THE EFFECTIVENESS OF THE FISCAL MECHANISM OF ENSURING SUSTAINABLE DEVELOPMENT IN UKRAINE

Анотація

Fiscal mechanisms, principally taxation and public expenditure, are central to aligning economic growth with social equity and environmental objectives in transitioning economies. In Ukraine, persistent challenges in revenue mobilization and spending efficiency necessitate quantification of how fiscal variables co-move with GDP growth. This study examines the association between budgetary revenues and GDP growth in Ukraine. Specifically, it investigates whether total tax revenue and the composition of taxation (direct versus indirect) are differentially related to growth across business cycle phases. The analysis uses annual time-series data for 2000–2022 from the Ministry of Finance of Ukraine, the World Bank, and the International Monetary Fund. Variables include GDP growth (dependent), tax revenue (% of GDP), direct and indirect taxes (% of GDP), government expenditure (% of GDP), inflation, foreign direct investment (FDI, % of GDP), and trade openness (% of GDP). Quantile regression is estimated at q = 0.25, 0.50, and 0.75 to capture heterogeneity across low-, median-, and high-growth conditions. Results indicate positive and statistically significant associations between tax revenue and GDP growth at all quantiles: 0.28 (q25), 0.35 (q50), and 0.42 (q75). Direct taxes display larger coefficients (0.31, 0.44, 0.51) than indirect taxes (0.12, 0.18, 0.24). Government expenditure is positively related to growth (0.15, 0.19, 0.22), as are FDI (0.20, 0.25, 0.30) and trade openness (0.18, 0.22, 0.28). Inflation is negative and not statistically significant (−0.08, −0.10, −0.12). The principal finding is that association magnitudes increase toward upper quantiles, with direct taxes exhibiting the largest coefficients relative to indirect taxes.

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