Inna Shkolnyk

Department of Finance, Banking and Insurance, Sumy State University, Ukraine

y.shkolnyk@uabs.sumdu.edu.ua

ORCID 0000-0002-5359-0521

Dependence of the state of public finances on their transparency and the level of corruption in a country

Olga Kozmenko

University of Economics and Innovation in Lublin, Poland

o.v.kozmenko@gmail.com

ORCID 0000-0003-0088-593X

Robert Nowacki

Institute of Security Sciences, Higher School of Criminology and Penitentiary Science in Warsaw, Poland

ORCID 0000-0002-1620-8493

Borys Mershchii

Department of Finance, Banking and Insurance, Sumy State University, Ukraine

b.mershchii@gmail.com

ORCID 0000-0002-4831-6907

Abstract. Creating conditions for the effective formation, distribution and use of public finances, both at the macroeconomic and regional levels, is a key task for public administration. Achievement of high efficiency in this area is determined by many factors. For Ukraine, the most important here are the level of transparency and the level of corruption. Given that the level of transparency is not high enough, and the level of corruption, on the contrary, is high, the existing dependence between the state of public and local finances in Ukraine on the levels of corruption and transparency in the public sector is assessed. Based on the data characterizing the state of public finances at the national level through the indicators of Ukraine's consolidated budget, and at the regional level – through the indicators of local budgets of 22 regions (2010 to 2019) as well as a wide set of other selected factors, the relationship is determined between the corruption level, finance security, the transparency of public sector and the state of public finances at the macroeconomic and local levels. The use of Multiple Indicator – Multiple Cause and Dynamic Multiple Indicator – Multiple Cause models, based on the concept of soft modeling, revealed a significant impact of corruption on changes in Ukraine’s consolidated budget expenditures. Besides, the importance of other factors such as economic freedom and conditions created by the state for doing business is established. At the regional level, the dependence of local finances on the level of corruption and transparency was much lower. However, the models used indicated the presence of latent variables with significant influence, which would be the subject of our further research.

Received: February, 2020

1st Revision: October, 2020

Accepted: December, 2020

DOI: 10.14254/2071-789X.2020/13-4/18

JEL Classification: E60, G17, G18, D73

Keywords: state budget, municipal budget, state debt, shadow economy, finance security, public finance, transparency, corruption