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  • Сontribution of regions and their sectors to the financial instability of the russian economy


TERRA ECONOMICUS, , Vol. 16 (no. 3),

The subject of this research is the financial instability of national economy and its sources. The study is aimed at assessment of contribution of various regions and types of economic activity (sectors) to the financial instability of the Russian economy in 2004–2016. The research hypothesis is that the contribution of regions and their sectors to the financial instability of country depends on intra-sectoral, intersectoral, intraregional and interregional covariances of financial return, as well as the scale of the region’s (industry’s) economy, its financial return and the relative volatility of this return. The portfolio approach, portfolio risk decomposition, correlation analysis and the construction of the Lorenz curve were used as research methods. As a result of the study, the sectoral and regional risk structure of the national economy was assessed. The regions and sectors that have made the greatest absolute and relative contribution to the financial instability of the country, as well as the regions and industries that have played the role of dampers of this instability were determined. A positive correlation of intra-sectoral risk and a negative correlation of inter-sectoral risk with financial return of regional economies and some of their sectors were revealed. The decomposition of the volatility of the country portfolio showed that the absolute contribution to the overall financial instability was made by the manufacturing industry and the real estate operations sector, and the latter, together with financial activity, also proved to be the largest volatility amplifiers. In the period under review, the mining industry showed a significant stabilizing role, while the agriculture and fisheries slightly mitigated overall volatility. The results obtained are applicable to the management of financial stability at the national and regional levels by means of changing the sectoral structure of the economy.

Keywords: national economy; regions; sectoral structure; financial return; financial instability; gross value added; portfolio approach; risk decomposition.

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606