Yemelina N., Teleuova  A.

Karaganda  Economic  University, Kazakhstan

The lag model of interaction of investment and economic growth in the Republic of Kazakhstan

 

The role of investment in the economy of Kazakhstan is of great importance, because they largely shape the future of the country, its regions, each economic entity - investments made today are the basis of future prosperity. In turn, the current economic condition is largely predetermined by past investments.

According to Marchenko, the value of the investment is that the implementation of their functions is a necessary condition and the foundation the following:

-     restructuring of social production, the balanced development of all sectors of the economy;

-     the expanded reproduction;

-     the acceleration of scientific and technical progress;

-     ensuring defensibility of the state;

-     development of financial markets, the banking sector;

-     improving the quality of goods and services, ensuring their competitiveness;

-     protection of the natural environment, the solution of environmental problems;

-     increase in employment and reducing unemployment;

-     international cooperation;

-     social development [1].

Definitely the effective use of investment business entities to the state's economy is crucial, especially with regard to scaling up investment. When the desired level of efficiency, investment leads to sustained economic growth.

Dependence on the investment growth factor expressed by gross and net investment was underlined by Kobozev.

Gross investment - is the amount of invested funds allocated in fixed capital in a certain period of time, these include investments to expand and upgrade [2].

Net investment reflect the full amount of gross investment, which is reduced by depreciation for the period. The amount of the investment determines the phase of development of the economy [2].

Based on this, the following causal relationships were established:

-     The production capacity leads to expand production the economy is on the rise in the development stage, if the amount of the gross investment is more than depreciation charges.

-     If the gross investment and depreciation charges are equal, the economy has the same amount of investment, both incoming and consumed, it is characterized by a lack of economic growth.

-     If depreciation charges are more than the value of gross investment, investment declines, reduced productive capacity, there is an economic downturn.

Investment process affects the development of the economy in a balanced mode, when the amount of net investment affects the change in the economy, causing a multiplier effect. In other words, in a recurring flow of investment expenditure and revenue expenditure of one subject are becoming income to other, the initial fluctuations volume of investment leads to repeated, each time decreases, the change in income.

This multiplier effect can act in the opposite direction. While reducing of investment costs it would be a reduction of revenue. Therefore, the role of investment in the economy that is necessary to ensure a certain coefficient multiplier and to ensure conditions for a permanent investment activity. [3]

In economic theory, economic growth is defined as "an increase in the volume of economic activity as a result of increasing the number of factors of production used or development of technique and technology" [4].

Sustained economic growth of any country should be based on the existing objective reality of economics and politics and be a reflection of the long-term socio-economic development of the country as its main component.

Early as the end XX century have determined that the primary purpose of economic growth is to "increase the volume of production of goods and services, improving their quality, providing better quality of life". [5]

The state as a market participant should pursue policies to stimulate economic growth in order to ensure the development of the national economy in its most important industries. This policy must be coordinated with fiscal, investment, credit and other economic policies. This relationship is necessary because it is able to provide sufficient stability of the country as a complex sociosystem in market conditions in order to achieve economic growth.

Sustained economic growth is fundamental to improving the welfare of the population and therefore the growth parameters can be used as the objective function at modeling of many states. GDP growth ensures the welfare of the population, the possibility of the development of enterprises and industries, and may increase the country's competitiveness on the world stage, etc. Therefore, the policy of most states is aimed to promote economic growth.

In our opinion, for the dynamic sustainable development of economy of Kazakhstan is necessary to stimulate production, to invest financial resources in the manufacturing industry, create new machines, equipment and final products. Economic growth without development of all sectors of the national economy is impossible. However sectors of the economy cannot work if they do not have any invests. That is why the government pays great attention to the state and development of the investment policy of the country.

State investment policy describes the dynamics of the following indicators: total investment, share of investment in gross domestic product (GDP), share of real investments of the total investments, total amount of real investments, share of real investment flows to fixed assets and others.

Indirectly but quite objectively characterize the state of the investment activity growth rate of the main macroeconomic indicators: national income, GDP and GNP, industrial production, release of major industrial products, agricultural production, productivity of social labor and others.

Objectivity of these indicators is in the assessment of investment activity, which related to the fact that their growth is inconceivable without investment. These indicators are certain extents characterize the efficiency of investment. If the growth rates of these indicators outpace the growth rate of investment, it is a clear sign of efficiency investments and vice versa.

In turn, the mechanism of interaction between economic growth and investment, which is formulated by the Nobel Prize P. Samuelson as the "principle of the accelerator», is: real GDP growth leads to an increase real investments, in turn, real investments rise leads to a response GDP growth. Important in this principle is that a real investment refers only to increase the cost of fixed capital (buildings, machinery and equipment) and industrial stocks, i.e. investment in fixed capital.

In connection with the foregoing, it seems interesting to determine the impact of changes in the volume of investment in fixed capital to the dynamic (increase / decrease) of gross domestic product of Republic of Kazakhstan.

We have built a dynamic model of the Almon distributed lag to identify this relationship. The main advantage of Almon’s method is versatile and it can be used at modeling processes, which are characterized by different structures lag.

General view of the distributed lag model:

To construct the model we used statistical data on GDP in the Republic of Kazakhstan and the amount of investment in fixed capital in the period from 2000 to 2013 (Table 1).

Table 1: Trends in GDP and investment in fixed capital in the Republic of Kazakhstan (2000-2013)

Millions tenge (KZT)

Year

GDP

Investment in fixed capital

2000

2 599 901

595 664

2001

3 250 593

943 398

2002

3 776 277

1 099 986

2003

4 611 975

1 327 864

2004

5 870 134

1 703 684

2005

7 590 594

2 420 976

2006

10 213 731

2 824 523

2007

12 849 794

3 392 122

2008

16 052 919

4 210 878

2009

17 007 647

4 585 298

2010

21 815 517

4 653 528

2011

27 571 889

5 010 231

2012

30 346 958

5 473 161

2013

34 140 040

6 052 907

Note:  The data of the official Internet resource Agency on Statistics of the Republic of Kazakhstan

 

Construct a model for distributed lag l = 3:

assume that the lag structure is described by a polynomial of second degree:

It is necessary to determine which effect is given investments in fixed capital relative to GDP in the period of 3 years.

To calculate the parameters of this model is necessary to transform raw data into new variables z0, z1, z2 by the following formulas:

Table 2: Calculation of new variables.

Year

GDP

Investment in fixed capital

Z0

Z1

Z2

2000

2 599 901

595 664

 

 

 

2001

3 250 593

943 398

 

 

 

2002

3 776 277

1 099 986

 

 

 

2003

4 611 975

1 327 864

3966912

4773774

10234554

2004

5 870 134

1 703 684

5074932

6358030

14218390

2005

7 590 594

2 420 976

6552510

7659370

16915014

2006

10 213 731

2 824 523

8277047

9811936

21186488

2007

12 849 794

3 392 122

10341305

12777527

27841583

2008

16 052 919

4 210 878

12848499

16304096

36478998

2009

17 007 647

4 585 298

15012821

19468691

43200073

2010

21 815 517

4 653 528

16841826

23183420

51957908

2011

27 571 889

5 010 231

18459935

26456758

60892622

2012

30 346 958

5 473 161

19722218

28073181

64892025

2013

34 140 040

6 052 907

21189827

29454207

67395837

Note: Compiled by the authors

Estimate the parameters of the regression equation in the LS method. As the dependent variable is the size of GDP. Calculated by formulas z0, z1, z2 are independent variables. Obtain a three-factor linear regression model:

The regression equation is statistically significant and meaningful as all the regression coefficients with variables.

Find the coefficients of the original model according to the formulas:

Thus, the original model of distributed lag takes the following form:

Analysis of the model shows that an increase in investment in fixed assets of 1 million tenge will lead to an average GDP growth of 1,7016 millions tenge in the current period.

When investing in fixed capital in a year can be expected to decline in GDP by 0.1 million tenge, after two years at 0.17 million tenge.

Growth of investment in fixed assets of 1 million tenge lead after three years to the growth in GDP at 6.7 millions tenge.

We calculate the contribution of each lag:

Consequently, 25.4% of the total increase in GDP caused by the growth of investment in fixed assets, there is at the current time; -26.9% - a year; -1.2% - two years; 102.7% - in three years.

Average lag model will be equal to:

 (years)

The magnitude of the lag 2.79 years confirms that most of the effect of GDP growth is manifested in three years.

Thus we can say that the investment in fixed assets do have long-term positive effect on the dynamics of the country's GDP, as one of the main indicators of economic condition of the country. It is interesting that in the first two years of their investment effect is negative. However, the results allow us to assume that in the first two years of the investment base of capital cannot be updated immediately, so the investment does not demonstrate its effectiveness in the production process, i.e. it is only partially transferred to the finished product. Naturally, this study can be expanded to accommodate other development indicators of investment activity.

At the macro level investment, and especially capital investment, are the foundation for the development of the national economy and improve the efficiency of social production, i.e. investment ultimately determine economic growth.

 

References:

1.   Марченко Г. Исследование инвестиционного климата регионов России: проблемы и результаты / Г. Марченко, О. Мачульская // Вопросы экономики. - 2011. - № 9.

2.   Кобозев О.В. Анализ подолов к оценке инвестиционной привлекательности регионов / О.В. Кобозев // Экономика и управление. - 2010. - № 5 (66).

3.   Тренев В., Лихачев А. Повышение инвестиционной привлекательности региона // Информационные Ресурсы России. - 2012.- № 5.

4.   Гогуа М.В. Финансирование инвестиций в инфраструктуру рекреационного комплекса: Автореф. дисс. канд. эконом. наук. - Краснодар, 2011. - 25 с.

5.   Оспанов М.Т., Мухамбетов Т.И. Инвестиционный капитал и инвестиции: вопросы теории, практики привлечения и использования. – Алматы, 2009.