MODELING BUDGET DEFICIT RISKS IN CONDITIONS OF MACROECONOMIC INSTABILITY

Abstract

This research focuses on modeling budget deficit risks under conditions of macroeconomic instability. The study examines the relationship between the budget deficit and key macroeconomic indicators – gross domestic product and government debt. A high-quality multifactor regression model was constructed based on statistical data over an extended period. The research establishes a direct relationship between government debt growth and budget deficit increase, and an inverse relationship between GDP growth and deficit levels. The study addresses the critical issue of quantitatively assessing budget deficit dependencies on macroeconomic factors in high economic environment volatility conditions. Traditional approaches to public finance management prove insufficient under macroeconomic instability, necessitating the development of new modeling and forecasting tools for the budget deficit. The research employs econometric methods to formalize budget deficit dependencies and identify patterns underlying budget imbalance dynamics. Statistical analysis reveals that government debt exerts a greater influence on deficit formation than the positive effect of economic growth. This finding emphasizes the importance of careful government debt management and highlights the pressure of debt obligations on the fiscal system. The constructed model demonstrates the stabilizing role of economic growth for public finances while confirming the burden of debt obligations on the budget system. Budget deficit forecasting for the prospective period was conducted using the developed model. The research methodology enables short-term and medium-term forecasting and identifies potential risks of exceeding critical deficit levels defined by budget resolutions or international obligations. The practical value lies in creating a tool for government authorities that allows rapid assessment of the impact of macroeconomic changes on public finance conditions and making informed decisions regarding budget policy adjustments. The model can be integrated into medium-term budget planning systems as an early warning element for fiscal risks. The research contributes to fiscal policy modeling and provides practical instruments for crisis management in public finance under uncertainty and economic volatility conditions.