Merab Julakidze, Ph.D. (Econ.), Chief Specialist of the Committee for Economic Policy, Parliament of Georgia (Tbilisi, Georgia)


Macroeconomic modeling of the national economy is an analytical tool based on scientifically proven ideas designed to examine the possible growth rates of the gross domestic product (GDP), its rational allocation into consumable and accumulable parts, investment efficiency, and return on capital and labor employed. It can be used to designate the most important long-term indicators, such as rate of return. And all of this, in turn, provides starting points for drawing up structural and investment policy at the interstate and interregional level for bringing the designated economic growth rates to fruition.

Problem Statement

Scientists have long been engaged in developing the theory of macroeconomic dynamics and its most important element, production functions (PF). But several questions remain unanswered:

1. The interrelations between the branches of the production and nonproduction spheres have not been specifically established, and the benefits of the activity of the latter are still undetermined. However, the nonproduction branches include those that are considered a productive force (science, education, and management). So the degree of interaction between the factors of production and nonproductive factors of intensification of the economy must be determined.

2. The main goals of socioeconomic development require clarification and correlation in macroeconomic terms.

3. These elaborations should be directed at defining and resolving the problems associated with the optimal allocation of resources for developing production and intensification factors and with optimizing the rates and proportions for achieving the designated goals.

4. The question of correlating macroeconomic development models for separate regions of Georgia should be analyzed. It is also very important to compare the results obtained in the Caucasian and Central Asian countries.

An economic and mathematical analysis of production at the macro level is based on building and studying PF; it shows in condensed form how the results of the production process are achieved under the influence of the main production factors, which makes it possible to determine the inputs activity ratio.

In particular, PF make it possible to study the labor cost effectiveness and the efficiency of various production assets, as well as the factors substitutability boundary. They also make it possible to determine the most rational proportions (with respect to the end result) and, in so doing, form the most important element of models of macroeconomic dynamics.

PF have great potential when analyzing technical progress (TP) and its contribution to the aggregates of production growth dynamics.

In actual fact, PF should make it possible to assess the cost effectiveness of R&D, study the type of technical progress (labor-using, capital-using, or neutral), and determine the contribution of.

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