Impact of investments on economic development

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Impact of investments on economic development

E.S. Semenyuk

Abstract

An effective innovation process is a method of combating the crisis, and also contributes to the growth of the country's economy. Each country uses both external and internal sources of investment. The article considers the relationship between economic growth and inflow of investments. The multiplier effect is an important property of the investment process, and it leads to economic growth. The article will present the forms and types of investments, as well as the obstacles to effective implementation of the investment mechanism of economic modernization.

Keywords: investments, innovations, national economy, economic growth, economic process, multiplier effect.

Эффективный инновационный процесс является методом борьбы с кризисом, а также способствует росту экономики страны. Каждая страна использует, как внешние, так и внутренние источники инвестирования. В статье рассмотрена связь между экономическим ростом и притоком инвестиций. Эффект мультипликатора является важным свойством инвестиционного процесса, а также он приводит к экономическому росту. В статье будут представлены формы и виды инвестиций, а также рассмотрены препятствия для эффективной реализации инвестиционного механизма модернизации экономики. investment economic growth and modernization

Ключевые слова: инвестиции, инновации, национальная экономика, экономический рост, экономический процесс, эффект мультипликатора.

World experience confirms that it is impossible to ensure the competitiveness of the economy without large-scale support of innovative activity by the state.

Based on this, it can be argued that the importance of investment support for innovation is due to the following factors:

- First, the growing importance of innovation both for increasing the efficiency of industrial enterprises and for the development of the country's economy as a whole;

- Second, the need for significant changes in the organization and regulation of financial and economic activities of enterprises, due to the urgency of the transition to an innovative direction of economic development;

- Third, the creation of an integrated management system for innovation processes;

- Fourth, inadequate scientific and methodical development of problems of resource support of innovation activity, which determines the need for research aimed at the formation of an effective innovative strategy for the development of economic entities.

The role and significance of investment support for innovation activity is clearly evidenced by the goals and tasks posed by the current economic situation:

1. Ensuring the level of national standards in the areas of national defense, a competitive economy, health and intellectual development of the nation;

2. Ensuring the personal safety of citizens by adapting and disseminating innovations at the national and interstate level, by financing the next level of innovative development within the main operating technological order;

3. Creation of a new generation of products within the nascent technological order.

It can be noted that during the economic downturn, the phase of depletion of the innovation stock is on. This, first of all, is due to the insufficiency of investment provision, namely, financing the process of their development and implementation. [1] Therefore, it can be argued that by limiting the amount of resources to the innovation sphere, the state, thereby, further delays stagnation and contributes to the unevenness of scientific and technological development, the curtailment of innovative processes that will help overcome the recession and will help bring the economic system to a qualitatively new level of evolution.

In addition, an effective investment process is not only a way to overcome crisis phenomena, but also an extremely important factor in the economic growth and development of the state economy.

Virtually every national economy uses both internal and external sources of investment. Investments as a factor in the development of the national economy can be attracted in various forms. [2]

Forms of investment deposits:

1. Private -- invest independent investors;

2. State investments are carried out by the state itself;

3. Foreign -- come from other states;

4. Mixed form -- a combination of any of the above types is acceptable.

These forms are determined by different indicators, which are closely intertwined. That is why the economic essence and classification of investments is not clearly formed, it is permissible to allocate many species based on various criteria.

The main types include:

1. For financing objects: Real; Financial.

2. Depending on the form of ownership

3. By purpose: Direct; Portfolio;

4. By period: Short-term; Medium-term; Long-term.

Foreign direct investment is most preferable. Important for the movement of foreign investment are the environment of investment and investment climate, characteristic of a particular country. In conditions of socialization of economic systems and their transformation to market relations, special attention is required for investment as one of the main elements of state economic policy in general. [3] The impact of investment policy can be manifested both in accelerating the pace of economic development of the country, and in stimulating industrial production, providing conditions for sustainable and rapid economic growth, and raising public welfare.

Economic growth is a change in the well-being of society over a period of time, which is also one of the most important general economic goals. [1] An increase in output is often seen as a measure of economic growth. It is thanks to investments, injections into the national economy, this growth is possible.

At the present stage of the development of the economic system, Wagner's law, which assumes that the growth of the gross domestic product (national income) is accompanied by an accelerated growth of public spending, can be formulated as follows: social development in general and industrial growth, in particular, should be accompanied by a constant increase in the share of investment expenditures in gross domestic product (GDP). [4]

The economy of developed countries demonstrates a certain cyclicality in observing the basic relationships between the rates of investment spending growth and GDP growth. It seems that this is evidence of the completion of the structural redistribution and consolidation of the proportions of the coexistence of the private and public sectors in the economic environment of these states. In addition, the obtained results of a comparison of the growth rates of investment spending and GDP indicate that Wagner's law is executed primarily in countries with underdeveloped economies, and in developed countries this law began to lose its significance from the end of the 70s of the twentieth century. Investments are fixed assets and future fixed assets. [4] Taking into account the fact that fixed capital is the determining factor of production, it can be argued that the volume of output is directly dependent on fixed capital, as well as on the number of people employed in the production of labor resources.

Proceeding from this, it seems that to increase production volumes, stimulate economic growth, it is necessary to provide an increase in either capital or labor resources, or two of these factors simultaneously [2]. And since the opportunities for increasing the labor factor are limited, it means that the key and fundamental source of growth is capital, which can be multiplied by increasing investment.

The relationship between economic growth and inflow of investment can be characterized from two sides. On the one hand, the state of production, the position and level of the technical equipment of fixed assets of enterprises of the national economy, the solution of social and environmental problems depend on the effectiveness of investment policy-that is, investments are the basis for the development of enterprises, individual industries and the economy as a whole. On the other hand, the volume of investments and their role in the economies of countries depend on the specifics of the national economy, the stage of its development and its place in the international economic system [3].

In addition to the fact that investments affect overall business efficiency and the possibility of growth in the long term, they also have a direct and rapid impact on employment and income. This leads to a reduction in income and a decrease in employment in the sectors.

The investments made by the organization to expand its own production facility are an incentive for the entire economy.

Obstacles to the effective implementation of the investment mechanism of economic modernization are created by:

- Uncertainty in the priorities for the development of basic sectors of the economy, lack of a clear vision of the prospective structure of the economy;

- Lack of effective tools to stimulate investment in high-tech activities and innovation;

- The lack of a system of legal instruments for attracting non-state investments in the modernization of the economy;

- Unfavorable conditions for bank lending to the real sector of the economy through high credit rates and the difficulty of access to their receipt;

- Imperfection of legislation on transfer of technologies and technological cooperation of domestic producers of high-tech products among themselves and with foreign partners, etc.

Not every investment has a positive impact on the economic process. Investments can be erroneous if they were sent to unpromising sectors and industries.

This is due to incorrect information about the future. When the economic management bodies that make decisions on investments can not correctly determine which production will be profitable or when, in general, the strategy and economic policy are misinterpreted.

Investments of an erroneous nature mean a waste of resources, since they are linked in projects that do not lead to the anticipated growth of the economy. And, consequently, they do not represent a reliable source of jobs in the long term.

Scientific knowledge of the future demand, the latest production technology and the forthcoming business environment -- is crucial for economic growth [1]. Education, the field of scientific research, is becoming a decisive criterion for economic growth.

For economic growth to have a stable level, resources should be invested in those economic sectors that will produce the greatest economic effect [3].

Summing up, it can be noted that investments have a decisive influence on the formation of the rates of economic growth, the welfare of the population of the country, which, in turn, is directly related to ensuring the optimal balance between accumulation and consumption. The activity of investment resources as an economic factor is also determined by their unique property -- the «multiplier effect». The effect of the multiplier leads to approximately a doubling of the initial investment and, accordingly, to economic growth, which is confirmed by the economic practices of a number of countries.

Библиографический список

1. Алешин Л.Н. Анализ воздействия объемов инвестиций в основной капитал на динамику денежной массы и экономического роста России // Научные труды Вольного экономического общества России. 2012. Т. 161. С. 284-301.

2. Беляев Д.В. Воздействие прямых иностранных инвестиций на экономический рост и реальный сектор национальной экономики страны-реципиента на примере России и Польши // Журнал научных публикаций аспирантов и докторантов. 2013. №4 (82). С. 24-25.

3. Захаров В., Голикова Е. Иностранные инвестиции в экономике России: за и против // Проблемы теории и практики управления. 2012. №03. С. 120-125.

4. Мицек С.А., Мицек Е.Б. Сбережения, инвестиции и модель экономического роста с запасами // Финансы и кредит. 2012. №47. С. 2-6.

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