№ 6/2016

Fìnansi Ukr. 2016 (6): 51–

TAX POLICY

VDOVYCHENKO Artem Mykolayovych, ZUBRYTSKYY Arthur

FISCAL POLICY EFFECTS ON COMMODITY EXPORTS IN THE GRAVITY MODEL OF UKRAINE’S FOREIGN TRADE

The article addresses the issue of the discretionary fiscal policy impact on Ukraine’s commodity exports. The gravity model is used to analyze the effect of changes in relative fiscal balance and a number of control variables, including monetary ones, on export flows to major importing countries. The authors suggested a number of alternative approaches to the evaluation of gravity model specifications to obtain robust model parameters. The findings point to the positive effect of fiscal consolidation on the volume of commodity exports with a lag of 2-3 years. This confirms the existence of a double deficit phenomenon in Ukraine’s economy, which, however, manifests itself with a certain lag. The distinctive feature of results obtained is the fact that fiscal policy has an impact on foreign trade through the fluctuations in aggregate demand in the economy rather than through the exchange rate channel. Specific features of the impact of fiscal and monetary policies on the dynamics of Ukrainian exports are analyzed. The authors describe the mechanics of the fiscal consolidation impact on national exports in the context of the need to stabilize the Ukrainian public finance system. The authors conclude that, under conditions of a fixed exchange rate, monetary policies cannot act as a regulator of export activities of domestic producers. However, austere fiscal policies with a lag of several years demonstrate a positive impact on the dynamics of foreign trade despite the initial negative effect associated with a restriction of the money supply in the economy.

Keywords:fiscal policies, exports, gravity model, fixed effects, random effects, fiscal consolidation, monetary policies.

JEL: F10, F17, E62, G28.

VDOVYCHENKO A. M. FISCAL POLICY EFFECTS ON COMMODITY EXPORTS IN THE GRAVITY MODEL OF UKRAINE’S FOREIGN TRADE / A. M. VDOVYCHENKO, A. . ZUBRYTSKYY // Фінанси України. - 2016. - № 6. - C. 51-.

Article original in Ukrainian (pp. 51 - 71)

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