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Budgetary Policy of the Emerging Countries in Conditions of Institutional Transformations”

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Budgetary Policy of the Emerging Countries in Conditions of Institutional Transformations” “Budgetary policy of the emerging countries in conditions of institutional transformations” Igor Chugunov http://orcid.org/0000-0003-4915-1267 http://www.researcherid.com/rid/O-8662-2016 Valentyna Makohon https://orcid.org/0000-0002-2331-8455 AUTHORS http://www.researcherid.com/rid/P-3053-2017 Yuliya Markuts https://orcid.org/0000-0002-5131-1592 http://www.researcherid.com/rid/M-5090-2016 Igor Chugunov, Valentyna Makohon and Yuliya Markuts (2019). Budgetary policy ARTICLE INFO of the emerging countries in conditions of institutional transformations. Problems and Perspectives in Management, 17(4), 252-261. doi:10.21511/ppm.17(4).2019.21 DOI http://dx.doi.org/10.21511/ppm.17(4).2019.21 RELEASED ON Wednesday, 18 December 2019 RECEIVED ON Monday, 16 September 2019 ACCEPTED ON Wednesday, 27 November 2019 LICENSE This work is licensed under a Creative Commons Attribution 4.0 International License JOURNAL "Problems and Perspectives in Management" ISSN PRINT 1727-7051 ISSN ONLINE 1810-5467 PUBLISHER LLC “Consulting Publishing Company “Business Perspectives” FOUNDER LLC “Consulting Publishing Company “Business Perspectives” NUMBER OF REFERENCES NUMBER OF FIGURES NUMBER OF TABLES 34 0 3 © The author(s) 2021. This publication is an open access article. businessperspectives.org Problems and Perspectives in Management, Volume 17, Issue 4, 2019 Igor Chugunov (Ukraine), Valentyna Makohon (Ukraine), Yuliya Markuts (Ukraine) Budgetary policy of the emerging countries BUSINESS PERSPECTIVES in conditions of institutional transformations LLC “СPС “Business Perspectives” Hryhorii Skovoroda lane, 10, Sumy, 40022, Ukraine Abstract www.businessperspectives.org In the conditions of institutional transformations, the issue of raising the budgetary policy prudence level, strengthening its impact on socio-economic processes becomes relevant, especially in emerging countries. This paper delivers the essence and role of budgetary policy in ensuring the macroeconomic stability and social welfare in the emerging countries. The approaches to budget policy vectors in terms of budget revenues and expenditures, budget deficits, and public debt are presented. The article provides a detailed analysis of public debt service ratio, the proportion of the budget deficit, and public debt to GDP in national currencies of emerging countries to the US dollar during 2000–2018. The authors outlined the budgetary policy objectives, summarized and systematized the approaches to its implementation in the emerging Received on: 16th of September, 2019 countries in the conditions of institutional transformations. The article identifies the Accepted on: 27th of November, 2019 features of medium-term public debt management strategies in the emerging coun- tries, in particular in terms of marginal indicators of the budget deficit and public debt, improvement of the debt management system, maintaining the debt portfolio optimal structure. The impact of budgetary policy on social and economic processes is proved. © Igor Chugunov, Valentyna Makohon, Yuliya Markuts, 2019 Keywords finance, budget, debt, deficit, budgetary policy, emerging markets JEL Classification Е62, H60, O40 Igor Chugunov, Doctor of Economics, Professor, Kyiv National University of Trade and Economics, Ukraine. Valentyna Makohon, Doctor of INTRODUCTION Economics, Senior Researcher, Kyiv National University of Trade and Economics, Ukraine. In theoretical and methodological studies of different scientific schools, Yuliya Markuts, Ph.D. in Economics, more attention is paid to the development of reasonable budgetary Associate Professor, Finance policy and its coherence with other components of the financial policy Department, Kyiv National University of Trade and Economics, Ukraine. in the conditions of institutional transformations to ensure the mac- roeconomic stability and social welfare. The importance of improv- ing the level of budgetary policy in the emerging countries is driven by the need to take into account globalization processes and the real financial and economic capabilities of countries, to assess the impact of institutional transformations on the stability and sustainability of public finances and its components. Currently, to ensure macroeconomic stability in emerging countries, fiscal policy is aimed at implementing long-term reforms of the public finance system and its components. Reform takes place gradually, tak- This is an Open Access article, distributed under the terms of the ing into account social and economic conditions of countries. First of Creative Commons Attribution 4.0 International license, which permits all, the tasks and ways of their realization, which are aimed at ensur- unrestricted re-use, distribution, ing the proper functioning of the basic elements of the public finance and reproduction in any medium, provided the original work is properly system, are substantiated. The next step is to implement measures to cited. strengthen financial and economic potential. At the same time, re- 252 http://dx.doi.org/10.21511/ppm.17(4).2019.21 Problems and Perspectives in Management, Volume 17, Issue 4, 2019 forming instruments of the public finance system in emerging countries are borrowed in countries with developed economies, without taking into account the peculiarities and level of the national economy development, as well as the limited financial and economic potential of the countries. Accordingly, en- suring the effectiveness of budgetary policy is a complex task, which involves substantiating the strategic objectives of the country’s development based on the assessment of the available financial and economic potential and determining the logical sequence of implementation of the budgetary policy instruments to solve these strategic objectives. This has intensified the ocessespr of finding effective tools for budget- ary policy formation and implementation, its coherence with other components of financial policy. 1. LITERATURE REVIEW Fritscher, 2019). More active monetary policy con- tributes to reducing the level of expansionary im- Economic science determines that budgetary pol- pact, reducing the inflationary consequences. The icy is: a set of relevant forms of interdependencies downside is the fiscal stimulus measures associated and interrelationships of economic, legal, political, with tax cuts that are disinflationary. Accordingly, institutional components of the budget space and more active monetary policy enhances the expan- the institutional environment of the society in the sionary impact and mitigates the disinflationary formation and use of budgetary funds to achieve impulse (Nandi, 2019). At the same time, in the strategic goals and basic tasks of society’s devel- emerging countries, compared with the countries opment (Lysiak, 2009); direction of state regula- with developed economies, interest rates are more tion of economic processes through the income variable, which reduces the government’s ability generation and expenditures determination of the to smooth tax rates. Default risk also limits the budget (Paykovich, 2015). accumulation of public debt and the ability to use monetary policy instruments (Roettger, 2019; It is determined that the use of discretionary P. Asimakopoulos & S. Asimakopoulos, 2019). budgetary policy creates differences in expecta- tions about the level of public debt and budget bal- It is argued that if the budgetary policy is effective, ance (Montes & Luna, 2019); ensure budget bal- implementing an inflation-oriented policy instead ance by reducing public investment may restrain of an optimal monetary policy does not neces- economic growth. Accordingly, it is advisable to sarily mean a social welfare decline (Ivens, 2018). implement a budgetary policy that is character- The value of optimal fiscal stimulus decreases as ized by a larger share of public investment and, at the stability of inflation. If inflation resistance is the same time, less sensitive to business cycles. At driven by adjustment expectations rather than the same time, it is advisable to use public debt in- price indexation, monetary policy is ineffective, struments only to finance public investment to in- while an optimal fiscal stimulus is a weighty one crease their share in general government spending (Michau, 2018). (Zeyneloglu, 2018). At the same time, the level of social welfare de- 2. METHODS pends on the validity of budgetary policy and its coherence with other components of the finan- The neo-institutionalism provisions have been cial policy, including monetary policy (Hauga, used to disclose the nature and role of budget- Jędrzejowicz, & Sznajderskab, 2019). It is deter- ary policy in ensuring macroeconomic stability mined that the coordination of fiscal and monetary and public welfare in conditions of institutional policy contributes to the stabilization of econom- transformations (North, 1991). In contrast to the ic processes (Hettig & Müller, 2018). Commodity provisions of neoclassical and classical theories, a prices are an important driver of budgetary policy strong prerequisite of the neo-institutional theo- and the business cycle. The use of different finan- ry is the “concept of economic man” according to cial hedging instruments reduces the versatility which human behavior is rational, aimed at mak- of macroeconomic variables and their correlation ing decisions with the optimal value of the utility with commodity income (Lopez-Martin, Leal, & function. This provided an opportunity to draw a http://dx.doi.org/10.21511/ppm.17(4).2019.21 253 Problems and
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