Key Takeaways from the 9th Annual Research Conference of the NBU and NBP: Economic and Financial Integration in a Stormy and Fragmenting World

The relevance of the research is due to the change in the monetary policy regime of the National Bank of Ukraine (NBU), which consists in the transition from inflation targeting with a floating exchange rate to a fixed exchange rate as the nominal anchor of monetary policy under martial law. Such a plan to change the monetary policy regime was carefully calculated and outlined in the NBU's Monetary Policy Guidelines for the Duration of Martial Law. The timeliness and effectiveness of the NBU's monetary policy decisions enabled it to mitigate the impact of the military shock on the macro-financial stability of the national economy. The purpose of the article is to consider the theoretical and practical aspects of the NBU's monetary policy under martial law. Methodology. The study uses a systematic method of cognition to determine the sequence of application of monetary policy instruments to smooth out monetary shocks of the wartime period; an abstract-logical method to understand the future monetary policy strategy based on the abandonment of the fixed exchange rate regime and a gradual return to inflation targeting; and a statistical method to analyse the dynamics of monetary indicators of the national economy. Results. The paper presents the main principles of the NBU's monetary policy under martial law. The first shock from the war led to changes in the conduct of monetary policy and a shift to unconventional instruments of its regulation. The gradual adaptation of the economy to the new conditions determined the NBU's further steps to ease monetary policy and move to greater exchange rate flexibility. Practical implications. The practical significance of the research results is to assess the conditions for the transition from the key policy rate-based inflation targeting regime as the main monetary policy instrument to the use of foreign exchange interventions as the main operation in the foreign exchange market under martial law. Value / Originality. The originality of the article is due to the need to identify the prerequisites for the transition to a new monetary policy strategy in a wartime economy. Conclusions. The NBU's timely response to the negative phenomena associated with deteriorating inflation expectations, multiple exchange rates and pressure on international reserves helped prevent the development of a currency and financial crisis in Ukraine. Despite the active hostilities, the NBU is trying to find options that will allow it to conduct an effective monetary policy in the face of a full-scale invasion and unprecedented internal and external shocks. Internationally, Ukraine has exceeded expectations and the NBU has shown a high degree of responsibility, professionalism and creativity in the conduct of monetary policy. Increased confidence in the central bank is a valuable resource in times of martial law.

PurposeThis paper seeks to provide a textual analysis of the anti money laundering practices of the central banks of Australia (Reserve Bank of Australia (RBA)) and Ukraine (National Bank of Ukraine (NBU)).Design/methodology/approachThe analysis is performed two ways by both calculating a disclosure index and through use of textual analysis.FindingsThe results show very low levels of anti money laundering disclosures by both NBU and RBA with NBU usually showing more. Textual analysis reveals that the NBU is prepared to internalise its discussion on anti‐money laundering discussing wide‐ranging topics. There appears to be a concerted communication effort by NBU to tackle the issues of money laundering head‐on. Textual analysis of the RBA's four annual reports show a clipped discourse on anti‐money laundering, treating it as if it were a distant concern. Over the four year period, there is little acknowledgement in the way of RBA textual discourse that Australia is a jurisdiction of primary concern.Originality/valueThe value of this paper is that, it emphasizes that, if the globalised activity of money laundering is to be crushed further energies are needed to woo central banks from varied backgrounds into exerting their considerable resources toward anti‐money laundering enforcement.

The article contains a comprehensive analysis of the path of Ukraine’s monetary policy, focusing on the potential for returning to the inflation targeting regime in terms of the level of foreign exchange interventions. The purpose of the study is to convey the critical importance of FX interventions in Ukraine’s monetary policy and to determine the required maximum level at which the National Bank of Ukraine (NBU) will be able to return to the inflation targeting regime. The pre-war period, during which the NBU switched to the inflation targeting regime, which replaced the exchange rate targeting regime, is considered. The article discusses the transitional stage, describes in detail the obstacles faced by the NBU in achieving inflation targets. These challenges included internal factors such as structural weaknesses in the economy, external shocks, and the overall impact of economic trends. The transition to the inflation targeting regime was marked by periods of uncertainty that required the NBU to adapt its actions to ensure the efficiency of monetary policy. The implemented reforms helped to reduce inflation and stabilized the economy in general. At that time, the inflation targeting regime proved to be really effective and the one to which the NBU should return in the future. After the start of the full-scale war unleashed by the russian federation, the central bank was forced to return to exchange rate control. This change was driven by the urgent need to maintain economic stability in the face of the daily shocks of war. The article highlights the reasons for the transition to fixing the exchange rate, outlines the consequences for the economic trajectory of Ukraine and indicates the reasons that record the impossibility of implementing this regime in the long term due to the depletion of reserves and the creation of non-market conditions that will not reflect the real economic situation in the country. A key component of the study is the analysis of foreign exchange interventions, which play a crucial role in stabilizing the economy. Studying various indicators and levels of foreign exchange interventions, the article identifies the optimal level of interventions necessary for Ukraine. This analysis is based on central bank statistics and theoretical principles, providing a solid basis for determining the conditions under which Ukraine can successfully return to inflation targeting. The article concludes that a return to inflation targeting is not only desirable, but also vital, provided that the NBU is able to maintain the optimal level of FX interventions identified in the study.

Introduction. The article provides a comprehensive overview of regulators’ approaches to climate risk management that have a notable impact on financial stability, and the current state of climate risk management in Ukrainian banks. Problem Statement. The analysis of the climate risk management frameworks established by central banks. Purpose – to highlight the impact of climate risks on financial stability and analyze approaches of European central banks to their assessment and management, and to outline possible National Bank of Ukraine’s (NBU) approaches to future management of those risks. Methods. General scientific analysis and synthesis, normative analysis, comparison, systemic and interdisciplinary approach were used. Results. The essence of climate risks impact on the financial system is disclosed. The international experience in assessing climate risks is analyzed, with particular emphasis on the leading role of central banks, and the sequence of their steps to analyze the risks is outlined. The EU’s progress in managing climate risks is presented as a benchmark for Ukraine. Domestic financial sector is at the initial stage of managing such risks, and although certain steps have been taken at the state, regulatory, and bank levels, the integration of climate risks lacks systematicity. Conclusions. Climate risks are becoming an integral factor of financial stability, thus requiring an active role for central banks in ensuring management thereof. The steps taken by central banks to analyze and manage these risks occur in a certain sequence. The EU developed advanced practices that Ukraine will gradually implement. The National Bank of Ukraine (NBU) will enhance its analysis and regulatory framework to facilitate the incorporation of climate risks management into banking business models.

Introduction. The introduction of martial law creates new challenges for financial market regulators, primarily in terms of maintaining the liquidity of financial intermediaries and trust in the national currency. Problem Statement. The results of the monetary and currency policy of the National Bank of Ukraine (NBU) on the eve of the introduction of martial law made it possible to prevent uncontrolled inflation, continue the movement towards currency liberalization, create prerequisites for the activation of the economy and achieve macro-financial stabilization. However, currently the NBU is forced to promptly implement a set of measures to stabilize the financial sector. Purpose. To assess the effectiveness of the NBU\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\'s actions on the capital markets on the eve and in the first months of the war in Ukraine, to assess the mechanisms for supporting the liquidity of financial institutions, as well as the expediency of regulatory restrictions and their impact on the investment attractiveness of government bonds. Methods. Economic-statistical and mathematical-statistical methods are used to determine absolute and relative indicators of the level and dynamics of market development, comparison, descriptive method, analysis, generalization and induction. An abstract-logical method was used to formulate the conclusions. Results. The sequence and tools of the central bank regarding the support of banks\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\' liquidity have been defined. The dominant role of domestic loan bonds in the domestic financial system is substantiated. The pricing of local government bonds of Ukraine in crisis conditions is much more controlled and predictable than that of Eurobonds, the circulation and main owners of which are concentrated mainly in foreign markets. The NBU pursues a balanced policy in order, on the one hand, to maintain the stability of the financial system, and on the other hand, not to hinder the recovery of economic processes. The inadequacy of financial instruments allowed for circulation (military bonds) for investment activities, diversification of portfolios of financial institutions and meeting the demand of mass investors is substantiated. Conclusions. The consistent and predictable position of the NBU, balanced monetary and regulatory policy made it possible to ensure the stability of the financial system. The central bank is gradually relaxing the requirements introduced at the beginning of the aggression. Restrictions of the National Capital Markets Fund on areas of activity and instruments on the capital markets remain a restraining factor for the recovery of investment activity. They apply not only to securities of private issuers, but also to most government bonds, on the liquidity and investment attractiveness of which depend the attraction of resources to counter external aggression, the stabilization of budget policy, as well as the activities of financial institutions, including entities regulated by the NBU.

We propose a simple metric to measure two aspects of market integration, namely economic integration (defined as a common cash flow dynamic) and financial integration (defined as a common risk pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. While the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years -- their level of economic integration has reached that of DEV countries.

We propose a simple metric to measure two aspects of market integration, namely, economic integration (defined as a common cash-flow dynamic) and financial integration (defined as a common risk-pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. Although the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years; their level of economic integration has reached that of DEV countries.

The objective of this paper is to examine the role of geography in explaining the patterns of financial and economic integration among both developed and developing countries. Using a gravity model, we compare North-North, North-South and South-North FDI, trade and portfolio investment flows to examine how geographical factors influence these bilateral flows. The results indicate that the impact of geography variables on FDI and portfolio are similar to their effect on trade. Geography variables have a statistically significant effect both on FDI and portfolio investment, but FDI is more sensitive to distance. We interpret the negative effect of distance as the existence of information costs in financial flows. Also bilateral FDI, trade and portfolio investment flows react to macroeconomic fundamentals in the same way, however, with different degrees of sensitivity. There are significant differences between North-North and North-South flows. Our results find support for the argument that most FDI among industrial countries are horizontal, whereas most FDI investment in developing countries is vertical. The fact that the significance of geographical variables on financial flows still remained even after controlling for the macroeconomic fundamentals, is in contrast with the standard capital market model. The results can, however, be reconciled if geographical factors can proxy for information costs, which may in turn explain why country portfolios are still home-biased. The significant effect of distance on financial flows may also explain how idiosyn cratic shocks are spread (i.e. contagion) to other countries in the same region. Ultimately, the geographical location of a country may determine its economic and financial integration into the world economy.

This paper presents new evidence on international financial market integration using stock analyst earnings forecasts from around the world. By examining cash flow and discount rate news comovements, we find that financial and economic integration has diverged over time as financial integration has developed particularly more rapidly than economic integration over the past decade. However, this divergence is less severe in emerging markets compared with developed markets where financial integration has proceeded at a slower pace. We find that financial integration has developed relatively slowly in emerging markets due to the hampering effects of their poor information environments.

ДЕЯКІ АСПЕКТИ ПРАВОВОГО СТАТУСУ НАЦІОНАЛЬНОГО БАНКУ УКРАЇНИ

Environmental protection and sustainable development are connected. Such connection is considered highly important for Venezuela, where fossil fuel abundance has created economic and environmental challenges. Surprisingly, only limited attention has been directed to identifying policy options for charting the path to sustainable development in the economy. Contributing to filling this gap in the literature, this study examines whether financial development, de facto and de jure conditions in trade and financial integration can trigger long‐term economic shifts that will change the trajectory of carbon dioxide (CO2) emissions in the economy using a novel estimation approach—dynamic simulations of autoregressive distributed lag (ARDL) models. The empirical modelling framework incorporates the impact of population, economic growth, energy intensity and government consumption expenditure. ARDL‐bounds test provides evidence that the variables are cointegrated. Long‐run estimates from the dynamic ARDL analysis show that de facto and de jure conditions in trade and financial components of economic integration offer varied policy options for carbon mitigation in Venezuela. Population size, energy intensity, government consumption expenditure and de facto condition in financial integration have increasing impact on CO2 emissions, exacerbating suitability challenges in the economy. On the other hand, positive shocks in financial development, de facto condition in trade integration and de jure condition in financial integration have a mitigation effect on CO2 emissions. Overall, financial development, trade integration and the control of cross‐border financial flows are needed economic conditions that can accelerate a quick transition to a low‐carbon develpoment in Venezuela.

This article provides an in-depth analysis of the transformation and implementation of the exchange rate policy of the National Bank of Ukraine (NBU) in the context of the full-scale war, economic crisis, and increased financial fragility. It outlines the strategic rationale behind the NBU’s decision to shift from a managed floating regime to a fixed exchange rate peg in July 2022, aimed at preserving macroeconomic stability during an unprecedented shock caused by the Russian invasion. The authors argue that this transition was not merely a reactionary tool but a calculated monetary strategy designed to anchor inflationary expectations, reduce psychological panic in currency markets, support financial sector liquidity, and ensure price predictability for critical imports such as energy and defense-related goods. By fixing the official exchange rate at 36.57 UAH/USD, the NBU created a short-term nominal anchor, which helped stabilize economic agents’ expectations, protected household savings from rapid depreciation, and facilitated continued donor and technical assistance flows. However, the article emphasizes that such rigid policies have inherent long-term risks, including the buildup of macroeconomic imbalances, suppressed market signals, widening gap between official and market rates, weakening export incentives, and increasing reliance on administrative restrictions. The authors evaluate the NBU’s gradual steps to reintroduce flexibility by refining the currency intervention mechanism, adjusting the official rate, and lifting restrictions on current account operations. Based on comparative analysis with exchange rate policies of other emerging economies under crisis conditions, the study underscores the importance of maintaining a balance between exchange rate stability and external competitiveness. It also highlights the role of clear and timely communication by the central bank as a trust-building mechanism with market participants and society at large. The research concludes that Ukraine’s future exchange rate regime must be aligned with broader monetary and fiscal reforms and integrated into the framework of European economic convergence. Strategic return to flexible exchange rate arrangements, backed by institutional strengthening and capital market development, is essential for post-war recovery, investor confidence, and sustainable economic growth.

The article is devoted to the legal regime of information owned by the National Bank of Ukraine. The content of the concept of information is disclosed and its types are defined. The legal basis for disclosure of information owned by the National Bank of Ukraine is investigated and the aspects of protection are analyzed. Information is any information and/or data that may be stored on a physical medium or displayed electronically. The legislation defines the following types: information about an individual; information of reference and encyclopedic nature; environmental information; product information (job, service); scientific and technical information; tax information; legal information; statistical information; sociological information; other types of information. Information owned by the NBU includes information about an individual, namely information or a set of information about an individual that is identified or can be specifically identified; information about the debtor of the bank (and/or related persons); on credit operations of banks and on the status of the fulfillment of obligations under such operations, analysis and classification of loans; information on monetary and banking statistics; information on the ownership structure of banks and the composition of banking groups, bank executives. The legal bases for disclosure of this information are defined in the Laws of Ukraine “On the National Bank of Ukraine”, “On Banks and Banking”, “On Access to Public Information”, Regulations on the Credit Registry of the National Bank of Ukraine, etc. The regulation on the organization of information security measures in the banking system of Ukraine defines the following principles of information protection: the approach to information security should be systematic (comprehensive); the process of improvement and development of information security must be continuous and carried out by substantiation and implementation of rational means, methods, measures using the best international experience; safeguards against real and potential threats to the information security of the bank should be timely and adequate; ensuring the proper level of information security of the bank is impossible without the support and control of the bank’s executives; sustainable development of information security systems is only possible if resources, including financial resources, are sufficient. The features of information protection in banking systems are set by the National Bank. Keywords: the legal regime of information, information, open data, information with restricted access, information security, National Bank of Ukraine, credit register.

Introduction. Monetary policy serves as a fundamental component of the economic strategy of the National Bank of Ukraine (NBU), focused on ensuring price stability and fostering an environment conducive to economic growth, development, and increased employment levels within the country. Following the onset of large-scale military occupation in Ukraine, which inflicted significant damages on the national economy and disrupted international trade, the NBU has been compelled to take decisive actions. These measures aim to minimize the severe impacts of military operations on Ukraine’s banking and monetary systems and address multiple emerging challenges. The purpose of this paper is to explore the approaches of the NBU's monetary policy aimed at curbing inflation and preventing the rapid devaluation of the hryvnia during wartime conditions. Results. The strategy pursued by the NBU is directed towards securing both price and financial stability, which are essential for macroeconomic stability. The current state of Ukraine’s monetary policy reveals several institutional challenges, including unstable exchange rates, hryvnia devaluation, an expansion of the shadow economy, and a high volume of currency transactions within the country. During the conflict, the monetary and credit policies of the NBU prioritize fulfilling Ukraine’s defense needs, ensuring the functionality of financial markets, maintaining the smooth operation of banking and payment systems, controlling inflation, stabilizing the hryvnia, and safeguarding necessary levels of international reserves. Conclusions. A key mechanism for the NBU’s influence on inflation in Ukraine is the primary interest rate, which determines the rate at which the NBU provides funds to financial institutions. This key rate significantly impacts the interest rates commercial banks offer to individuals and enterprises, which in turn affects the inflation level.

The article notes that the National Bank of Ukraine (NBU) must ensure price stability, high and stable level of economic development and optimal employment. Conceptually agreeing with this approach, the authors prove that the mechanism for its implementation does not ensure the fulfillment of the NBU mission. Analyzing changes in the banking sector of Ukraine over the last 2.5 years, the authors emphasize that due to the implementation of insufficiently balanced NBU regulatory policy, the volume of banks' investments in NBU certificates of deposit increased almost fivefold –– from UAH 95 billion. at the beginning of 2022 to UAH 456 billion at the end of the year. As a result of such an unsuccessful policy and contrary to economic logic, the NBU generated a huge positive liquidity balance in the banking sector, while the real sector of the economy suffers from a lack of funds Undoubtedly, such regulatory actions, which are "unique" in modern economic theory and historical practice, cannot stand criticism and should be rethought and significantly revised. The reasons and consequences of such an ineffective regulatory policy of the NBU are analyzed and important conceptual ideas aimed at improving bank management are suggested. According to the formulated conclusions, it is necessary to create an effective mechanism of credit monitoring in Ukraine. The activity of which should be devoted to assessing economically justified levels of different banking rates and analyzing innovations in the ideology of banking management that are used in other countries where central banks operate very successfully.