The golden rule of public finance under active monetary stance: endogenous setting for a developing economy

Abstract

The paper aims to verify the introduction of the golden rule of public finance under an active monetary stance for a developing economy using a dynamic stochastic general equilibrium model. Besides the two rigidities, namely the deep habit formation and Calvo-style price stickiness, the model structure incorporates real money holdings and welfare-enhancing government purchases in the utility-generating function and a modified Taylor rule. The simulation results have validated the visible crowding-out of private consumption and investment in the short run and a positive impact of the productive government spending on long-run growth, but with some important caveats. In the case of a developing economy that usually has low efficiency and high returns to public capital, the given factors prove significant in addressing the study issue. The results are robust in terms of the structure of utility-generating function, a relatively high share of liquidity-constrained households, and a degree of price stickiness. Moreover, to offset the debt accumulation as a result of increased public investment financing by persistent output growth, in the long run, the central bank should not only rely on response to the fluctuation of inflation and output but also account for a move of public debt.

Modeling the Behavior of Banks in Instability Conditions

“…At the conceptual level, such an approach to the construction of production functions more adequately reflects the specifics of the tasks that banks solve. It should be noted that this approach to development in [14]. It should also be noted that the results obtained in the models of both the first and second types differ very little from each other.…”

“…Let The situation of perfect competition is uncharacteristic of the banking industry, which is characterized by high entry barriers. Among the most famous models of behavior of the monopolist bank can be attributed to the Monti-Klein model, see [14], within which the bank operates, according to the classical microeconomic theory of monopoly.…”

“…Many authors, in [12][13][14][15], studied the problem of ownership of information. Its essence is that borrowing firms may suffer losses if some private information about their activities becomes available to competitors.…”

Застосування Нейронних Мереж До Аналізу Курсу Валют

“…The purpose of the article is to study the application of information technologies, in particular the Python programming language, to the analysis of the stock market, and in particular the currency market. To do this, you need to deal with a number of specific issues: familiarize yourself with the historical data of the hryvnia exchange rate; make a research analysis; review the main points related to the construction of neural networks and implement a model of forecasting financial time series with their help (Merton, 1973;Shvets, 2020).…”

State budget revenue optimization using the simplex method

“…In this case, the projected income gaps significantly exceed the projected expenditure gaps, which means more stability in the formation of revenues and a rather low predictability of expenses. Shvets (2020) noted the importance of adhering to the golden rule of public finance, as well as the positive impact of well-established public spending and effective public procurement on long-term economic growth. Chugunov and Nasibova (2021), after examining the data on the state budget of 17 eurozone countries, found a significant impact of state budget expenditures on social protection on the level of countries' socio-economic development.…”