SIMULTANEOUS MODELING OF ECONOMIC GROWTH AND INFLATION LEVEL IN UKRAINE
Abstract
The purpose of the investigation is to identify and quantify the interdependence between inflation and economic growth in Ukraine. Methodology of research. To achieve the goal of the investigation, econometric modeling methods were used, namely systems of simultaneous equations. Findings. The investigation reviewed scientific approaches to the nature and causes of two processes: economic growth and inflation, examined the relationship between them and reviewed empirical studies that explain it, analyzed the dynamics of these indicators in Ukraine for 2000-2020, which confirms the hypothesis that there is a close inverse relationship between them. A simultaneous macromodel of the Ukrainian economy was proposed, which consisting of two equations, the endogenous variables of which are real GDP and the consumer price index, and the factor variables are real consumer spending, the share of exports in GDP, gross fixed capital formation, industrial producer price index and real wage index. The model was tested for adequacy, has rather high accuracy and fulfillment of the basic assumptions of correlation-regression analysis. The influence of all factor variables of the model on the resulting variables is statistically significant. In addition, the equations system fairly and accurately reproduces the dynamics of the original series, so it can be used as an effective tool for macroeconomic forecasting. Practical value. In general, the results of the econometric modeling indicate the existence of a statistically significant negative impact of inflation on economic growth in Ukraine, which is explained by the adaptation of producers to changes in the market by reducing output. The result of the implementation of a scenario that considers the situation, if inflation in Ukraine's economy in all quarters would be 5% higher than the actual values, confirms the assumption of an inverse relationship between the two processes, however, due to the fact that the CPI values do not correspond to galloping inflation levels, such the impact is moderately insignificant and insufficient to provoke an economic downturn. The question of the impact of real GDP values on inflation in Ukraine is interesting: the results of the simulation show that the CPI value in the current period is reversed by the value of real GDP for the previous quarter, but the relationship between inflation and GDP for the corresponding quarter of the previous year is direct. The results can be used to forecast Ukraine's inflation and GDP, as well as to make effective management decisions at the macro level.
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