Investment Function of Economic Growth in Russia

The intensification of investment dynamics is a determining factor in the new growth model of the Russian economy. The Covid crisis has greatly limited the opportunities to use this factor and made restoring growth dynamics an urgent task. The aim of the study is to determine the investment function of the Russian economy before the Covid crisis in order to identify the main instruments of the investment policy of growth in the post-crisis period. The research methods are macroeconomic and regression analysis based on software Gretl 2020b, which helped to choose the investment function according to the instrument-factors. Solving the problem of collinearity of multiple regression factors makes it possible to select the best models for GDP and investment in fixed assets of the Russian economy. The research result is selected multivariate models of gross product and investment that allow considering the impact of the following instruments on the goal’s function: monetization level, key interest rate, exchange rate, risk, profitability, oil prices, financial investments, inflation. The author concludes that an increase in the monetization of the economy, a decrease in the key interest rate, and a controlled devaluation generally had a positive effect on the amount of investment in fixed assets. The investment growth increased the risk of economic activity; the decrease in profitability relatively decreased investment and increased Russia’s GDP with an increased risk over the considered time interval. When implementing investment policy, one should consider these features along with the specified macro-aggregates, the structure of investment distribution between sectors and types of investments, for example, in financial and non-financial assets. The paper shows the significance of this condition, which affects the effectiveness of the investment policy, when the shift in investment towards financial assets accompanies the slowdown in economic growth. The prospect of further research is an assessment of the equalization of sectoral risks affecting the distribution of investments and investment dynamics.

1. Aganbegyan A. G. Reduction of investments is destruction for the economy, growth of investments is its salvation. Ekonomicheskie strategii = Economic Strategies. 2016;18(4):74-83. (In Russ.).

2. Glaz’ev S. Yu. Thoughts about the ways to ensure economic growth of Russia. Nauchnye trudy Vol’nogo ekonomicheskogo obshchestva Rossii = Scientific Works of the Free Economic Society of Russia. 2017 ;203(1):229-242. (In Russ.).

3. Maevsky V. I., Malkov S. Yu., Rubinstein A. A. Analysis of the economic dynamics of the US, the USSR and Russia using the SMR-model. Voprosy ekonomiki. 2018;(7):82-95. (In Russ.). DOI: 10.32609/0042-8736-2018-7-82-95

4. Teixeira A. A., Queiros A. S. Economic growth, human capital and structural change: A dynamic panel data analysis. Research Policy. 2016;45(8):1636-1648. DOI: 10.1016/j.respol.2016.04.006

5. Sukharev O. S. Economic growth, institutions and technologies. Moscow: Finansy i statistika; 2014. 464 p. (In Russ.).

6. Sukharev O. S., Voronchikhina E. N. Financial and non-financial investments: Comparative econometric analysis of the impact on economic dynamics. Quantitative Finance and Economics. 2020;4(3):382-411. DOI: 10.3934/QFE.2020018

7. Sukharev O. S. Investments in the transactional sector and in financial assets: Impact on economic growth. Finansy: teoriya i praktika = Finance: Theory and Practice. 2020;24(3):60-80. (In Russ.). DOI: 10.26794/2587-5671-2020-243-60-80

8. Helpman E. The mystery of economic growth. Cambridge, MA: Belknap Press; 2010. 240 p. (Russ. ed.: Helpman E. Zagadka ekonomicheskogo rosta. Moscow: Gaydar Institute Publ.; 2011. 240 p.).

9. Saviotti P. P., Pyka A., Jun B. Education, structural change and economic development. Structural Change and Economic Dynamics. 2016;38:55-68. DOI: 10.1016/j.strueco.2016.04.002

10. Alonso-Carrera J., Raurich X. Demand-based structural change and balanced economic growth. Journal of Macroeconomics. 2015;46:359-374. DOI: 10.1016/j.jmacro.2015.10.005

11. Samaniego R. M., Sun J. Y. Productivity growth and structural transformation. Review of Economic Dynamics. 2016;21:266-285. DOI: 10.1016/j.red.2015.06.003

12. Zeira J., Zoabi H. Economic growth and sector dynamics. European Economic Review. 2015;79:1-15. DOI: 10.1016/j.euroecorev.2015.06.007

13. Perelman S., Walheer B. Economic growth and under-investment: A nonparametric approach. Economics Letters. 2020;186:108824. DOI: 10.1016/j.econlet.2019.108824

14. Afonso A., St. Aubyn M. Economic growth, public, and private investment returns in 17 OECD economies. Portuguese Economic Journal. 2019;18(1):47-65. DOI: 10.1007/s10258-018-0143-7

15. Afonso A., Jalles J. How does fiscal policy affect investment? Evidence from a large panel. International Journal of Finance and Economics. 2015;20(4):310-327. DOI: 10.1002/ijfe.1518

16. Calcagnini G., Giombini G., Travaglini G. A theoretical model of imperfect markets and investment. Structural Change and Economic Dynamics. 2019;50:237-244. DOI: 10.1016/j.strueco.2019.07.005

17. Swamy V., Dharani M. The dynamics of finance-growth nexus in advanced economies. International Review of Economics & Finance. 2019;64:122-146. DOI: 10.1016/j.iref.2019.06.001

18. Sukharev O. S. Economic crisis as a consequence COVID-19 virus attack: Risk and damage assessment. Quantitative Finance and Economics. 2020;4(2):274-293. DOI: 10.3934/QFE.2020013

19. Tinbergen J. The duration of development. Journal of Evolutionary Economics. 1995;5(3):333-339. DOI: 10.1007/BF01198312

20. Tinbergen J. Economic policy: Principles and design. Amsterdam: North-Holland; 1956. 276 p.

21. Anchishkin A. I. Forecasting the rates and factors of economic growth. Moscow: MAKS Press; 2003. 300 p. (In Russ.).

22. Sukharev O. S. Investment policy of economic growth. Vestnik Yuzhno-Rossiiskogo gosudarstvennogo tekhnicheskogo universiteta (Novocherkasskogo politekhnicheskogo instituta). Seriya: Sotsial’no-ekonomicheskie nauki = The Bulletin of the South-Russian State Technical University (NPI). Social and Economic Science. 2020;13(2):7-27. (In Russ.). DOI: 10.17213/2075-2067-2020-2-7-27

23. Romano L., Trau F. The nature of industrial development and the speed of structural change. Structural Change and Economic Dynamics. 2017;42:26-37. DOI: 10.1016/j.strueco.2017.05.003

24. Vu K. M. Structural change and economic growth: Empirical evidence and policy insights from Asian economies. Structural Change and Economic Dynamics. 2017;41:64-77. DOI: 10.1016/j.strueco.2017.04.002

25. Iamsiraroj S. The foreign direct investment — economic growth nexus. International Review of Economics & Finance. 2016;42:116-133. DOI: 10.1016/j.iref.2015.10.044