in the world trade. Development of the trade with China creates significant risks of the increasing of raw materials orientation of export and strengthening dependence on the import of industrial goods from China. Vital risks also follow signing of the credit and investment agreements with China. Chinese investment in agriculture and food industry are the riskiest as they use natural potential of the recipient countries and Chinese technologies to diversify the sources of the food import to China. The shaping of the Ukrainian trade policy with the EU countries in the medium term will be influenced by latter’s new trade policy of Open Strategic Autonomy. The main challenge is created by the EU plans to implement the Carbon Border Adjustment Mechanism (CBAM), which provides for the import tax on the import of the electricity, cement, aluminum, fertilizers, and products from steel and iron. The opportunities, created by the new EU trade policy for Ukraine have emerged due to the EU’s declared support to the countries of the Eastern Partnership that have DCFTA with EU, including green and digital transition. The principle of “autonomy” in the new EU trade policy emphasizes the EU’s ability to make its own choices, reflecting its strategic interests, which has features of the policy of economic nationalism and protectionism and will create a “corridor of opportunities” for pursuing protection measures for the development of domestic industries.

Unintended consequences and the problem of ensuring sustainable development

The sources, types, and mechanisms of formation and tools for minimizing "unintended consequences" of economic reforms in Ukraine are considered. "Unintended consequences" are understood as unpredictable, unintentional, indirect, and incredible consequences of actions of initiators, organizers and executors of Ukrainian reforms, which were not included in their plans but happened in reality and have have a decisive influence on the state of the national economy. The methodological basis of the study includes historical-genetic, comparative, statistical, and graphical analysis. The origins of the study of " unintended consequences" of human actions can be traced in the works of N. Machiavelli, J. B. Vico, B. Mandeville, A. Ferguson, W. Petty, A. Smith, J.-B. Sаy, K. Marx, С. Menger , W. Pareto, M. Weber, F. Hayek, and R. Merton. Prerequisites for the "unintended consequences" of economic reforms in Ukraine include insufficient competence of initiators and organizers, errors in analyzing problems due to ignoring the specifics of the current situation, focus on achieving immediate results without the possibility to calculate long-term consequences of implemented measures, underestimation of the role of basic values of national culture and the impact of disclosure of predictions on the behavior of economic entities. The types of “unintended consequences” that affected the course of economic reforms in Ukraine include those that, while remaining functional for the system, rely on latent, unconscious and unplanned factors arising from latent dysfunctions. Varieties of mechanisms for the formation of "unintended consequences" of economic reforms in Ukraine include the manifestation of the results of latent functions, self-realization of social beliefs and self-destructive beliefs. It is substantiated that the practice of mandatory preliminary testing at the local level on the basis of relevant information platforms makes it possible to eliminate shortcomings in advance, clarify and improve the implemented measures, determine their social effectiveness, and choose the best alternative. Conducting preliminary economic experiments avoids situations where, as a result of the reform, certain groups gain access to various types of rental income at the expense of society.

Corporate income tax gap estimation in the context of development of fiscal space

The article is devoted to the analysis of the corporate income tax gap as one of the indicators that characterizes the tax revenues that a country can accumulate accounting for its economic potential. The author summarizes the main theoretical views on the causes of the tax gap and investigates existing methodological approaches to assess the tax gap on corporate income tax in OECD countries. The article estimates the income tax gap under the OECD Revenue Administration - Gap Analysis Program, which is based on determining potential tax revenues by adjusting the aggregate indicators of the system of national accounts (gross output, mixed income), which, according to the analysis, averaged at 1.4% GDP in the period 2017-2019, which shows a potential for the development of the fiscal space of Ukraine. Upon analysis of the distribution of the tax gap between institutional sectors of the economy, the largest gap in income tax was found in the sector of foreign corporations whose potential tax revenues were estimated as tripled relative to the declared tax revenues accrued in the Consolidated Budget of Ukraine in 2018. The author conducted a comprehensive analysis of the effectiveness of corporate income tax in Ukraine on the basis of tax efforts and budget efficiency ratios, which revealed significant weaknesses in comparison with similar indicators in other countries. The main measures aimed at eliminating tax gaps in OECD countries are summed up and recommendations are made for Ukraine.

Conceptual approaches to improving carbon dioxid taxation in Ukraine

The domestic carbon tax needs to improve tax administration to ensure its fiscal efficiency and reduce transaction costs for tax compliance. Despite the fact that in the Tax Code of Ukraine the calculation of such a tax is based on the actual indicators of CO2 emissions, in practice it is based on the amount of resources consumed and the characteristics of the production process. Accordingly, the difficulties in administering this tax are the complexity of tax audits and the need to involve environmental experts. All this does not allow to adhere to the principle of cost-effectiveness of taxation and highlights the need to find opportunities to simplify the process of tax administration on the basis of world best practices. The purpose of the article is to outline conceptual approaches to improving carbon taxation, which will allow Ukraine to simplify tax administration and together with the EU to effectively combat the effects of climate change in order to increase security and create new opportunities for Ukrainian business under the European Green Deal. The methodological basis of the study was the use of a set of general and special methods: generalizations and scientific abstraction, historical and logical, extrapolations, spatial and graphical and tabular methods of visualization. The application of the SWOT analysis method and the systematization of European practice revealed that the most acceptable for Ukraine is the use of tax on CO2 emissions in the form of an indirect tax on energy consumption. Coefficients of carbon content in fuel, calorific value of fuel and its oxidation factor were used to convert the emission base carbon tax into the fuel base carbon tax. The implementation of these proposals will help increase the efficiency of administration of such a tax, as it will: 1) reduce the number of taxpayers through the introduction of the institution of tax agents while increasing the amount of tax paid by one taxpayer; 2) simplify the procedure for calculating the tax base by taxpayers and employees of tax authorities; 3) increase the fiscal efficiency of the environmental tax on carbon dioxide emissions from stationary sources by 50% in the case of setting the CO2 price at UAH 10 per ton (5-fold when setting the CO2 price at UAH 30 per ton in accordance with the proposals of the bill No 5600) and to attract potential revenues from the transport sector in the amount of 0.06% of GDP. The use of practical proposals and recommendations obtained in the article will increase the effectiveness of Ukraine's tax policy by forming a set of measures which will reduce the energy dependence of the national economy, including through incentives for energy-saving and climate-neutral technologies, reduce the burden on the environment, and will help simplify the administration of environmental taxes while increasing their fiscal efficiency. Research materials can be used in the preparation of draft regulations and policy documents in the field of environmental and excise taxation, which is within the competence of the Ministry of Finance of Ukraine, as well as in the formation of proposals, reservations and recommendations to other regulations on improving environmental and excise taxation initiated both by the authorities of the executive power of Ukraine, and the Verkhovna Rada of Ukraine on improving environmental and excise taxation. The theoretical results are the development of a general theory of fiscal administration for environmental and excise taxation.

The global context of land market liberalization in Ukraine: opportunities and risks for rural development

The article considers various global factors influencing rural development under the conditions of liberalization of the agricultural land market in Ukraine. The author assesses the impact of global processes and global capital on the development of national farms, income distribution, access to land resources, production processes and equitable development in this country. It is proved that globalization, leading to increased concentration of agri-food production and business and expanding the role of large transnationalized corporations, is primarily aimed at exploiting the country’s existing comparative advantages, rather than increasing them, and promotes, in many recipient countries, a model of double economy split in the technological and socio-economic dimensions into qualitatively heterogeneous sectors. The author concludes that although global factors of agricultural production may have a relatively positive impact in macroeconomic terms, the dominance of multinational (transnational) companies, large exporting companies and financially powerful sovereign welfare funds in the market may create risks and threats of crowding out Ukrainian farmers from the market and blocking the sustainable development of rural areas. At the same time, Ukraine's agricultural sector will be transformed into a raw-material link of global food production chains dominated by large transnationalized entities, and a kind of raw-material enclave of transnationalized production will be created within the Ukrainian economy. The article argues that in today's global economy, where cardinal transformations are taking place and uncertainty is growing, land will become an increasingly valuable asset, attractive not only to agricultural producers but also to land speculators and those who try to maintain the value of their assets under the conditions of growing global risks. Under such conditions, investment in land will not at all necessarily contribute to the development of agricultural production, because speculative capital in the face of widespread expectations of a long and significant upward trend in land prices will prevail over productive agricultural capital. In general, this might lead to a significant increase in the cost of agricultural production and food prices. The author proves that the liberalization of the land market leads to increased risks of transfer of the control over Ukraine’s land resources to foreigners (sovereign financial funds and major international corporations), given their dramatic advantage by available financial resources for land acquisition, compared to those possessed by Ukraine’s residents. The article substantiates a set of policy measures and national policy instruments necessary to minimize the risks associated with the introduction (in the context of globalization) of free purchase and sale of agricultural land, which comply with the regulation principles of the European Union.

Corporate entrepreneurship: state, organizational design, problems and development prospects

The article is devoted to the exploration of relevant issues of the development of corporate entrepreneurship organizational design in Ukrainian organizations. The implementation of corporate entrepreneurship organizational design provides acceleration of internal innovation process, increase of its effectiveness, identification and intensification of new opportunities for growth and creation of new businesses. The implementation of structures, definition of their functions, and description of the processes and formal relationships, which may encourage potential corporate entrepreneurs to generate and commercialize internal innovative initiatives, are becoming extremely relevant for Ukrainian business environment. A research map and questionnaire were developed in order to conduct the empirical investigation of existing design practices for corporate entrepreneurship in Ukrainian organizations, and a survey was compiled through questionnaires with the use of Google forms. The results of the research revealed that Ukrainian organizations implement structures, processes, systems and norms, which stimulate corporate entrepreneurs, and initiate internal innovative projects. At the same time, design practices for corporate entrepreneurship in Ukrainian organizations are characterized by a lack of integrity. This blocks quick development of innovations by internal venturing teams and their transformation into a value for business. Potential corporate entrepreneurs often leave the organization to start their own businesses because of the absence of internal organizational conditions for realizing their innovative ideas. The consequence of this situation is the emergence of a powerful ambitious competitor, thus, the strategic competitive position of the organization may suffer. The practical value of the research is to obtain empirical data about the state of implementation of the corporate entrepreneurship system in Ukrainian organizations and explore the parameters of its organizational design, such as: quality of internal organizational climate and human resources for the implementation of the corporate entrepreneurship process, development and implementation of corporate entrepreneurship programs, mechanisms for financing internal entrepreneurial initiatives of employees, legal support of corporate entrepreneurship, incentives and rewards for internal entrepreneurial behavior, and information distribution models and organizational forms of corporate entrepreneurship. The research results can serve as an information base for the formulation of recommendations for implementation of integral and effective organizational design aimed at retention and development of corporate entrepreneurs, and realization of their internal entrepreneurial initiatives in organizational context.

A toolkit for assessing the directions of budget financing of education in post-crisis conditions

Public financing of education is one of the most important fiscal instruments for responding to the challenges of post-pandemic economic recovery. Investments in higher and vocational education form the basis for the growth of total factor productivity, and therefore economic growth. At the same time, in the context of austerity, which will determine the directions of the budgetary policy of developing countries in the medium term, the key directions of fiscal intensification of the factors of economic growth require identification. It is proposed to include indicators of return on investments in various levels of education to the toolkit for assessing the directions of state financing of education as one of the most important factors of post-pandemic economic recovery in conditions of austerity. Differences in estimated returns from different educational levels can be taken into account in the development of public policy for financing education. The article offers an approbation for Ukraine of the approach of the Center for European Economic Research for calculating the return on investment in higher and vocational education. A feature of the proposed approach is the ability to simulate a sufficient amount of data on revenues of individuals in conditions of limited information. The calculations in the article are based, in addition to data on the level of wages of persons with higher and vocational education, on the amount of budgetary expenditures on education throughout the course of study per student, personal income tax rates, unemployment benefits and state social assistance per person. The proposed approach makes it possible to carry out scenario estimates of the return on investment in education based on macroeconomic forecasts and taking into account changes in tax legislation. It is found that in Ukraine the return on investment in higher and vocational education corresponds to the average values of the corresponding indicators for the OECD countries. The author outlines the guidelines of the proposed methodological approach and prospective areas for its application.

Structural shifts: impact on productivity and growth of Ukraine's economy

The leading feature of the modern world has been the deep structural shifts caused by radical transformations of its industrial landscape. The corresponding transformations were caused by changes in the internal structure of national industrial sectors and were based on the technologies of the "fourth industrial revolution", whose emergence gave additional impetus to the structural transformation of the world economy, intensifying competition in global markets. The Covid crisis was a catalyst for accelerating changes in the intersectoral proportions of the world economy, complicating the existing structural problems. The study shows that the key feature of the model of structural changes that occurred in Ukraine's economy after the global financial crisis was the accelerated reduction of the industrial sector, especially the loss of potential of the processing industry, its technological simplification and narrowing the variety of industries. This was accompanied by increased dominance of the tertiary sector and the growth of the primary sector. Excessive share in the structure of production is occupied by industries, whose mode of reproduction is able to generate only relatively low rates of economic growth (mining and related industries of primary processing in industry and agriculture). Such a trend of structural shifts is not able to generate the necessary boost of economic growth, and much less so as it is burdened by the risks of deepening structural inconsistency of Ukraine’s economy with the cardinal changes taking place in the world economy. Comparison of parameters and trends of structural changes in Ukraine’s economy and in a comparable group of countries and the world as a whole shows that the changes in the structure of Ukraine’s economy were much higher, but did not create sufficient potential for sustainable economic growth. The author analyzes the gaps in labor productivity between economic activities and sectors of Ukraine’s economy, as well as changes in their dynamics, which leads to the conclusions about the relationship between the rates of technological development of different sectors of Ukraine’s economy and the gradual slowdown of the already imperfect technological development of this country’s industry with further loss of competitiveness. Estimated the degree of influence of such factors as investments and technological innovations, as well as shifts in the structure of employment on the increase of labor productivity in Ukraine’s economy. Using the apparatus of econometric modeling, the author evaluates the dependence of the dynamics of GDP growth on the change of the indices of the physical volume of GVA in the sectors of this country’s economy.