Abstract
The paper is focused on the performance features of the monetary transmission mechanism (MTM) in Ukraine as a small open economy. To assess the efficiency of monetary transmission channels, it is important to disclose their interaction, define criteria and tools for analyzing their impact on key macroeconomic parameters. The study deepens approaches to the analysis of the intensity of using monetary, credit, interest rate and exchange rate channels in Ukraine in 2005–2020 and detects violations in the functioning of the MTM. Using economic and statistical methods and regression models, the influence of the main channels of monetary transmission on real GDP growth rate and inflation in Ukraine was assessed. It was concluded that it is advisable to clarify the conditions for increasing the efficiency of MTM in Ukraine; also, the parameters of forecasting the intensification of its channels in the medium and long term are determined. The paper highlights measures to improve the formation of volume and structure of the monetary base and monetary aggregates, improve credit and investment climate, and increase the efficiency of monetary regulation. Moreover, interest rate and foreign exchange policies of the central bank to transmit impulses from the decisions of monetary authorities to market participants were substantiated.
Highlights
The monetary transmission mechanism (MTM) plays an extremely important role in achieving the central bank’s primary goals of ensuring price stability and supporting economic growth by transmitting monetary impulses from the central bank to the real economy
R 0= .9233, R2 = 0.8525, F 3.28, DW = 1.80, Based on the established relationship (11), one can conclude that the total impact of credit, interest rate, monetary and currency channels of MTM in Ukraine on the dynamics of real GDP in 2005– 2020 was 85.25% of the total variability, which indicates the statistical reliability of the results obtained
To increase the efficiency of MTM in Ukraine, the priority measures to intensify the work of its channels should be: ensuring political and economic stability, increasing the banking system’s resilience to internal and external shocks, improving the credit and investment climate, improving methods for forming the volume and structure of the monetary base and monetary aggregates, as well as improving the efficiency of monetary regulation and the central bank’s implementation of a balanced monetary, interest rate and foreign exchange policy adequate to the conditions of economic development, which will help stabilize the money market and ensure sustainable economic growth
Summary
The monetary transmission mechanism (MTM) plays an extremely important role in achieving the central bank’s primary goals of ensuring price stability and supporting economic growth by transmitting monetary impulses from the central bank to the real economy. Due to the economic crisis, the COVID-19 pandemic, and political instability, the efficiency of MTM in Ukraine remains low, making it difficult for the central bank to make effective decisions, exacerbating monetary imbalances and holding back economic growth. The low MTM efficiency manifests itself in the imbalance of money and foreign exchange markets, deformation of the credit market, deterioration of credit and investment climate, disruption of financial intermediation, reduced impact of monetary impulses from the central bank on the financial system and the real economy, which increases inflation and devaluation expectations. Given the complexity and unpredictability of economic processes, changing economic conditions and financial instability, the operation of MTM in Ukraine requires an expanded understanding of the transfer of monetary impulses from the central bank to the real sector of the economy, so that monetary authorities can make better decisions
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