Modelling of public debt dynamics and factors of influence

Abstract

 The historical retrospective of the formation and dynamics of public debt of Ukraine is considered. The dynamics of public debt for recent 7 years, namely absolute and relative indicators, is analyzed. The trend forecast of the total amount of public and guaranteed debt, domestic and external debts has been made for the next 5 year. Its results have confirmed the increasing dynamics of the state’s debt. It has been proved the total public debt dependence on income and expenses, also on payments balance and Ukraine’s GDP. Significant influence of GDP on debt amount is established; however, all selected indicators are considered to affected the public debt. The impact of certain socio-economic factors on increase (decrease) of public debt is researched with direct correlation with the help of modelling, namely economic expenses, social welfare cost, capitalization through  public debt, index of industrial production, capital investment, wholesale turnover, CPI, and real wage rate. According to the results of analysis, it has been proved the significant correlation effect on the state’s debt of Ukraine caused by social expenditure and capitalization through public debt, capital investments, wholesale turnover, and inflation. The strategic objectives and principles of the debt policy development in current conditions are figured out. The main strategies for improving the dynamics of the public debt of Ukraineaere singled. Among them are the reduction of public expenses by cutting public administration costs; formation of such debt policy terms under which the cost of public debt service would be minimal; reduction of the guaranteed debt; keeping the debt size at the level safe for the state’s solvency; stimulation economic investments; ensuring stability of the national currency; optimizing the ratio between domestic and external debts.