THE IMPACT OF THE MONETARY TRANSMISSION MECHANISM ON MACROECONOMIC STABILITY IN UKRAINE

Abstract

The ability of changes in money supply to influence business activity is realized through the transfer mechanism of monetary policy. The purpose of the study is to reveal the theoretical foundations of the transmission mechanism of monetary regulation and the key channels for its implementation to ensure economic growth. The effect of the interest rate channel is that the change in monetary policy, primarily through the official discount rate, directly affects the short-term rates on the financial market, and through the yield curve – the long-term rates. The credit channel reflects the impact of the central bank's monetary policy on the availability of resources on the credit markets, primarily because of the volatility of the free reserves of the banking system. The action of the currency channel is that, in the event of a decrease in domestic interest rates resulting from an increase in money supply, the demand for the national currency decreases, which leads to a decrease of the national currency, and as a result, to the growth of net exports and aggregate demand. The action of the money channel is characterized by the direct influence of the money supply on the money market and the level of prices in the economy. The channel of expectations characterizes the impact of monetary policy changes on the expectations of economic agents concerning future prices and the macroeconomic situation and, accordingly, their decisions on volumes of consumption, savings and investments. The perspective direction in the field of improving the functioning of the transmission mechanism in Ukraine may be the further orientation towards the mode of inflation targeting, rebooting the banking system.