Journal of Scientific Papers VUZF REVIEW Volume 6, Issue 1, March 2021

ISSN 2534-9228 (online)
Journal of Scientific Papers
VUZF REVIEW
Volume 6, Issue 1, March 2021
https://papersvuzf.net/index.php/VUZF/
Public
organization:
VUZF
University
of
Finance,
Business
and
Entrepreneurship

VUZF review, № 6(1) – 2021 ISSN 2534-9228
Vol. 6, №1
March, 2021
Founded in 2016 by the VUZF University
The editorial board
Editor of the publication
Ivan TKACH Prof, Dr. of Sciences, Ukraine;
Deputy Editor-in-Chief
Radostin Vazov Assoc. Prof. PhD, VUZF, Bulgaria;
Igor Britchenko Prof., Dr. of Sciences, VUZF, Bulgaria;
Members of the editorial board
Mitko Atanasov
Dimitrov
Prof., PhD, Chairman of the Academic Council of the Institute for Economic Research of the
Bulgarian Academy of Sciences, Bulgaria;
Igor Britchenko Prof., Dr. of Sciences, VUZF, Bulgaria;
Daniela Bobeva Prof. Dr., Professor at the VUZF, Bulgaria;
Mariana M. Petrova Assoc. Prof. PhD, St. Cyril and St. Methodius University of Veliko Turnovo, Bulgaria;
Stanislav Dimitrov Assoc. Prof. PhD, VUZF, Bulgaria;
Julia Dobreva Assoc. Prof. PhD, VUZF, Bulgaria;
Ali Veysel Assoc. Prof. PhD, VUZF, Bulgaria;
Desislava Josifova Assoc. Prof. PhD, VUZF, Bulgaria;
Manyu Moravenov Assoc. Prof. PhD, VUZF, Bulgaria;
Tetiana Cherniavska Dr. Sc. (Economics), Professor of State University of Applied Sciences in Konin, Poland;
Tomasz Wnuk-Pel Poland;
Dio Caisar Darma Assist. Prof., Department of Management, Sekolah Tinggi Ilmu Ekonomi, Indonesia;
Nataliya Tanklevska Dr. of Sciences, Professor, State Higher Educational Institution "Kherson State Agrarian
University", Ukraine;
Roman Blizkyi Dr. of Sciences, Professor of the State University of Management, Member of the Institute of
Professional Accountants of Russia (IPAR), Russia;
Maksym
Bezpartochnyi
Dr. of Sciences, Professor at the Department of Economics, Marketing and International
Economic Relations Faculty of Soft Engineering and Business National Aerospace University
named after N. Zhukovsky “Kharkiv Aviation Institute”, Ukraine;
Jurgita Sekliuckiene Professor of International Business, Kaunas University of Technology, Litva;
Sudhanshu Rai Associate Professor, Phd, Copenhagen Business School, Denmark;
Panagiotis Kontakos Assistant Professor in International Business & Entrepreneurship, UCLan Cyprus University,
Cyprus;
Mustafa Erdogdu Professor of Department of Public Finance, Marmara University Faculty of Economics, Turkey;
Mariam Arpentieva Grand Dr. of Psychological Sciences, Assoc. Prof., Tsiolkovskiy Kaluga State University, Russia;
Radmila Pidlypna Dr. of Sciences, Professor, UTEI Kyiv National University of Trade and Economics, Ukraine;
Andrii Nikitin PhD in Economics, Associate Professor, Kyiv National Economic University named after
Vadym Hetman, Ukraine;
Yasheva Galina Doctor of Economics, Professor, Vitebsk State Technological University, Belarus;
Liudmila Bagdonienė Litva;
Hans van Meerten Netherlands;
Reinhard Magenreuter Germany.
e-mail: vuzfreview@gmail.com; tkachivan9@gmail.com https://papersvuzf.net/index.php/VUZF/index, тел. +38(093) 752-81-56
The authors of articles are responsible for the authenticity of facts, quotes, their own names, geographical names, names of enterprises,
organizations, institutions and other information. Opinions expressed in these articles may not coincide with the point of view of the
editorial board and do not impose any obligations on it.

VUZF review, № 6(1) – 2021 ISSN 2534-9228
CONTENT
1 Forecasting the state of agricultural enterprises based on the
results of economic diagnostics
Olesia Bezpartochna…………………………….….……………………..………………….…….. 3
2 Methods of assessing the impact of dollarization on economic
development
Оlena Chukurna ……………………………………………………………………………………………………………… 12
3 An innovative approach to managing the interest margin:
economic and statistical analysis of the resource base of a
commercial bank
Svitlana Andros, Shichao Chang ……………………………………………………………………………………… 26
4 Social Entrepreneurship as an Instrument of Development of Small
and Medium Entrepreneurship in Ukraine
Oleksandra Lysiuk, Igor Britchenko…………………………………………………………………………………..
38
5 Adapting Russian Accounting to the International Standards:
Models, Algorithms, and Amendments
Aleksandr Troitskiy, Roman Blizkiy, Irina Rakhmeeva..…………………………………………………….
49
6 The ways of the value assessment the enterprises and the micro-
enterprises
Maria Borowska……………………………………………………………………………………………………………... 58
7 Marketing strategy of territorial branding in the context of
sustainable development
Оlena Chukurna, Dmytro Nikolaiev…………………………………………………………………………………. 65
8 Banking innovations: security technology solution
Olena Stashchuk, Rostyslav Martyniuk……………………………………………………………………………. 79
9 The development of integrated business structures of Ukraine on
innovative and investment basis
Natalia Trusova, Oksana Hryvkivska…………………………………………………………………………………. 87
10 Methodological basis of statistical analysis of foreign trade
Ilona Dumanska, Olha Matviiets………………………………………………………………………………………. 98
11 Analysis of approaches to determining the cost of production
Anatolii Loishyn, Oleksandr Shevchenko, Ivan Troyan, Volodymyr Mazur………………………… 106

ISSN 2534-9228 (2021) VUZF review, 6(1)
3
Forecasting the state of agricultural enterprises based on the
results of economic diagnostics
Olesia Bezpartochna * А
A
VUZF University, 1, Gusla str., Sofia, 1618, Bulgaria
Received: March 07, 2021 | Revised: March 09, 2021 | Accepted: March 31, 2021
JEL Classification: C53, Q12.
DOI: 10.38188/2534-9228.21.6.01
Abstract
This article is devoted to the study of information support and methodological tools for
economic diagnostics of agricultural enterprises, based on the results of which the cost of
resource potential predicted. Determined the factors of influence of the internal and external
environment on forecasting the cost resource potential of agricultural enterprises. The
methodological toolkit for forecasting the cost resource potential of agricultural enterprises
used, taking into account the extrapolation of indicators and the coefficient of change. Built the
economic-mathematical models for forecasting the general potential of agricultural enterprises
in Ukraine. Proposed the scheme of forecasting the state of agricultural enterprises and complex
information support the stages of making managerial decisions by the management of
agricultural enterprises. For agricultural enterprises of Ukraine, promising directions for the
development of economic activities are proposed.
Keywords: forecasting, resource potential, information support, economic diagnostics,
agricultural enterprises.
Introduction
In order to study the state and assess the
effectiveness of economic diagnostics
agricultural enterprises, an analysis of the
formation and use of resources economic
entities carried out with the help of appropriate
methodological tools and information support,
which subsequently serves as the main one for
forecasting the state of agricultural enterprises.
It should be noted that the functioning of
agricultural enterprises is determined by the
specifics and characteristics of the activities of
economic entities in this area. Accordingly, this
reflected in the state, dynamics of the
forecasting development of agricultural
production and on the results of economic
diagnostics of the activities agricultural
enterprises.
In market conditions and crisis phenomena
the economic assessment of the results of
economic diagnostics agricultural enterprises
*
Corresponding author: doctorant VUZF, e-mail: olesyabezpart@gmail.com, ORCID: 0000-0002-0919-2972
makes it possible to forecasting further trends
and propose ways to increase the efficiency of
using the resource potential, to develop a
strategy, as well as directions for the formation
of an effective organizational-financial
mechanism for economic diagnostics of
agricultural enterprises.
Carrying out economic diagnostics of the
economic activities agricultural enterprises,
they monitoring the processes and phenomena
occurring in the agricultural sector. The internal
environment is a sphere in which specific
decisions made regarding agricultural
production, the formation of the organizational
structure and corporate culture of agricultural
enterprises. The external environment is a set of
economic entities, economic, social and natural
conditions of national and interstate
institutional structures, and other external
economic entities in the agricultural sector,

ISSN 2534-9228 (2021) VUZF review, 6(1)
4
conditions and factors operating in the global
environment.
Solving problems related to information
support of economic diagnostics in the
agricultural sector have found their scientific
and practical application in research on
management support of agricultural enterprises
(Ensslin, L. et al., 2017); support services for
innovations in agriculture (Faure, G. et al.,
2019); functioning information systems in
agricultural enterprises (Látečková, A. et al.,
2018); diagnostics and decision-making of the
company management within the period of
economic crisis and recession (Tomšík, P. et al.,
2010) and others.
Material and methods
To determine the economic condition of
agricultural enterprises in the future, they use
various forecasting methods and make forecasts
based on the results of economic diagnostics.
Our analysis of modern approaches to
forecasting the state of agricultural enterprises
shows that in modern conditions they use
normative forecasts that determine the state of
an object under the influence of purposeful
economic activity. (Bezpartochna, O. et al.,
2020). Search forecasts – possible prospects
that describe the state of solving problems in the
future, are not widely used by economic entities
as a justification for the value of indicators
economic activity of agricultural enterprises and
their effective management decisions.
To carry out economic diagnostics
agricultural enterprises must have appropriate
information support in order to conduct
qualitative and quantitative studies of indicators
economic activity and monitoring the market
environment. Information support of economic
diagnostics agricultural enterprises is a system
of data and methods of their processing, which
make it possible to identify the real activities of
an agricultural enterprise, the effect of factors
affecting the economic process or performance
indicators, as well as the possibility of
implementing the necessary management
decisions.
An important part of the data for economic
diagnostics is planned information used as
baseline data for assessing the fulfillment of
planned targets for agricultural enterprises as a
whole and for individual structural units,
monthly, quarterly, for a year and other periods.
For the studied agricultural enterprises, we
propose the preparation of normative and
search forecasts by the information and
analytical department using such a forecasting
method as determining the trend extrapolation.
The problems of using methodological tools
for forecasting various objects of research at
agricultural enterprises have been investigated
in publications various scientists. The articles
investigated forecasting livestock prices (David,
A. et al., 1981), forecasting the demand for
agricultural products (Haoxiong, Yang et al.,
2019), forecasting sales of agricultural
equipment (Krutz, G. et al., 1986), economic
forecasting in agriculture (Geoffrey, P., Allen,
1994).
Results and discussion
Agricultural enterprises in the process of
economic diagnostics use planned information
about the production program, costs production
of agricultural products, the formation and use
of resources, profitability, etc.
Information support for the economic
diagnostics of the external environment
agricultural enterprises are indicators that
characterize the general economic development
of the country, the conjuncture of internal and
external markets of agricultural products, the
activities of counterparties and competitors.
Consider the above indicators in more detail.
We divide the indicators characterizing the
general economic development of the country
into two groups:
– indicators of macroeconomic development
(volume of revenues and expenditures of the
state budget, budget deficit, money emission,
inflation index, unemployment rate, minimum

ISSN 2534-9228 (2021) VUZF review, 6(1)
wage and subsistence level, etc.);
– indicators of sectoral development (the
volume of agricultural production, the total
value of assets of agricultural enterprises, the
total amount of capital, the amount of profit
before taxation and net profit of the enterprises
of the industry, the price index for agricultural
products, the amount of subsidies to producers
of agricultural products by their types, etc.).
The system of indicators of information
support for economic diagnostics of this group,
using agricultural enterprises, serve as the basis
for assessing and forecasting the conditions of
the external environment functioning of
economic entities when making effective
management decisions.
The indicators that characterize the
conjuncture of the domestic and foreign
markets of agricultural products and are used by
agricultural enterprises of Ukraine include the
following indicators: supply and demand for
types of agricultural products, prices, level of
quality of agricultural products, the volume of
imports and exports of agricultural products by
type, the volume of commodity futures
exchanges. The system of indicators of this
group used by agricultural enterprises of
Ukraine to make informed management
decisions in the field of forming their own
production program and the volume of sales of
agricultural products, determining the cost and
selling prices of crop and livestock products.
Indicators characterizing the activities of
counterparties and competitors and are used by
agricultural enterprises include indicators of the
activities of banking institutions, insurance
companies, suppliers and buyers of agricultural
products, competitors. Sources of information
about these indicators and the use of
agricultural enterprises are the publication of
reporting materials in the press and the Internet
(for certain types of economic entities), ratings
(banks, insurance companies), and paid business
information. They used by agricultural
enterprises to make effective management
decisions on operational economic activities.
The conducted studies have shown that in
modern conditions is extremely difficult for
agricultural enterprises to form information
support for economic diagnostics of the external
environment, since economic entities
experience a shortage of financial resources to
collect relevant data, need specialists in
analytical research, especially foreign markets
for agricultural products, as well as accessibility
to technical-communication support of the
Internet.
Taking into account the practical activities of
agricultural enterprises, we have identified the
directions of using quantitative methods for the
study of economic diagnostics, which
manifested in the following:
– time series analysis is used by economic
entities to take into account the time
fluctuations of the studied quantities (study of
the main indicators of economic activity by
types of production resources);
– when using the analysis of cyclicality,
entities reveal changes in the studied values
associated with the business cycle, namely:
determination of supply and demand for
agricultural products within the marketing year;
– seasonality analysis is used when taking
into account the period of sowing and
harvesting, raising animals, etc.;
– the method of extrapolation trends is used
when observing the dynamics of a certain
indicator of the enterprise’s activity,
determining the trend of its development for
the future period;
– the forecasting method based on the past is
used to determine the volume of activity or other
indicator based on the data of the past period to
forecasting the likelihood in the future;
– the trend correlation method is used by
entities in the study of relationship between
various trends in order to establish their mutual
influence;
– regression analysis is used to build a model
of the dependence a certain quantity on another
or several other quantities.
In order to improve the mechanism for
assessing results of economic diagnostics the
internal environment of agricultural enterprises
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ISSN 2534-9228 (2021) VUZF review, 6(1)
proposed to use economic-mathematical
modeling in order to forecasting the total cost of
potential taking into account changes in each of
its elements, which will allow to reasonably
determine the volume of activity and need for a
particular production resource.
To forecast the resource potential of
agricultural enterprises, we will define the main
elements and their significance. We have
referred to the elements of the resource
potential of agricultural enterprises: production
stocks, fixed assets, personnel cost, financial
resources, which in general constitutes the
general potential.
Specific features of the economic diagnostics
of fixed assets of agricultural enterprises is the
determination of optimal ratio between the
active and passive parts. This is due to the
belonging of agricultural enterprises to crop or
livestock complexes. Accordingly, if economic
entity of the agrarian sector is engaged in the
cultivation of agricultural products, then the
share of the active part of fixed assets
(agricultural machinery, vehicles, inventory,
etc.) must exceed the passive part (warehouses,
repair and garage facilities). In the case of
agricultural enterprises operating in a livestock
complex, the share of fixed assets of the passive
part (farms, storage facilities for feed, etc.)
should not exceed the active part.
Specific features of the economic diagnostics
of labor resources when using them in
agricultural production are: 1) high proportion
of labor operations in the livestock complex, and
its gradual reduction in crop production through
the introduction of modern progressive
technologies in the cultivation of agricultural
crops; 2) high proportion of the costs of living
labor in the total costs of agricultural
enterprises; 3) limiting the possibilities of a
narrow professional and technological division
of labor.
The specificity of the agrarian sector also
reflected in features of the economic
diagnostics formation of assets and the
functioning of the capital agricultural
enterprises. In modern conditions, capital
formation occurs precisely due to its
concentration in the field of agricultural and
industrial production, as well as due to
investment resources. Most of the large
agricultural enterprises are part of holding
structures and are included in the integration
links in the “production-processing-sale-
consumption” chain. Other entities of the
agrarian sphere seek to integrate or merge with
large economic entities or industrial groups in
order to attract working capital and use their
own resource potential, etc.
The methodology for calculating the
forecasting value indicators of the resource
potential agricultural enterprises provides for
the use of coefficient change, which we
determined using the information tools of the
Excel spreadsheet processor (TENDENCY
function) by studying the change in indicators
for the period 2015-2019 compared to the same
indicator in 2019.
In order to study the state of economic
diagnostics, we have selected 10 agricultural
enterprises of Ukraine, which carry out the
production of crop and livestock complexes,
namely: Agricultural Consumer Society (ACS)
“Krajany”, LLC named after Vorovsky,
Agricultural LLC (ALLC) named after Kalashnika,
Subsidiary Research Facility (SRF) “Yuvileiny”
PSAA, Agricultural LLC (ALLC) “Zlagoda”,
Research Enterprise (RE) “Vital-Agro”, LLC
“Poltava-Sad”, Agricultural LLC (ALLC)
“Vasilkovskoe”, Subsidiary Research Facility
(SRF) “Stepnoye”, Private Agricultural Enterprise
(PAE) “Promin”.
It should be noted that at the studied
agricultural enterprises of Ukraine, the state of
economic diagnostics depends on the level of
use of methodological tools, methods of
conducting economic diagnostics, the possibility
of processing accounting and statistical
information, the use of modern computer
technology, the availability of appropriately
qualified personnel, the further use of the
results of economic diagnostics in the process of
making managerial solutions, etc.
(Bezpartochna, O. et al., 2019).
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ISSN 2534-9228 (2021) VUZF review, 6(1)
The influence of environmental factors on
the studied agricultural enterprises of Ukraine
negatively affects the production of agricultural
products, therefore, the forecasting value of
production stocks tends to decrease compared
to 2019; the coefficient of change is in the range
of 0.39-0.65.
For the forecast period, not all agricultural
enterprises in Ukraine may have a growth trend
in fixed assets. Thus, the largest growth rate in
the cost of fixed assets is shown by the SRF
“Yuvileiny” PSAA and the SRF “Stepnoye” –
respectively by 73% and 2.8 times compared to
2019; the forecasted value of the cost fixed
assets will amount to 3336 thousand UAH,
respectively 32013 thousand UAH.
The difficult economic situation and the need
to optimize the number of personnel agricultural
enterprises in Ukraine can lead to a decrease in
the cost of personnel, therefore, its forecast value
tends to decrease compared to 2019; the
coefficient of change is in the range of 0.38-0.91.
For the forecast period, not all agricultural
enterprises in Ukraine may have a growth trend
in the cost of financial resources. Thus, the
highest growth rate of the cost financial
resources is observed in the (RE) “Vital-Agro”,
ALLC “Vasilkovskoe”, and the SRF “Stepnoye” –
by 93%, 69% and 26%, respectively, compared
to 2019; the forecasted value of the cost
financial resources will be, respectively, 118
thousand UAH, 182 thousand UAH and 129
thousand UAH.
For the forecast period, only one agricultural
enterprise in Ukraine can have a positive
dynamic of growth in the value of the total
potential – SRF “Stepnoye”. The growth rate will
be 36.0% compared to 2019, and the forecast
value will be 40764 thousand UAH.
We have built economic-mathematical
models for forecasting the cost of elements and
the general potential of agricultural enterprises
in Ukraine (Table 1). The proposed economic-
mathematical models will allow agricultural
enterprises in Ukraine to forecasting the cost
total potential, as well as adjust the cost each
element when the external and internal
environment changes. That is, by improving the
mechanism for assessing the results of
economic diagnostics by using a forecasting
system and economic-mathematical modeling,
agricultural enterprises are able to optimally
determine the need for a particular production
resource and calculate the volume of activity.
Improving the mechanism for assessing the
results of economic diagnostics also allows
agricultural enterprises to determine promising
areas of economic activity in the future and the
magnitude of the economic effect.
Table1 – Economic-mathematical models for forecasting the total potential of agricultural
enterprises in Ukraine
Agricultural enterprises Economic-mathematical models 2019 2020
Deviation
2020 from
2019,
(+, -)
ACS “Krajany” y = 0,56x1 + 0,38x2 + 0,50x3 + 0,18x4 10250 4361 -5889
LLC named after Vorovsky y = 0,65x1 + 0,62x2 + 0,91x3 + 0,13x4 7758 4661 -3097
ALLC named after Kalashnika y = 0,39x1 + 0,62x2 + 0,62x3 + 0,52x4 35194 17374 -17820
SRF “Yuvileiny” PSAA y = 0,76x1 + 1,73x2 + 0,68x3 – 70,85x4 8416 7851 -565
ALLC “Zlagoda” y = 0,61x1 + 1,07x2 + 0,60x3 – 0,04x4 26321 14299 -12022
RE “Vital-Agro” y = 0,45x1 + 1,00x2 + 0,38x3 + 1,93x4 5326 3225 -2101
LLC “Poltava-Sad” y = 0,53x1 + 0,67x2 + 0,67x3 + 0,48x4 34143 20460 -13683
ALLC “Vasilkovskoe” y = 0,57x1 + 0,81x2 + 0,71x3 + 1,69x4 2511 1690 -821
SRF “Stepnoye” y = 0,48x1 + 2,80x2 + 0,43x3 + 1,26x4 29962 40764 10802
PAE “Promin” y = 0,58x1 + 1,03x2 + 0,68x3 + 0,22x4 10674 6839 -3835
Source: built by the author
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ISSN 2534-9228 (2021) VUZF review, 6(1)
Legend: x1 – the cost inventories, thousand UAH; x2 – the cost fixed assets, thousand UAH;
x3 – personnel cost, thousand UAH; x4 – the cost of financial resources, thousand UAH.
For agricultural enterprises of Ukraine,
promising areas of economic activity are:
1) expansion of sales channels and an
increase in sales of agricultural products
through the formation a portfolio of orders
sellers in the wholesale and retail markets;
2) cooperation with financial-credit
structures for the leasing of agricultural
machinery and replenishment of working
capital;
3) development of export potential through
entities of foreign economic activity;
4) mediation with manufacturers and retailers
on cooperation in the processing of raw
materials and the sale of finished products
under its own trademark, etc.
The results of study allowed us to develop a
scheme for forecasting the state of agricultural
enterprises based on the results of economic
diagnostics (Fig. 1). With the help of the
proposed forecasting system, agricultural
enterprises can make various forecasts of the
state and development of their own activities
based on the results of economic diagnostics.
Figure 1 – Scheme of the process of forecasting the state of economic activity and the
development of agricultural enterprises
Source: suggested by the author
In order to improve the organization and
methodology of information support for
economic diagnostics of agricultural enterprise
about the process of making managerial
decisions based on the results of forecasting, we
proposed the stages of decision-making as
organizational, analytical, predictive and
effective. The allocation of these stages makes it
possible to effective implement the mechanism
for formation and functioning of the information
Statement of problems and the
choice of forecasting methods
І. Assessment of the
state and position
of the enterprise
Analysis of the business
environment and infrastructure
of the agricultural market
Assessment of the external
environment
Assessment the potential
of agricultural enterprise
ІІ. Determination of
directions and
development goals
Modeling condition
scenarios based on
probable events
Forecasting the state of
agricultural enterprise
Assessment of alternatives,
selection of the most
sustainable scenario
Selection and formation of
development directions in the
relevant market
ІІІ. Formation of
ways to achieve
goals
Develop of plans for the
development of an agricultural
enterprise on the market
Formation of budget for the
implementation of plans for the
development of agricultural
enterprise on the market
8

ISSN 2534-9228 (2021) VUZF review, 6(1)
support system for economic diagnostics of
agricultural enterprise in the forecasting process
(Fig. 2).
Figure 2 indicate that for the practical
implementation of the approach we have
presented at agricultural enterprises,
appropriate forms of information provision
(documentary, electronic) must be developed,
suitable for its analysis (organizational stage),
the procedure for obtaining the results of
information assessment (analytical and forecast
stages) must be carried out. In general, this will
allow agricultural enterprises to form an
information model of the research object
(productive stage), which provides favorable
conditions for the practical application of
substantiation methods and effective
management decision-making.
Figure 2 – Comprehensive information support for the stages of management decision-making
of agricultural enterprises
Source: suggested by the author
Conclusions
Thus, the information support economic
diagnostics of agricultural enterprises includes
data from the internal and external
environment of activity. When using the
appropriate methodological tools, the main
indicators of the activity agricultural enterprises
assessed. Information support of the external
environment is an appropriate system of
indicators that allow agricultural enterprises to
study the state of the national economy and
macroeconomic indicators, analyze the state
and changes in the regulatory framework of
activities in the agricultural sector, navigate the
The need for user decision
making
Collection of data about the
object of research and their
disclosure
Economic diagnostics of the
information received
Determination of probable
alternatives for the development
of the research object
Analytical justification for the
development of certain
alternatives
Choosing a reasonable alternative
Practical implementation of the
decision
The procedure for
obtaining the results
of assessment
information
Forecasting
indicators of
economic activity
Information model of
the research object
Forms of providing
information for
diagnostics
Organizational
Analytical
Forecast
Result
Stages of making
management
decisions
Management decision-making
process
Improvement of
information support
9

ISSN 2534-9228 (2021) VUZF review, 6(1)
markets of agricultural products and monitor
counterparties and competitors.
Based on the results of economic diagnostics
using information support, agricultural
enterprises forecasting the cost of resource
potential. The proposed methodological toolkit
for forecasting the state of agricultural
enterprises in Ukraine based on the method of
extrapolating these resources and the
coefficient of their change for the corresponding
period.
The proposed scheme for formation and
functioning of the information support system
for economic diagnostics of agricultural
enterprise allows you to obtain relevant
information, analyze it, determine the quality
and sufficiency of information, provide it to the
management system for making informed and
effective decision-making. Comprehensive
information support for the stages of
managerial decision-making by the
management of agricultural enterprises serves
as a tool for tracing the stages and the decision-
making process in order to improve information
support.
The information support system of
agricultural enterprise is factor of direct
influence on the effectiveness of management
decision-making. An important direction in the
functioning of information support system is the
search for effective ways to ensure the
efficiency of economic activity agricultural
enterprise based on continuous processing of
information flows in order to make informed
management decision-making.
In general, the improvement organizational-
financial mechanism of economic diagnostics
agricultural enterprises based on the use of
methodological tools for studying the factors of
the external and internal environment. On the
basis of obtained results of forecasting the state
and further activities of agricultural enterprises,
the effective formation and use of resource
potential, optimization of individual elements
the resource potential of economic entities,
prospects for further development, which will
ensure the management decision-making and
obtain a positive financial result in the future.
References
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mechanism of management innovative
development of economic entities: collective
monograph, Higher School of Social and
Economic. Przeworsk, WSSG, 142-153, ISBN
978-83-937354-6-4.
Bezpartochna, O. & Britchenko, I. (2020).
Diagnostics the economic efficiency of
agricultural enterprises, New trends in the
economic systems management in the context
of modern global challenges: collective
monograph, VUZF University of Finance,
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(2019). How to Strengthen Innovation
Support Services in Agriculture with Regard
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to Multi-Stakeholder Approaches, Journal of
Innovation Economics & Management, 1(1),
145-169. DOI: 10.3917/jie.028.0145
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Methods of assessing the impact of dollarization on economic
development
Оlena Chukurna * А
A
Odessa National Polytechnic University (ONPU), marketing department, Odessa, Ukraine
JEL Classification: F63.
DOI: 10.38188/2534-9228.21.6.02
Abstract
The article considers the transformation of the money function as a consequence of the impact
of dollarization on the economic development of countries in the global context. The economic
substantiation of the process of dollarization of the economy, which is connected with the
function of money, is proved. The influence of dollarization on the macro – and macro levels of
the economy is substantiated. Approaches to methods of estimating dollarization on the
economic development of the country in the context of globalization are proposed.
The article defines the degree of dependence of the machine-building industry of Ukraine on the
processes of dollarization of the world economy through the use of the effect of transferring the
dynamics of changes in exchange rates to the price dynamics in the machine-building industry.
Using the ARIMA model, the effect of transferring the exchange rate to prices for mechanical
engineering products is proved. The expediency of using the ARIMA forecasting model to predict
the further spread of the effect of the change in exchange rates on prices.
An approach is proposed to determine the sensitivity of domestic prices for the products of
engineering enterprises to changes in the exchange rate through modified elasticity coefficients.
It was determined factors affecting the size of the effect of transfer of the exchange rate on
domestic prices for the products of machine-building enterprises.
Keywords: price dynamics, exchange rate, price indices, dollarization of the economy, indicators
of dollarization.
Introduction
Under the influence of globalization,traditional
pricing factors change in their content and
content. In addition, there are new factors of
global subordination, which should be attributed
to uncontrolled factors for the company. In this
context, one of the most important trends in
globalization, which affects the transformation of
pricing factors, is the dollarization of national
economies. Dollarization contributes to the
emergence of a new pricing factor - changes in
exchange rates, which occurs on the methodology
and pricing strategy of enterprises and entire
sectors of the economy and many countries
around the world, especially with economies in
transition. Thus, dollarization as a factor of
* Corresponding author: Doctor of Economics sciences, Professor of marketing department, e-mail: elenаchukurna@gmail.com,
ORCID: 0000-0001-9285-7068
globalization affects all economic levels, starting
from the macroeconomic scale and ending with a
direct impact on the pricing of enterprises through
the effect of the transfer of exchange rates to
domestic prices.
Dollarization, as a global process, takes place
against the background of partial or complete
substitution of national currencies by the dollar in
the internal settlements of many countries, which
is associated with unofficial dollarization. It has
been generally accepted among scholars that the
problem of dollarization is more inherent in
transition economiesor emergingeconomies.This
has led to scientific interest in the study of this
issue on the example of the analysis of the
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ISSN 2534-9228 (2021) VUZF review, 6(1)
dynamics of dollarization in developing countries.
The methodological basis of the study is the
methods of theoretical generalization - to group
the factors influencing pricing in the context of
globalization and to determine the
transformation of the functions of money in the
context of dollarization; semantic-structural
analysis - to clarify the conceptual and
categorical apparatus of money functions in
terms of dollarization Specific research
methods: statistical methods - to study the state
and dynamics of dollarization through the
definition of public debt and its share in GDP;
vector autocorrelation model (VAR) and ARIMA
model – to assess the degree of effect of the
transfer of the dynamics of exchange rates to
domestic prices for products of machine-
building enterprises.
The information base of the study is the
fundamental scientific works of domestic and
foreign scientists on marketing pricing and
globalism, legislative and regulatory documents,
official materials of the State Statistics Service of
Ukraine, the Ministry of Industrial Policy,
information materials of international
organizations (IMF, UNCTAD reports), societies
and associations. reporting of machine-building
enterprises of Ukraine and the EU, open
information resources of the Internet, expert
assessments, results of own researches.
Significant contributions to the study of
dollarization of transition economies have been
made by scientists such as: Calvo G. R.C. (Calvo,
2002: 379-408), Devereux M. (Devereux, 2006:
478-506), Webber A.G. (Webber, 2000: 71-87),
Dobrynskaya V.V. (Dobrynskaya, 2008: 29-62),
Delatte A.-L. (Delatte, 2012), Golovnin M.Yu.
(Golovnin, 2004: 124-135), Anishchenko A.V.
(Anishchenko, 2012: 172-174), Semenov S.K.
(Semenov, 2007: 47-51), Piontkovsky R.V.
(Piontkovsky, 2007).
However, the theoretical aspects of the
dollarization of the national economy in these
studies require further systematization of
factors influencing the spread of the
dollarization process and economic justification
of the causes and relationships of dollarization
and assessment of its impact on the national
economy of Ukraine. The problem of
dollarization in recent years has gone beyond
the world's transition economies.
The spread of the dollar as the reserve
currency of many countries creates the problem
of accumulating a large money supply of the
dollar, which has no economic support. In
addition, there is the recognition and spread of
the dollar as the second national currency in
many countries. According to the IMF, in seven
countries the dollar is used as the official
currency in settlements along with national
currencies. In another twelve countries, the
share of foreign currencies in official
transactions and settlements ranged from 30%
to 50% (World Investment Report 2018;
International Monetary Fund, 2018).
The International Monetary Fund (IMF)
refers to semi-officially dollarized countries in
which foreign currency acts as a secondary
means of payment relative to the national
currency. In the global world, there are more
than 10 countries with semi-officially dollarized
economies: the Bahamas, Bhutan, Brunei, Haiti,
Cambodia, Sao Tome and Principe, Lesotho,
Liberia, Namibia, the British Crown, the Isle of
Man and the Channel Islands (Guernsey and
Jersey) (International Monetary Fund, 2018).
In the global world, there are also about 20
officially dollarized national economies that use
2 currencies at the same time. For example,
countries such as Andorra, the Vatican, Kosovo,
Monaco, San Marino, Montenegro, as well as
the overseas departments and provinces of
France use both the euro and the dollar in their
calculations. Liechtenstein uses the Swiss franc
and the euro; Kiribati, Nauru, Tuvalu, and the
three Australian-controlled territories use the
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Australian dollar and the US dollar; the self-
governing territories of Denmark, Greenland
and the Faroe Islands use the Danish krone and
the US dollar; the unrecognized republic of
Northern Cyprus – the Turkish lira and the US
dollar.
As shown by an analytical study of scientific
and practical sources on this issue, the term
“dollarization” is associated with the following
two areas of economic policy:
1) The process of complete replacement of
the national currency by the dollar or official
support of the bimonetary system, is the
simultaneous functioning of the national
currency and the dollar. Such monetary policy is
officially pursued by the state (Panama, El
Salvador, Ecuador, Palau, the Marshall Islands,
the Federated States of Micronesia).
2) The process of economic replacement of
the national currency by the dollar, which can be
expressed in the use of the dollar as a means of
payment in settlements in the domestic markets
of national economies. However, this process
takes place not only at the official level, but also
in the shadow economy. This trend is also
reflected in the depository policy of the National
Bank, which is dominated by dollar assets and
deposits. Which indicates the gradual
replacement of the country's assets by the
money supply of the dollar. The accumulation of
dollar assets inevitably leads to dysfunctional
shifts in national assets in the direction of
dependence on exchange rate fluctuations. The
openness of the national economy to
international markets and the action of global
factors, its dependence on exchange rate
fluctuations while maintaining a negative
foreign trade balance of the country, affects the
growth of domestic prices in such economies.
The most influential structural shifts occur
against the background of dollarization in the
economies of developing countries or countries
with economies in transition. Unconditional is
the significant impact of dollarization on the
monetary system of the economy, which can be
manifested in the following:
- If the dollar participates in economic
calculations along with the national currency,
then there is a transfer of inflationary pressure
to the national currency. Which is manifested in
the increase in money supply, especially with
floating exchange rates, and the promotion of
inflation.
- Dollarization affects the function of demand
for money by increasing the sensitivity of
demand to the dynamics of exchange rates,
which occurs on its elasticity depending on the
interest rate.
- Exchange rate volatility increases, as the
demand for currency in foreign markets is joined
by the demand for currency in the domestic
market. This complicates the implementation
and regulation by the National Bank of
monetary policy and its currency control.
- Dollarization has a significant effect due to
the accumulation of deposits and loans in
foreign currency. If the accumulation of deposits
in foreign currency (dollars) increases the
dependence on the money supply of foreign
currency and the loss of stability of the national
currency, then lending reduces credit risk for the
banking system.
The above issues of dollarization have
influenced the formation of scientific opinion on
its interpretation. Most scholars who have
studied dollarization and formed an economic
opinion on its interpretation, hold the view of
the official recognition of the dollar as a national
currency, which will indicate the full
dollarization of the economy. However, the
informal use of foreign currency in the national
calculations of many countries creates the
phenomenon of penetration of the dollar as a
means of circulation, payment and
accumulation along with the national currencies
of such countries. This aspect contributed to the
emergence of a new integrative view of
dollarization as a gradual process of replacing
the national currency. For example,
Anishchenko O. V. interprets dollarization as:
“the process of distribution and use in the
national economy as a means of payment,
accumulation, measure of value and means of
formation of assets by economic entities of
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foreign currency, regardless of whether partial
or complete replacement of national currency in
money systems and assets» (Anishchenko,
2012: 172-174). Other scholars have linked this
process to the complete replacement of the
national currency as a means of circulation,
payment, and a measure of value. Thus,
Semenov S.K. (Semenov, 2007: 47-51) and
Mikhalchuk N.O. (Mikhalchuk, 2016: 68-72)
interpreting dollarization, focus on the
formation of high inflation in countries where
dollarization is widespread. Golovnin M.Yu. also
follows the approach to the interpretation of
dollarization in the context of foreign currency
substitution of three functions (as a measure of
value, means of circulation and means of
payment), which performs the national currency
in the economy (Golovnin, 2004: 124-135). In
this context, his research focuses on the solved
problems of economic measurement and
assessment of the degree of dollarization and is
based on the formation of indicators of
dollarization of the country's economy.
While acknowledging the significant
contribution of scientists to the study of the
problem of dollarization of the economy, some
aspects of this problem are debatable.
According to the author of this study, when
defining the concept of dollarization, it is
necessary to take into account not only the
official signs of dollarization, but also the degree
of substitution of foreign currency functions
performed by the national currency in the
economy. In addition, none of the scholars
working on this issue link dollarization with the
transformation of pricing methodology and do
not separate or justify it as a factor influencing
pricing. The author understands the term
“dollarization” as the process of complete
replacement of all five functions of money by
foreign currency, which contributes to the
accumulation of money supply of foreign
currency as an asset and reserve currency. This
process affects the spread of inflationary
pressures and the spread of the effect of
transferring exchange rate fluctuations to
external and domestic prices within the national
economy.
Thus, the economic justification of the
process of dollarization of the economy is
associated with the functions of money, which
are changing. Consider the transformation of
the functions of money in the context of
dollarization of the economy. Traditional
economic theory defines five functions of
money: as a measure of value; as a means of
circulation; as a means of calculation; as a
means of accumulation and storage and world
money. Dollarization of the national economy
can be justified through the transformation of
the function of money, which is manifested in
the following.
1) The replacement of the function of
money as a measure of value contributes to the
spread of the use of foreign currency in shaping
the value of goods produced within the national
economy. Given that the value of a commodity
consists of the socially necessary labor costs that
have been expended on its production, this
function measures these costs in a single
currency. If we take into account the trend of
dollarization, the formation of value is directly
influenced by the exchange rate and the
dynamics of its change. Thus, the cost of factors
of production within national economies
becomes vulnerable to exogenous factors,
namely exchange rate fluctuations. Given that
the exchange rate depends on many factors of
macroeconomic nature, the formation of the
value of goods is subject to other laws of
economics.
The transformation of factors influencing the
price needs a separate substantiation, because
the price is a monetary expression of the value
of the goods. Changing the pricing system in the
conditions provided by dollarization depends on
the formation of value. In addition, there is a
need to compare prices of different goods
requires the reduction of the price system to
their expression through a single currency,
which will then be adjusted for the exchange
rate. These processes are complicated by the
difficulty of calculating the price in cases where
companies use imported raw materials for
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production.
2) Replacement of the function of money as
a means of circulation occurs due to
hyperinflation. The increase in inflation
encourages market participants to switch to
mutual settlements in foreign currency, which is
the result of high costs of using the national
currency. The spread of foreign currency as a
means of circulation contributes to the full or
partial replacement of the national currency in
the calculations. Thus, there is a process of
dependence of the formation of real prices on
the exchange rate.
a means of accumulation and storage is carried
out through the use of assets in foreign
currency. If the majority of assets in national
accounts, including deposits, are concentrated
in dollars, then in fact there is a process of
informal dollarization, which is manifested
through the replacement of this function of
money. Of course, the accumulation of savings
and assets in foreign currency is a measure of
insurance against currency risks, but, at the
same time, is a means of contributing to the
dependence of the economy on demand for
foreign currency. It is through the indicator of
the level of deposits and assets denominated in
foreign currency that the level of dollarization of
the country's economy is determined. This
approach is common.
a means of payment, which has the following
manifestation. The function of money as a
means of payment is used in servicing credit
relations. It mediates the movement of goods
and capital and is used in credit operations, bank
settlements, wage payments. Historically, this
feature is associated with the occurrence of
installments and lending when buying goods.
When selling goods on credit, debt obligations
become a means of circulation, the repayment
of which requires the use of money as a means
of payment. Thus, money as a means of
payment completes the exchange process,
repaying debts, at the same time, as a means of
circulation, they are an intermediary in the
exchange of goods. If this function of money is
replaced by the use of foreign currency, then
there is a full or official dollarization of the
economy. The level of settlements in foreign
currency in the amount of domestic settlements
in the country's economy also determines the
level of dollarization.
5) The function of world money is carried
out in the context of international economic
relations, when money is used to determine
world prices and as an international means of
payment and to form the country's foreign
exchange reserves. In fact, this function requires
money to perform all previous functions
internationally. In practice, the function of world
money is performed only by the currencies of
those countries that have been recognized by
the IMF as reserve currencies (US dollar, pound
sterling, Chinese yuan, euro, Japanese yen). The
quotations of these currencies are quoted on
the basis of floating exchange rates, which are
determined by the supply and demand for these
currencies. According to the Jamaican monetary
system, the introduction of special drawing
rights involves the formation of a basket of
currencies, which depends on the share of each
currency in international trade and its
contribution to world gross domestic product.
Despite the possibility of an annual review of the
shares of currencies in the basket of currencies,
the leadership has remained for many years on
the US dollar. According to the IMF Annual
Report, from October 1, 2016, the ratio of
currencies in the "currency basket" is as follows:
the US dollar - 58.2%; euro - 38.6%; Chinese
yuan - 10.2%; Japanese yen - 11.9%; British
pound sterling - 8.5%. This trend creates
demand for this currency in international
settlements in world trade (International
Monetary Fund, 2018).
The abandonment of the gold-currency
standard in 1973 actually contributed to the
emergence of an approach to determining the
exchange rates of national currencies based on
the ratio of prices in these currencies for a
basket with the same set of goods. However, the
existing difference in the cost of producing the
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same goods in different countries makes such an
equivalent an unreliable international measure
of value. Thus, the rejection of the gold-currency
standard, due to the fact that the development
of the scale of commodity production was not
ensured by the presence of such a mass of gold.
The situation was exacerbated by the spread of
paper and electronic money, increasingly
separating the value of money from its gold
equivalent. In our opinion, this situation is
becoming the foundation of the dollarization of
the world economy. In this context, the dollar
begins to perform all the functions of money,
establishing itself as the main currency in
international settlements. In addition, the
functions of the dollar as a world currency
become the global function of money, as
dollarization can be done legally when countries
with economies in transition officially
implement the transition dollar as a domestic
currency. This aspect creates the preconditions
for the emergence of the global function of
money, which is more widely used than world
money, through the legalization of a currency on
a global scale and its recognition as the national
currency of most countries. In addition, the
emergence of digital currencies, among which a
significant place belongs to cryptocurrencies,
which are generally decentralized, form the
basis of the global function of money.
The generalization of the substantiation of
the transformation of the functions of money
proves that the substitution of all five functions
of money can lead to the complete dollarization
of the economy.
Full dollarization of the economy occurs in
conditions of complete replacement of all
functions of the national currency by the reserve
currency (dollar). In this context, it should be
noted that countries that pursue a policy of
dollarization and do not have the opportunity to
receive seigniorage, fully supporting the dollar
as a world currency, give the United States the
opportunity to receive quasi-money.
The general analysis of the degree of
dollarization of the Ukrainian economy,
conducted on two groups of indicators,
reflecting the replacement of the functions of
money as a means of payment and the functions
of world money, allowed us to draw the
following conclusions. According to the
calculations of the coefficients of credit
dependence of the population and the
dependence of the national economy on loans
from international funds, the Ukrainian
economy can be attributed to economies with a
high degree of dollarization.
Currently, the dependence of the Ukrainian
economy on IMF loans is quite significant.
Moreover, in recent years there has been an
effect of accumulation of public debt, in 2017 its
share was almost 72% of GDP. By the period
2018-2019, there is a slight decrease in these
indicators (Fig. 1).
Fig.1. Dynamics of change in the share of public debt of Ukraine relative to GDP for the period
2010-2019 (%)
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Source: improved on the basis (State Statistics Service of Ukraine)
Over the past eight years, the dollarization
ratio has tended to increase, but it reached a
critical point in 2014, when the share of public
debt relative to the country's GDP was 69.4%.
The gradual increase in this indicator in the
following years demonstrates the increase in
Ukraine's dependence on foreign lending and
the lack of economic growth. The state-
guaranteed debt also increased during this
period, but in 2017 its share almost approached
the level of 2010.
The analysis of dollarization indicators at the
macro level allows us to conclude that Ukraine's
economy is highly dependent on dollarization
processes.
A fundamental issue in the transformation of
economic laws is the study of the mechanism by
which one can assess the degree of dollarization
of the economy at the enterprise level. This
mechanism is based on the pricing process. It is
through the price system at the micro level that
the ultimate effect of dollarization on the
activities of economic sectors is reflected.
In this context, the issue of studying the
effect of the transfer of changes in the exchange
rate to domestic prices for the products of
enterprises operating within the framework of
the national economy is actualized. If this effect
is relatively high, then we can conclude that the
economy is highly dollarized. This effect is the
indicator that allows you to determine the level
of dollarization at the micro level or at the level
of individual industries.
The pass-through effect on prices means that
fluctuations in the exchange rate of the national
currency are reflected at the level of domestic
prices of sectors of the economy. The main
reason for the pass-through is the change in
producers 'costs, expressed in buyers' currency,
when the exchange rate changes.
The most accurate definition of the exchange
rate pass-through is provided in the scientific
works of P. Goldberg and M. Knetter: “The
exchange rate pass-through is the change in the
prices of imported goods as a percentage,
expressed in the national currency of the
importing country, depending on the one-
percent change in the exchange rate between
the country -exporter and importing country”
(Goldberg & Knetter, 1997).
Exchange rate transfer is always carried out
using the following mechanisms:
- Direct effect. According to this approach, a
change in the exchange rate of the national
currency (for example, the hryvnia) to the
currency of the importing country leads to a
change in the producer's costs expressed in the
national currency. This, in turn, forces exporters
to change the prices of their goods.
- Indirect effect (indirect). This approach
involves the transfer of exchange rate changes
to the factors of production of the importing
country. In this case, the effect of changes in the
exchange rate on the goods of national
producers is observed, both in the consumer
market and in the market for industrial goods.
- The indirect effect of foreign direct
investment (FDI), which is associated with the
transfer of foreign production to countries with
relatively cheap currencies in order to save costs
for factors of production. This will lead to an
increase in the demand for labor, wages and
prices in this economy.
If there is a complete dependence of the
price level on the exchange rate, then it can be
argued about the full pass-through effect (at the
level of 100%). This result indicates a single
exchange rate elasticity of domestic prices. In
practice, the pass-through effect is incomplete if
its level is less than 100% or E <1.
Based on this approach, the effect of the
exchange rate pass-through on the internal
prices of enterprises should be understood as
the degree of price sensitivity to a 1% change in
the exchange rate. If there is a complete transfer
of the exchange rate of currencies to domestic
prices, then there is a complete elasticity of
prices depending on the exchange rate, which
can be expressed through a coefficient
presented in the form of the formula:
𝜀 = |
𝛥Р
Р
÷
𝛥К
К
|, (1)
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where: Р
 – changes in domestic prices;
Р – average value of domestic prices, Р=
(P1+P2)/2; К
 – differences in foreign exchange
rates; К – average value of exchange rates for
the period, К = (К1+ К2)/2;
The interpretation of the coefficient of
elasticity of domestic prices from changes in the
exchange rate of currencies is to determine the
degree of price sensitivity in percent relative to
the rate of change in exchange rates. If E = 100%,
there is a complete sensitivity of domestic prices
to the exchange rate and there is an absolute
pass-through of exchange rates on the domestic
prices of enterprises.
In addition, the effect of exchange rate pass-
through on prices is reflected in the degree of
interchangeability between domestic and
imported goods. With significant fluctuations in
exchange rates, the rise in prices for imported
products forces buyers to switch demand to
domestic counterparts. The degree of
interchangeability between domestic and
imported goods can be determined using the
modified coefficient of cross-elasticity of
demand, which is determined by the following
formula:
𝜀 = |
𝛥𝑄в
𝛥𝑃і
×
Рв
𝑄𝑖
|, (2)
where: 𝑄𝑖 – sales of domestic goods product
group in the commodity market;
 𝑄𝑖 – change in the volume of domestic goods
of this product group in the commodity market;
𝑃і – the price of the imported product in this
commodity market; 𝛥𝑃𝑖 – increase the price of
imported goods in this product market.
Cross-elasticity coefficient shows the
percentage change in demand for domestic goods
while increasing the price of imported goods due
to the increase in the exchange rate.
If E> 0, then the goods are interchangeable,
which indicates a high degree of demand
switching for domestic goods with an increase in
prices for imported goods, due to an increase in
the exchange rate. This confirms the high degree
of sensitivity of demand with the effect of pass-
through of changes in exchange rates to import
prices.
If E < 0, then such goods are mutually
complementary, that is, an increase in prices for
imported goods due to changes in exchange
rates will lead to a drop-in demand for goods
from domestic producers. This will also confirm
the indirect impact of exchange rate pass-
through on enterprise prices.
If E = 0, then the goods are independent from
each other and the effect of exchange rate pass-
through does not affect demand in any way.
In the study, the coefficients of elasticity of
domestic prices for finished products of
machine-building enterprises from changes in
the exchange rate were calculated (Table 2).
Table 2. Calculations of the coefficient of elasticity of domestic prices for finished products of
machine-building enterprises of Ukraine for the period from 2014 to 2018
Year Price
change
The
average
price
Change in
exchange
rates
Average
exchange
rate
The rate
of
change in
price
The rate of
change of
exchange
rate
differences
The
value of
the
coefficie
nt of
elasticity
2014 (І) 38 733 0,71 8,345 0,051 0,085 0,61
2014 (ІІ) 23,05 763,525 2,6 10 0,030 0,26 0,12
2014 (ІІІ) 43,92 797,01 -3,07 9,765 0,055 -0,315 -0,17
2014 (ІV) 75,83 856,885 6,27 11,365 0,088 0,55 0,16
2015 (І) 545,2 1167,4 7,8 18,4 0,467 0,42 1,10
2015 (ІІ) 99,3 1489,65 -0,2 22,2 0,066 -0,009 -7,4
2015 (ІІІ) 29,5 1554,05 0 22,1 0,018 0 0
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Year
Price
change
The
average
price
Change in
exchange
rates
Average
exchange
rate
The rate
of
change in
price
The rate of
change of
exchange
rate
differences
The
value of
the
coefficie
nt of
elasticity
2015 (ІV) -114,8 1511,4 0,3 22,25 -0,075 0,013 -5,6
2016 (І) 208,49 1558,245 3,1 23,95 0,133 0,129 1,03
2016 (ІІ) 346,91 1835,945 -0,6 25,2 0,188 -0,024 -7,9
2016 (ІІІ) 50,9 2034,85 0,3 25,05 0,025 0,012 2,09
2016 (ІV) 88,4 2104,5 0,5 25,45 0,042 0,019 2,14
2017 (І) 53,43 2175,415 1,2 26,3 0,024 0,045 0,54
2017 (ІІ) 99,07 2251,665 -0,75 26,525 0,043 -0,028 -1,56
2017 (ІІІ) 151,8 2377,1 -0,35 25,975 0,063 -0,01 -4,74
2017 (ІV) 0,8 2453,4 1,2 26,4 0,0003 0,045 0,007
2018 (І) 10 2458,8 0,5 27,25 0,004 0,018 0,22
2018 (ІІ) 50,1 2488,85 -1,2 26,9 0,020 -0,04 -0,45
2018 (ІІІ) 108,9 2568,35 1,5 27,05 0,042 0,055 0,76
Source: own development
As you can see from the table. 2. calculations,
in those periods when there were sharp changes
in exchange rates, there is full price elasticity
depending on changes in the exchange rate.
Thus, it can be argued that there is a pass-
through effect of changes in exchange rates to
domestic prices for finished products of
machine-building enterprises. However, in
those periods when the exchange rate was
stable and unchanged during the analyzed
period, the values of the coefficients are equal
to zero, which indicates that there is no reaction
of prices to changes in the exchange rate.
Calculations of the modified coefficient of
cross-elasticity of demand, which shows the
percentage changes in demand for domestic
goods with a simultaneous increase in the price
of imported goods due to an increase in the
exchange rate, for the engineering industry of
Ukraine are presented in Table. 3.
Table 3. Calculations of the modified coefficient of cross-elasticity of demand for the products
of engineering enterprise
Year
Production
volume
mechanical
engineering,
thousand
pieces
Price
of
imported
products
(thousand
euros)
The
average
price
in
the
industry
Volume
of
imported
engineering
products
Change
in
the
price
of
imports
Changes
in
sales
of
domestic
producers
The
ratio
of
sales
of
domestic
products
to
changes
in
import
prices
The
ratio
of
domestic
prices
to
the
volume
of
imports
Elasticity
2008 36900,6 5958218,58 477,675 13379839,3 400000 -1191,9 -0,003 3,57 -1,063
2009 18785,7 6558218,58 533,55 6257043,8 600000 -18114,9 -0,03 8,52 -2,57
2010 30879,5 7958218,58 597,4675 8166974,9 1400000 12093,8 0,008 7,31 6,32
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Year
Production
volume
mechanical
engineering,
thousand
pieces
Price
of
imported
products
(thousand
euros)
The
average
price
in
the
industry
Volume
of
imported
engineering
products
Change
in
the
price
of
imports
Changes
in
sales
of
domestic
producers
The
ratio
of
sales
of
domestic
products
to
changes
in
import
prices
The
ratio
of
domestic
prices
to
the
volume
of
imports
Elasticity
2011 3119,7 8602385,06 608,5225 12795104,9 644166,5 -27759,8 -0,04 4,75 -2,04
2012 2520,1 8658754,32 633,655 13178672,5 56369,26 -599,6 -0,01 4,80 -5,11
2013 2168,7 9096969,84 681,4725 12470050,3 438215,5 -351,4 -0,0008 5,46 -4,38
2014 1140,4 9476347 810,205 8720756,2 379377,2 -1028,3 -0,002 9,29 -2,52
2015 1561,1 10158193,2 1500,525 6273379,8 681846,3 420,7 0,0006 0,0002 1,47
2016 20,79 10517985,6 1970,222 7889365,2 359792,4 -1540,31 -0,0043 0,0002 -1,069
The size of the exchange rate pass-through
on domestic producer prices depends on many
factors, the most significant of which are:
- the structural organization of markets for
specific goods or industries (the degree of
market monopolization, product differentiation
and the risks of price discrimination);
- features of consumption of imported goods
and the elasticity of this consumption. The
higher the share of imports in production costs,
the closer the estimate of the elasticity between
the exchange rate and inflation;
- macroeconomic features of the national
economy (monetary policy regime, balance of
payments structure).
Within the framework of the study, an
assessment was made of the influence of the
dynamics of changes in the exchange rate on the
change in the average price in the general
engineering industry. The results of the
correlation analysis of the dynamics of the
change in the exchange rate for the change in
the average price in the car building industry
with a lag in the 1st quarter are presented in Fig.
2.
As can be seen from the calculations, in the
field of general mechanical engineering, there is
a closer relationship between the change in the
exchange rate and the price, while maintaining
the seasonality factor. This is due to the fact that
the Ukrainian car building industry is 80%
export-oriented.
Calculation of the correlation of these
indicators for the car building industry with a lag
in the second quarter demonstrates an
insignificant smoothing of the determination
coefficients while maintaining the influence of
the seasonal factor.
The calculations show a close relationship
between the change in the exchange rate and
the price of general engineering products. In
addition, calculations indicate the influence of
seasonality on fluctuations in the exchange rate
and prices (Fig. 3).
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Fig. 2. The dynamics of change in the coefficients of determination based on the results of
correlation analysis for general mechanical engineering for the period 2007-2018.
lagged I quarter
Fig. 3. The dynamics of change in the coefficients of determination based on the results of
correlation analysis for general mechanical engineering for the period 2007-2018
with a lag of the II quarter
Studies of the degree of dollarization of
Ukraine's economy at the macro level and at the
level of the engineering industry have shown
that the Ukrainian economy is influenced by a
high level of dollarization. At the micro level, ie
at the enterprise level, the impact of
dollarization is manifested through the effect of
transferring the dynamics of exchange rates to
domestic prices. In the course of the research, a
scientific hypothesis of the closeness of the
relationship between changes in exchange rates
and domestic prices for products of machine-
building enterprises was put forward.
To confirm the hypothesis, the
autocorrelation method and the ARIMA
prediction model were chosen. According to the
hypothesis, we believe that the observed
processes are random. In this case, it becomes
impossible to use dynamic models that are
based on the dependence of a variable on a
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ISSN 2534-9228 (2021) VUZF review, 6(1)
number of factors. For example, regression
analysis extrapolation is a method of describing
most time dependencies, which assume a clear
functional dependence of one factor on the
action of other factors. Therefore, if standard
regression methods are applied to successive
observations over a period of time, some
problems may arise in interpreting the results.
This statement fully justifies the choice of the
model that was used for this research method.
The effect of transferring the influence of
exchange rate dynamics on the domestic prices
of car-building enterprises is also confirmed by
the graph in Fig. 4.
Figure 4 - The effect of transferring the dynamics of exchange rates to domestic prices of
car companies (source: own development)
(Chukurna О., Nitsenko V.and other, 2019: 117-129)
The absolute value of the transfer effect and
the speed of its implementation in mechanical
engineering depends on the action of many
factors, among which the following should be
noted:
− The degree of openness of the industry to
foreign markets, namely: the volume of
exported products; the degree of involvement in
the production of imported factors of
production; degree of competition from
imported products. Indeed, the products of the
car-building industry have a high share of
exports in the structure of total production and
experience a high degree of competition.
− A high share of exports in the structure of
manufactured products will strengthen the
national currency. However, for exporters, this
situation may put pressure on the price of
engineering products in foreign markets, which
will help producers to limit export prices for
their products. In turn, they will seek to offset
costs by raising domestic prices in the Ukrainian
market. Thus, the following law comes into
force: the lower the share of exported products,
the less domestic prices for wagon products will
be subject to pressure from the exchange rate.
The lower the degree of differentiation of
wagon products, the more power machine-
building enterprises have in setting
discriminatory prices for consumers, translating
their foreign exchange costs into product prices.
This will indicate a high degree of
monopolization of the car industry.
Conclusions
− The study of dollarization as a global factor
has revealed the spread of dollarization in many
economies, especially those in transition. The
dollarization of the economy takes place against
Observations
Adjustment
The upper boundary of the confidence interval
The lower limit of the confidence interval
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the background of the replacement by foreign
currency (dollar) of all five functions of money
performed by the national currency. This
approach to the definition of dollarization
allowed to substantiate the fundamental
approach to the functions of money in the
context of dollarization and the transformation
of price functions depending on the functions of
money when they are replaced by foreign
currency. It has been proved that the law of
value transforms the mutual influence of money
functions and price functions. The price reflects
the value of the goods in cash through the sum
of the values of the factors of production and
the value of the goods. In this context, part of
the price functions is reflected precisely through
the law of value.
− In the course of the research, indicators of
estimating the degree of dollarization of the
economy at the macroeconomic level were
formed and substantiated, the measurement
and evaluation of which are interrelated with
the transformation of money functions.
− It was proved that at the meso- and
microeconomic level the degree of dollarization
of the economy occurs at the domestic prices of
machine-building industries and individual
enterprises due to the effect of transferring the
exchange rate to the prices of machine-building
products. Economic and statistical models
(autocorrelation, ARIMA model) were used to
prove the close relationship between them.
The study substantiates the use of
autocorrelation to prove the effect of the
transfer of the impact of exchange rates on
prices for finished products of mechanical
engineering enterprises. The expediency of
using the ARIMA forecasting model to predict
the further spread of the effect of transferring
exchange rate changes to prices for products of
machine-building enterprises has been proved.
When modeling the effect of the transfer of the
impact of exchange rates on prices for products
of machine-building enterprises, time gaps
between changes in exchange rate indices and
changes in domestic prices of machine-building
enterprises were revealed. The main factors
that determine the degree of influence on the
effect of transfer of exchange rates on the prices
of machine-building enterprises are
substantiated, among which, the following have
the greatest influence: degree of openness of
the branch to foreign markets and dependence
on import resources; high share of exports in the
structure of manufactured products; low degree
of product differentiation of machine-building
enterprises; discriminatory prices for
consumers.
References
Anischenko, A.V. (2012). World Monetary
System and Dollarization of the Russian
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172-174.
Babenko V.O., Petuhova V.O., Perepelitsia A.S.
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9576-2017-1-2(10)-24-34
Bannister, M. G. J., Turunen, M. J., & Gardberg,
M. (2018). Dollarization and Financial
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Chukurna О., Nitsenko V., Kralia V., Sahachko Y.,
Morkunas M., Volkov A. Modelling and
Managing the Effect of Transferring the
Dynamics of Exchange Rates on Prices of
Machine-Building Enterprises in Ukraine.
Polish Journal of Management Studies. 2019.
Vol.19, №1. р. 117-129 .URL:
https://pjms.zim.pcz.pl/resources/html/artic
le/details?id=190117
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Asymmetric exchange rate pass-through:
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DOI: 10.1016/j.jmacro.2012.03.003.
Devereux, M., Lane P., & Xu, J. (2006). Exchange
rates and monetary police in emerging
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market economies. Economic Journal, 116
(511), 478-506. DOI: 10.1111/j.1468-
0297.2006.01089.x.
Dobrynskaya, V.V. (2008). The monetary and
exchange rate policy of the Central Bank of
Russia under asymmetrical price rigidity.
Journal of Innovations Economics, Vol.1, №1,
29-62.
Goldberg, P.K., & Knetter, M.M. (1997). Goods
Prices and Exchange Rates: What have we
Learned. Journal of Economic Literature,
XXXV, 1243–1272.
Golovnin M.Y. (2004) Dollarization in the
transition economies of Russia and Central
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https://econpapers.repec.org/article/scn009
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https://www.imf.org/external/
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Michalchuk, N.A. (2016). Dedollarization policy
in foreign countries. Economy and
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Ozturk, S., & Ozturk, F. (2018). Forecasting
energy consumption of Turkey by Arima
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8(2), 52.
Pai, P. F., & Lin, C. S. (2005). A hybrid ARIMA and
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Piontkovsky R.V. (2007) Dollarization, inflation
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Semenov S.K. (2007) Money: dollarization as an
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https://unctad.org/en/PublicationsLibrary/w
ir2018_overview_ru.pdf.
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An innovative approach to managing the interest margin:
economic and statistical analysis of the resource base of a
commercial bank
Svitlana Andros* А
; Shichao Chang B
A National Scientific Center «Institute of Agrarian Economics»,
Department of Financial and Credit and Tax Policy, 10, street Heroyiv Oborony, Kyiv 03127, Ukraine
B China Zhejiang Golden Egg Technology LLC Company, Pavlo Tychyny Avenue, 1B apt. 430, Kyiv, Taras Shevchenko National University of Kyiv,
Department of Enterprise Economics, 60, street Volodymyrska, Kyiv, 01033, Ukraine
JEL Classification: C43, E41, E43, G21, G35, H21.
DOI: 10.38188/2534-9228.21.6.03
Abstract
The dynamics of interest income, that is, the difference between the average rates on active and
passive operations of the bank, has been analyzed. It was found that the increase in the share
of term deposits in the total amount of the bank's mobilized resources is positive, despite a
temporary decrease in net interest income. It has been substantiated that the deposits of legal
entities are a stable part of the attracted resources. The purpose of the article is to improve an
innovative approach to managing the interest margin based on the economic and statistical
analysis of the bank's resource base. The scheme of the bank interest income management
process is proposed. The size of interest income, trends and factors of its change have been
determined. The indicator of the minimum interest income was calculated on the basis of which
the bank covers expenses but does not ensure profit. The level of profitability of bank loan
operations has been determined. It has been established that a change in interest income can
be caused by an increase or decrease in rates on active operations of the bank, interest on
attracted resources and the shares of the latter in the total volume of credit investments. A
mechanism for the formation of bank interest income is proposed. The possibility of reducing
the spread of interest rates and placement rates in the bank through the use of the proposed
funding mechanism has been scientifically substantiated.
Keywords: bank, deposit, efficiency, customers, interest margin, interest rate, resources.
Introduction
In the context of the globalization of financial
markets, the penetration of foreign capital into
the Ukrainian banking system and, as a result,
the growth of competition with international
financial intermediaries represented by
subsidiaries of transnational bank holdings, the
search for optimal ways of organizing the
activities of banks is of particular relevance.
Transformations in the construction and
functioning of the banking sector have become
* Corresponding author:
A Doctor of Economics, Associate Professor, e-mail: andros.sv@ukr.net, ORCID: 0000-0001-5561-901X
B Director of the Ukrainian Branch Golden Egg Technology, e-mail: changshichao8888@126.com, ORCID: 0000-0003-2945-5220
the starting point for the development of the
direction of "banking financial management" in
economic science. But now, not all issues of
financial management in the bank have been
worked out by scientists deep enough, which is
due to the specifics of the activities of a
commercial bank as a single economic entity
that systematically manages all functions of
money.
The path towards the formation of a
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ISSN 2534-9228 (2021) VUZF review, 6(1)
powerful banking sector in Ukraine increases
the importance of the issues of performance
management of each specific bank for the
banking system as a whole. Therefore, the
problem of assessing the effectiveness of a
commercial bank and taking measures to
improve it requires a detailed study and
development of a scientific concept.
Banks redistribute resources in the economy,
accumulating free cash resources in their
accounts (deposits) and lending them for
temporary use (loans). The main goal of the
bank's activities is to obtain maximum profit
while ensuring stable long-term operation and a
solid position in the market. The profit of a
commercial bank is the financial result of the
bank's activities in the form of an excess of
income over expenses. Thus, the main
components that form the bank's profit are
interest and non-interest margins. Interest
margin - the difference between interest income
and bank expenses, between interests received
and paid. It is the main source of the bank's
profit and is designed to cover taxes, losses from
speculative transactions and the so-called
“cargo” – the excess of interest-free income
over interest-free costs, as well as banking risks.
The size of the margin can be characterized by
an absolute value in national currency and by
many financial indicators.
Since 2018, the interest margin of Ukrainian
banks began to gradually decline. Ultimately,
this affects the profitability of banks and the
ability of individual banks to service their
obligations. This means that the business
models of many banks are at risk. This applies to
those banks that have not begun to build a
transactional business (based on commission
income and does not depend on the level of
interest rates in the market), invest little in
increasing non-interest income, do not have
pronounced advantages; rely on expensive
liabilities from individuals and legal entities. For
such banks, a decrease in interest margin, loss of
income from operating activities, loss of
competitive positions and residual investment
attractiveness are likely.
The scientific literature discusses in detail the
issue of the use of transfer pricing in banking in
terms of the redistribution of financial results
already obtained. However, insufficient
attention is paid to how to obtain this financial
result and optimize the procedure for obtaining
it, at what level it is necessary to set interest
rates on banking products that generate net
interest income. There is no scientific
justification for calculating the spread, which is
used in transfer pricing between rates for
attracting and placing resources.
An analysis of the determinants of corporate
dividend policy was performed in (Ali et al.,
1993; Andros, 2015). An innovative approach to
ranking and regulating systemic risks with a lack
of equity was proposed by scientists (Acharya et
al., 2012; Marlina and Danica, 2009; Miles et al.,
2013). An analysis of bank loan and deposit
portfolios and interest rates was carried out by
economists (Acharya et al., 2006; Barnett et al.,
1992; Craig and Dinger, 2011; Rice and Örs,
2006). Non-interest income and results of bank
deposit activities and financing strategies are
considered in (Bokyung et al., 2019; Demirguc-
Kunt and Huizinga, 2010; Diebold and Sharpe,
1990; Neumark and Sharpe, 1992; Hautsch et
al., 2015). A model of reserves, bank funds and
deposit insurance was proposed by scientists
(Bryant, 1980; Rotemberg et al., 1991). A
microanalysis of banking system stability was
carried out by researchers (De Jonghe, 2010; De
Young et al., 2013; Hannan and Berger, 1991).
The theoretical and practical foundations of
bank operating expenses were reflected in the
works (Kovner et al., 2015; Lucas and Robert,
1972; Hughes and Mester, 2013). The
determinants and the value of matching
discretionary loan loss reserves have been
studied by scientists (Morris et al., 2016).
Scientific studies of foreign authors are
marked by a high level of professionalism. Note
that each scientific work is devoted to a specific
problem and only indirectly concerns a
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ISSN 2534-9228 (2021) VUZF review, 6(1)
comprehensive analysis of the bank’s resource
base, which forms net interest income. In
addition, there is no economic and statistical
analysis of the resource base of a commercial
bank, due to which it is possible to really assess
the effectiveness of interest margin
management.
Today, there is a need to develop adequate
methodological and methodological methods for
the use of interest. Research in the field of net
interest income should be focused on the
activities of commercial banks. It is necessary to
equip Ukrainian banks with the new methodology
and tools for managing net interest income. The
new methodology and tools for managing net
interest income should cover the entire
technological cycle: setting the interest rate; its
use in calculating interest payments; allocation of
interest received and paid to expenses and
income; interest income generation; obtaining a
net financial result.
The purpose of the article is to improve an
innovative approach to managing the interest
margin based on the economic and statistical
analysis of the bank's resource base.
Managers need to know what margin is
(including in relative terms) to make a decision
in the field of marketing. Bank interest margin is
the difference between interest income and
expenses of a bank, between interest received
and paid. Interest margin is a profitability ratio
in the banking sector that measures how
efficiently a bank makes investment decisions by
comparing interest income and funding costs
(Ali et al., 1993). Banks get most of the profits
precisely from loans. Therefore, the cheaper
they get the money and the more expensive
they give, the better they work. Interest margin
as the main source of profit, is designed to cover
taxes, bank risks, losses from speculative
operations and the so-called “weight”, that is,
the excess of interest-free income over interest-
free costs (Hughes and Mester, 2013).
It is not appropriate to compare the interest
margins of different banks, since the nature of
lending and deposit activity varies for each bank.
Interest margin can be viewed from different
perspectives. It can be borrowed money that is
used to purchase securities (Marlina and Danica,
2009; Miles et al., 2013). The purchase of
securitiesusingborrowed fundscarriesgreat risks,
since for the potential opportunity to make big
profits; you have to pay significant financial losses.
At the same time, the investor faces an additional
risk - interest payment for the use of borrowed
funds (Acharya et al., 2006).
The interest margin may be characterized by
the absolute value in the national currency and
other financial ratios (De Jonghe, 2010). The
absolute value of margin can be calculated as
the difference between the total amount of
interest income and expenses of the bank
(Barnett et al., 1992). The absolute value of the
margin can be calculated as the difference
between the interest income for certain types of
active operations and the interest expenses
associated with the resources used for these
operations. For example, between interest
payments on loans and interest expenses on
loans (Bokyung et al., 2019).
The interest margin indicator measures the
profit that the bank generates from lending to
customers and payments on deposits from total
interest assets. Banks use this ratio to analyze
their investment decisions and track credit
returns (Morris et al., 2016). Thus, banks can
adjust their lending methods to maximize
interest margin margins.
The dynamics of the absolute value of the
interest margin is determined by the following
factors: the volume of credit investments and
other active operations that generate interest
income; rate for active operations; rate on
passive operations; the difference between the
rates for active and passive operations (spread);
the share of interest-free loans in the loan
portfolio; share of risky active operations that
generate interest income; the method of accrual
and collection of interest; a system of
generating income and expenses; inflation rate;
the ratio between the amount of equity and
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ISSN 2534-9228 (2021) VUZF review, 6(1)
attracted resources; resource structure (De
Jonghe, 2010). From a financial point of view,
the resource management process is an activity
related to the management of passive
operations of a bank. It is passive operations
that determine the volume, scale and direction
of profitable operations, therefore passive
operations play a decisive role in relation to
active (De Young and Gökhan, 2013). In
managing passive operations, it is necessary to
regulate the amount of expenses on raising
funds and the amount of income that can be
obtained from investing these funds in credit
operations or securities.
The totality of resources received by the bank
is used to carry out active operations in order to
generate income. The Bank places concentrated
funds in various assets (loans, securities, cash
and reserves) (Craig and Dinger, 2011; Rice and
Örs, 2006). At the same time, the bank should
strive to manage resources as efficiently as
possible. Managers should take into account not
only the purely professional aspects of banking,
the requirements and standards of the National
Bank of Ukraine or market competition issues,
but also the desire of depositors and customers,
the goals of the bank's shareholders and
interests (Andros, 2015).
However, the goals of bank depositors and
owners of its shares are sometimes
incompatible. Such incompatibility appears in
virtually every financial transaction of the bank
and is reflected in the inevitable contradiction
between the requirements of liquidity and the
desired profitability of operations (Rotemberg
et al., 1991). We consider this conflict between
liquidity and profitability to be the key problem
that the bank solves when placing funds. On the
one hand, the bank's management is feeling
pressure from shareholders who are interested
in higher incomes (Bokyung et al., 2019). High
incomes can be obtained by performing risky
operations, lending to borrowers with dubious
creditworthiness and reducing unused balances
(Demirguc-Kunt and Huizinga, 2010). On the
other hand, the bank's management
understands that placing funds in more
profitable investments and loans causes
increased risk and seriously impairs the bank's
liquidity (Andros, 2015).
Thus, an understanding of the relationship
between active and passive operations
management is critical to maintaining bank
profitability. In this regard, it is necessary to
determine the optimal combination of attracted
sources, based on the specifics of a particular
bank, as well as to effectively manage interest
rates on attracted resources (Diebold and
Sharpe, 1990). Given the above, we formulate
general provisions for managing interest
margin.
Firstly, the provision of loans is carried out at
the expense of own sources, attracted funds of
legal entities and individuals (Neumark and
Sharpe, 1992). From the standpoint of financial
security, it is not advisable to use interbank
credit for lending purposes.
Secondly, attracting various sources of funds
into circulation, the bank must constantly
compare their volumes and value with the
volumes and value of loans issued, thereby
managing the interest margin.
Thirdly, funds of legal entities and individuals
attracted by the bank are placed in loans,
factoring, leasing and securities in full, without a
balance (Hautsch et al., 2015).
Harmonizing relationships between different
parties and at the same time achieving profit
targets can be helped by the liabilities
distribution model (De Young et al., 2013). It
allows you to streamline financial resources and
form optimal directions for the transformation
of passive operations into active operations. The
process of managing the net yield on interest-
bearing assets (interest margin) is presented in
Fig. 1.
29

ISSN 2534-9228 (2021) VUZF review, 6(1)
YIELD MANAGEMENT ON INTEREST-BEARING ASSETS
Attracting financial resources
Balances on current accounts
(correspondent, current account,
single bank account)
Placement of financial resources
Cash
Interbank loan
Required reserves
Interbank loan
On-demand financial resources
Time deposits
Savings deposits
Own financial resources, profit
Short-term securities, short-term
loans, factoring
Long-term loans, forfeiting
Financial leasing
Long-term securities
Own funds and reserves
(statutory fund, reserve fund,
bank development fund
Debt securities issue
Fixed assets and intangible
assets
Precious metals
Ensure
ongoing
payments
Reliable
allocation
of
long-term
financial
resources
Formation
of
funds,
assets
and
property
of
the
bank
Fig. 1. The process of managing interest rate yields
Source. Improved by authors for [Kovner et al., 2015].
Each of the three blocks shown in Fig. 1, exists
more or less autonomously. The first block
provides ongoing payments. The second block
allows you to reliably place long-term financial
resources. The third block forms the funds,
assets and property of the bank, working for the
future. The advantage of the proposed approach
is that it provides a distinction between the
sources of attracting financial resources in
accordance with the norms of required reserves,
terms of attraction, the rate of turnover of funds
and the potential yield on interest-bearing
assets that they can bring. Indeed, own funds do
not require the creation of reserves, have an
unlimited nature of attraction and are able to
bring maximum yield on interest-bearing assets
(Bryant, 1980). Own funds do not require liquid
assets and are used to invest in fixed assets
(buildings, land), and the remaining funds are
intended for long-term loans and less liquid
securities. In other words, they are aimed at
increasing the bank’s income (Marlina and
Danica, 2009).
Conversely, demand deposits require a high
rate of required reserves compared with savings
and fixed deposits. The speed of their turnover
is much higher than that of other types of
deposits (Neumark and Sharpe, 1992).
Sometimes it reaches 25 and even 45
revolutions per year. Interbank credit is auxiliary
and is not considered as a source of coverage of
assets (Rotemberg et al., 1991; Hannan and
Berger, 1991).
Demand funds are not advisable to be placed
in long-term securities and fixed assets.
Demand deposits should be directed to the
formation of required reserves. Demand
deposits should be placed in short-term loans
and in secondary reserves for investment funds
in short-term government securities. Demand
deposits and own funds can bring a higher yield
on interest assets as compared to term and
savings deposits (Miles et al., 2013; Morris et al.,
2016).
Thus, the process for managing interest
income assets considered in Figure 2 provides a
methodological basis for making decisions on
the allocation of borrowed funds and reduces
the excess of liquid assets, as opposed to savings
and fixed-term deposits and equity.
30

Journal of Scientific Papers VUZF REVIEW Volume 6, Issue 1, March 2021

Journal of Scientific Papers VUZF REVIEW Volume 6, Issue 1, March 2021

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