Startup industry in Ukraine: a catalyst for post-war recovery and strengthening monetary transmission

Анотація

This article examines the role of the startup industry in Ukraine as a catalyst for post-war economic recovery and the strengthening of monetary transmission. The study highlights the significance of supporting innovation and attracting foreign investment to foster economic growth, drawing upon the analysis of the Ukrainian startup ecosystem across diverse sectors, including defense, healthcare, and technology. To quantitatively assess the relationship between the number of startup projects and the prevailing macroeconomic conditions, the author employs a multifactor regression model incorporating variables such as the short-term bank lending rate with a lag of one, past foreign direct investments, real wage index, differences in the National Bank of Ukraine’s policy rate with a lag of two, and economic agents’ inflation expectations for the next 12 months. To approximate the number of startups, the proxy variable of registered patents and inventions is used. The analysis underscores the comparative advantages of Ukrainian startups, particularly in terms of accessing talented IT professionals, and emphasizes the need for supporting the promotion of young innovative entrepreneurs. Ultimately, the research reveals that the growth of the startup industry can contribute to the strengthening of monetary transmission and reduce dependence on traditional sectors, enhancing the economy’s resilience to external shocks. Furthermore, Ukraine possesses significant potential for developing the startup business sector, driven by the successful resistance to Russian aggression, which has led to new initiatives by war veterans in drone manufacturing, improving the technical specifications of various weapons, and integrating into the global investment landscape. This, coupled with the country’s growing reputation as a new geopolitical investment hub for foreign investors, contributes to the increasing popularity of Ukraine in the global investment space. JEL classification: C22, M13, O31, E52, E58, F35

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