Transformation of savings into investments: role of financial intermediaries

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Authors:

O.A.Zadoia, Alfred Nobel University, Dnipro, Ukraine, e-mail This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract:

Purpose. Determining the structural elements of savings and clarifying the characteristics of their transformation into real and financial investment as well as studying the role of banks, pension funds, insurance companies and collective investment institutions in these processes in modern Ukrainian realities.

Methodology. Structural and functional analysis of components of using savings and general principles of macroeconomic modelling has been applied.

Finding. It has been proved that equality of savings and investment are only a necessary but not sufficient condition for achieving equilibrium. Three areas of savings use have been selected: for completion of financial and non-financial assets, as well as increasing cash reserves. It was found that part of the savings is eliminated from the process of their transformation into investment through sedimentation as cash reserves or through replenishment involved in speculative operations in the financial markets. The loss must be compensated at the expense of the money multiplier, creating a threat of building a macroeconomic pyramid and it is one of the causes of the financial and economic crisis. Funds mobilized by pension funds, insurance companies and collective investment institutions tend to remain in circulation in the financial market and do not turn into real investment. The balance of savings and investments under these conditions can be achieved only when new bank loans exceed the loans to be returned at this time. This cannot last continuously. That is why government regulation of saving processes is necessary.

Originality. The macroeconomic equilibrium model considering the different possibilities of individual parts to transform savings into investment has been improved.

Practical value. The ways of state influence on the structure of using savings, the implementation of which will improve the macro-economic, balance have been substantiated.

References

1. Pasazhko, T.S., 2015. Role of financial and credit markets in transforming savings into investment resources economy. Naukovi zapysky Natsionalnoho universytetu “Ostrozka akademiya”. Seriya “Ekonomika”: zbirnyk naukovykh prats, 28, pp. 134–139.

2. Prymostka, L.O. and Shevaldina, V.H., 2014. The savings of the population of Ukraine: formation and involvement in banks. Kyiv: KNEU.

3. Smriti Chand. Equilibrium Relations between Income, Saving and Investment.[online] Available at: <http://www.yourarticlelibrary.com/economics/money/equilibrium-relations-between-income-saving-and-investment/25615/>. [Accessed 29 December 2016].

4. State Statistics Service of Ukraine, 2015. Capital investments in January-December 2015. [online] Available at: <www.ukrstat.gov.ua/express/expres_u.html# 101> [Accessed 27 December 2016].

5. NABU started checking 20 officials who have declared large amounts of cash. [online] Available at: <nv.ua/ukr/ukraine/politics/nabu-pochalo-perevirku-20-chinovnikiv-jaki-zadeklaruvali-veliki-sumi-gotivki-261668.html> [Accessed 29 December 2016].

6. The National Bank of Ukraine. [online] Available at: <bank.gov.ua/control/uk/publish/category?cat_id=5802143> [Accessed 29 December 2016].

7. State Statistics Service of Ukraine. [online] Available at: <www.ukrstat.gov.ua> [Accessed 30 December 2016].

8. Deficit of Pension fund in 2017 is expected at the level of 156 billion UAH, Hroisman. [online] Available at: <www.rbc.ua/rus/news/defitsit-pensionnogo-fonda-2017-ozhidaetsya-1478287869.html> [Accessed 27 December 2016].

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10. The National Commission on Securities and Stock Market. [online] Available at: <www.ssmsc.gov.ua/fund/analytics> [Accessed 21 December 2016].

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ISSN (print) 2071-2227,
ISSN (online) 2223-2362.
Journal was registered by Ministry of Justice of Ukraine.
Registration number КВ No.17742-6592PR dated April 27, 2011.

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