М.V. Korneyev, PhD in Economics

FEATURES OF INTERACTION BETWEEN FINANCIAL AND REAL SECTORS OF THE ECONOMY

At the present stage, the development of public production is associated with efficient capital reallocation within a particular economic system. This task performs primarily financial market within proper financial sector.

The financial sector is not isolated but it is able to function only through the real sector, as the return on certain financial assets is provided by profit that is gained from economic utilization of debt on financial capital market. The structure of cash flows of financial and real sectors’ entities is quite different. The issue of intensification, structural optimization of cash flows may be related both to the particular entity of the real sector, and a number of macroeconomic issues (providing sufficient inflow of investments into the economy, creating a favourable economic environment for the smooth implementation of effective market reforms).The interaction between financial and real sectors of the economy determines the specific role of financial relations on the purchase (sale) of financial instruments at the market. The development of such financial relationships becomes relevant in terms of mixed transitive economy with its relatively low efficiency in using the disposable capital, disparity between savings and investments [3, 4].

Institutional units of the real economy usually are focused on the production of market goods, providing non-financial services, and their resources are formed usually by funds received from the sale of goods or services. They can cover some of the costs by budget subsidies. These units are the driving element of the modern economy, and their main financial resources are received from different sources (Fig. 1). Thus, Figure 1 shows that the authorized capital, as the seed money of the real economy entity formed to start its operations, and capital addition and reserve as a pledge of reliable stable operation of the real economy entity, accumulated profit and depreciation deductions as reserves for renewal of fixed and current assets, bank loans as collateral to cover temporary shortages in equity of the real economy entity, and profit as a result of its operations (is a set of basic financial resources of the real economy entity, giving him an opportunity for efficient and competitive production). The study of the cash flows in the financial and real sectors of the economy in terms of market reforms is aimed at ensuring the processes of national and regional socio-economic development.

Figure 1. Some sources of forming financial resources of real economy entity

Tactical tasks of managing cash flows in the financial and real sectors of the economy are aimed at increasing such inflows, ensuring their efficient use by optimizing distribution, reducing costs associated with their generation and allocation. The movement of cash flows should be investigated at the level of an integrated economic system, because the micro-level cash flows can flow in macro-level followed by their gradual reallocation [1]. In the movement of financial resources in the real economy, its entities choose different financial instruments and their use may cause changes in cash flows. This primarily determines a particular scheme of assets substitution while managing the studied flows [4]. Negative factor in the sustainability of cash flows may be a significant gap between actual and standard value of the money multiplier, which in certain periods varies significantly. The processes of decentralization of cash flows allow greater freedom of movement and thus can affect these dominating inflow areas.

Today in post-crisis environment there are particularly important issues related to ensuring the effective development of real economy entities that face the primary question - how to ensure the sustainability of their own operations with minimal financial resources. This issue may be definitely addressed by effective optimization measures of cash flows of real economy entities. [2]

Modern features of economies development can be determined by market reforms, gradual increase of the role of some entities in the real sector, the world trade intensification and general globalization of economic relations. The globalization is displayed in the growth of cash flows volume on global markets, new financial services, new innovative financial instruments that definitely do not only regulate, but also provide additional opportunities for grantors (donors) and recipients of cash flows. For example, an effective instrument for regulating such cash flows is taxes. A stimulation or limited foreign investment due to taxes, financial transactions is a factor of globalization in the international movement of cash flows.

The variety of cash flows regulation processes is caused by the intersection of the economic interests of many aspects in above-mentioned relations. For example, the government is interested in maximizing the efficient use of inflows and expects to return on such flows in the form of increased budget revenues due to the tax system. The recipients of cash flows try to maximize their volumes while minimizing their costs, including tax payment. Investors want to maximize their profits and to pay as lower part as possible as a tax to the state. These processes make it difficult to regulate cash flows and synchronize them [1].

In terms of crisis, financial instability, it is necessary to take into account the possible effects of stimulus (constraints) dominance of tax levers in the state financial policy. Incentive tax levers when crisis and financial instability should be used by countries that are economically emerging countries, and developed countries, however, have to choose constraint (neutral) tax policy. With financial instability of the domestic economy it is advisable to use relatively stimulating levers as regards cash flows of the real economy entities, as well as of "vertical" foreign investment. At the same time to control the movement of other cash flows, it is reasonable to use constraint (neutral) tax levers.

Therefore, the financial sector plays the important role in global economic transformations and takes part in the processes of reallocation of financial resources, while ensuring the functioning of investment and production areas, and sphere of social and economic relations. Such a mechanism is connected with the real economy. Thus, it is possible in the interaction of the financial and real sectors of the economy to argue about their extremely close relationship.

References:

1. Данілов О.Д. Фінансові потоки держави в умовах ринкових перетворень / О.Д. Данілов, Т.В. Паєнтко // Соціально-економічні наслідки ринкових перетворень у постсоціалістичних країнах : IV Міжнар. наук. конф., [м. Черкаси], 23-25 вересня 2009 р. : доповіді та сповіщення. – Т. 2. – Черкаси, 2009. – C.59-62.

2. Майборода О. В. Оптимізація фінансових потоків промислового підприємства / О. В. Майборода // Економіка розвитку. – 2012. – № 1. – С. 107- 110.

3. Азаренкова Г.М. Фінансові потоки в системі економічних відносин: Монографія / Г.М.Азаренкова. – Харків: «ІНЖЕК», 2006. – 328 с.

4. Базилевич В.Д.  Розвиток фінансового ринку в сучасних умовах / В.Д. Базилевич // Фінанси України. – 2009. – № 12 (169). – С. 5-10.