Determining the Effect of Budget Policy on the Dynamics of Russian Regional Development
https://doi.org/10.18288/1994-5124-2025-6-06-35
Abstract
Efficient use of state budget resources becomes an urgent matter when both government expenditures and budget constraints are growing. Budget efficiency at the regional level is particularly important in large federative states with high economic differentiation. The purpose of this study is to determine the effect of budget policy on the dynamics of business activity in the Russian Federation’s varied regions. This has been done by calculating government expenditure multipliers at the subnational level using impulse response functions derived from VAR models. The paper provides a business activity indicator based on sectoral indices in order to assess the quarterly dynamics of economic development in the regions. This approach indicates that regions with the highest budget multipliers have significantly less debt and slightly higher expenditures on projects. High multipliers are also typical in regions where budget expenditures, federal grants, and subsidies are large relative to the GRP. Less developed regions with high potential for investment and business growth also tend to have high multipliers. In addition, the authors calculate the sensitivity of regional business activity to federal budget expenditures. In general and within a certain margin of error, the outcomes of these analyses can be used to assess each region’s contribution to the efficiency of total government expenditures at the national level and can guide the way budget policy may be employed in stimulating national economic growth. However, these estimates are perhaps best suited to support policy decisions in difficult macroeconomic conditions because they have been derived from budget multipliers within a particular VAR model applied to a period (2011–2023) when the regions were adapting to new challenges in half the years included (forced implementation of the decrees of May 2012, the need for import substitution, COVID restrictions, and economic sanctions).
Supporting agencies: This article has been prepared based on research carried out with the help of budgetary funds as a part of th state-commissioned research program of the Financial University Under the Government of the Russian Federation.
About the Authors
I. A. Sokolov
Financial University under the Government of the Russian Federation
Russian Federation
Russian Federation
Ilya A. Sokolov, Cand. Sci. (Econ.), Lead Researcher
49/2, Leningradskiy pr., Moscow, 125167
E. O. Matveev
Financial University under the Government of the Russian Federation
Russian Federation
Russian Federation
Evgenii O. Matveev, Junior Researcher
49/2, Leningradskiy pr., Moscow, 125167
J. E. Kazakova
Financial University under the Government of the Russian Federation
Russian Federation
Russian Federation
Julia E. Kazakova, Junior Researcher
49/2, Leningradskiy pr., Moscow, 125167
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For citations:
Sokolov I.A., Matveev E.O., Kazakova J.E. Determining the Effect of Budget Policy on the Dynamics of Russian Regional Development. Economic Policy. 2025;20(6):6-35. (In Russ.) https://doi.org/10.18288/1994-5124-2025-6-06-35
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