Impact of Municipal Financial Resilience on Sustainable Economic Development: Case of Ukraine

Abstract

Reform of fiscal decentralization is one of the most effective modern tools to improve the efficiency of public and local finances, as it involves the transfer of some powers from central to sub-central governments according to the principle of subsidiarity. Therefore, one of the top priorities in public finance development nowadays is to ensure municipal financial resilience (financial capacity). In the paper it is proposed to measure municipal financial resilience (financial capacity) as an integral indicator of fifth parameters (ratio of revenue / cost / tax revenue of local budgets (excluding transfers) to revenue / cost / tax revenue of the consolidated budget, "1" reduced by the ratio of net intergovernmental transfers to own revenue of local budgets;ratio of own revenue of local budgets to their own expenditure) aggregated based on Fishburn formula. It is proposed to chose as a proxies of municipal sustainable economic development such indicators as consumer price index, current account balance, volume of credits to the private sector, net foreign direct investment, GDP growth, GDP per capita, gross capital formation, business density, employment ratio, R&D expenditures, trade turnover. Testing the hypothesis on relationship between municipal financial resilience (financial capacity) and its economic development is realized on data for Ukraine for the period 2008–2021. Method of modelling – regression analysis in Stata software. Based on the empirical research results it might be concluded that there are national peculiarities of relationship between municipal financial resilience (financial capacity) and its sustainable economic development in Ukraine, which might be considered in terms of fiscal decentralization reform implementation, counteraction to negative consequence of coronavirus disease pandemic and municipality post-pandemic recovery strategy. Copyright © 2022– All Rights Reserved.