The trajectories of macroeconomic policy under the middle-income trap

Konstantin P. Yurchenko and Irina N. Savelyeva
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Konstantin P. Yurchenko: Ural State University of Economics, Ekaterinburg, Russia
Irina N. Savelyeva: Ural State University of Economics, Ekaterinburg, Russia

Journal of New Economy, 2019, vol. 20, issue 5, 23-41

Abstract: By the end of 2013, Russia’s economy has entered a recession, which resulted from a combination of fundamental (the middle-income trap) and market (international sanctions and a reduction in the price of oil) factors reinforced by the Dutch disease. The economy found itself in a state of negative stabilization caused by a prolonged depression and leading to a stable equilibrium with low economic indicators. Consequently, Russian macroeconomic regulators now have to search for macroeconomic tools, which would be able to put the economy onto a way of sustainable growth. The paper aims to provide the rationale for the choice of structural policy tools and analyse their combination with the careful use of traditional monetary and fiscal policy tools. The methodological basis of the paper includes the models of resource-dependent economy as well as the empirical studies of reactions of such economies to the implementation of macroeconomic tools. The authors justify the necessity of returning to industrial policy as a fundamental tool for regulating economic growth and attempt to demonstrate the vulnerability of the Russian economy to the middle-income trap worsened by resource dependence employing the methods of comparative graphical analysis and correlation analysis. The trajectory of the economy proposed by the researchers in order to handle the situation implies a balanced use of traditional tools based on empirical evaluation of their impact on economic growth in similar conditions, which is feasible in the practice of macroeconomic regulation.

Keywords: negative stabilization; resource-dependent economy; the Dutch disease; economic growth; the middle-income trap; macroeconomic policy. (search for similar items in EconPapers)
JEL-codes: E58 E62 F43 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:url:izvest:v:20:y:2019:i:5:p:23-41

DOI: 10.29141/2073-1019-2019-20-5-2

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