Private debt and economic growth: trends and characteristics for Ukraine

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Видавництво Львівської політехніки
Lviv Politechnic Publishing House


Досліджено взаємозалежності темпів зростання ВВП України та приватного боргу. На основі застосування функції експоненціального росту розраховано лагову чутливість темпів змін ВВП та приватного боргу. Оцінено чутливість ВВП країни до змін у величині та динаміці приватного боргу. Використання підходу Грейнджера дало можливість оцінити приріст обсягів приватного боргу порівняно із попередньою динамікою ВВП та обсяг нарощеного у попередньому періоді приватного боргу за моделлю прямого та зворотного зв’язку.
Purpose. The purpose of the article is to determine the effects on economic activity of a pure temporary change in private debt and the relationship between the debt multiplier and the level of economic growth in Ukraine. Design/methodology/approach. In the article, the authors used the function of exponential growth for determining the GDP sensibility to the debt movements. There are also using the Granger approach for determining the direction of the relation between private debt and GPD. Rather than testing whether private debt causes GDP, the Granger causality has tested whether private debt forecasts GDP. The authors provided the calculation in the direct and indirect methods. The model of the direct method was based on the assumption that the GDP growth in the current period depends on the dynamics of GDP and increase of private debt in the previous period. The model of indirect correlation was based on the assumption that the increase of the amounts of private debt depends on the former dynamics of GDP and the amount of private debt accumulated in the previous period. Findings. The hypothesis that the GDP sensibility to the private debt movements is individual for every economy is proven. The households’ debt to GDP ratio and non-financial firms’ debt to GDP ratio for the conditions of economy of Ukraine is one of the lowest in Europe, which proves the low attractiveness of debt financing of the private sector growth. The authors show that elevated private debt sentiment in year t+3 is associated with a rising in economic activity in year t. Such conclusion is fair as for the sensitivity to the households’ debt movements and so to the firms’ debt movements. The increase in private debt causes the insufficient influence on the GDP increasing, so we cannot consider the debt market growth as a stimulator of the economy growth in Ukraine. The authors showed the existence of a relation between the GDP growth and increase of private debt only in indirect model. Private sector debt cycle more correlated with the business cycles: in the case of GDP growth the private debt rises also. But, the strength of influence of the GDP growth on the private debt growth is temperate: while the increase in the GDP by 1 % in the medium predicts 0.055 % subsequent private debt growth. Practical implications. The debt-growth nexus has received renewed interest among academics and policy makers. The results of this research are of interest to the government in its way of economic reform and generating effective tools to overcome the economic downturn. Also, the findings can help the financial market regulators to realize the effective monetary policy. Originality/value. This study represents a new evidence of relations between private debt and the real economy. In contrast to existing research the authors argued the reality of indirect impact of economical cycles to the private debt dynamic. But, the strength of influence of the GDP growth on the private debt growth is temperate. So it’s wrong to consider the debt market development as a stimulator of the economic growth in Ukraine. In contrast to the developed countries in Ukraine the main part of private debt belongs to firms.



приватний борг, відношення боргу домогосподарств до ВВП, відношення боргу нефінансових корпорацій до ВВП, економічне зростання, чутливість ВВП до зміни боргу, private debt, household debt to GDP ratio, non-financial firms debt to GDP ratio, economic growth, GDP sensibility to the debt movements


Shkvarchuk L. Private debt and economic growth: trends and characteristics for Ukraine / L. Shkvarchuk, R. Slav’yuk // Вісник Національного університету “Львівська політехніка”. Серія: "Проблеми економіки та управління". — Lviv : Lviv Politechnic Publishing House, 2021. — Vol 5. — No 1. — P. 112–120.