The Probability of the Military Potential Increase: Financial and Economic Factors

Purpose: To model financial and economic indicators and determine their real impact on Ukraine’s military power (military potential). Method: Non-linear modelling. Findings: The results of the preliminary exploratory data analysis indicate that it is advisable to use the following variables for modelling: business environment and credit. Thus, an increase in the business environment indicator (improvement in the following parameters: stability of economic policy for doing business; economic policy and entrepreneurship culture) adds 3.64% to the probability of improving the military potential rating; an increase in the credit indicator (financing start-ups and scaling up; domestic loans to the private sector, as a percentage of GDP; loans to microfinance institutions, as a percentage of GDP) adds 2.04% to the probability of improving the military potential rating. Theoretical implications: The understanding of Ukraine’s economic capabilities has been expanded to include the following factors: investment; credit; business environment; general infrastructure; intangible assets; trade, diversification and market scale.  Ukraine’s military potential has good chances for growth if defence production, i.e. military entrepreneurship, is properly supported, which in turn requires improvement of business tools and the business climate. Meanwhile, business activities related to the production of weapons and military equipment require proper crediting—financial support from the state and local budgets. Value: Classical and neoclassical theories have become a sufficient basis for an empirical study, which indicates that, given the positive dynamics of the financial and economic sector of Ukraine, the process of military building takes place in the plane of a favourable business climate and lending to entrepreneurial activities, in particular, the production of weapons and military equipment. Future research: The prospect of further research is to expand the range of time series, countries, and methods of nonlinear modelling. Future research: The prospect for further research lies in expanding the range of time series, countries, and nonlinear modeling methods. Paper type: емпірична.