Abstract
This study investigates the nature of the Ukraine interest rate pass-through from January 2000 to November 11, 2018-the post-1999 era. The empirical results reveal a relatively high short-run interest pass-through of 0.724100 and a marginally overshooting long-run interest rate pass-through of 1.054309. The bounds test results indicate a strong long-term relationship between countercyclical monetary policy and market rates. These empirical findings suggest that the National Bank of Ukraine has been very effective in formulating and implementing its countercyclical monetary policy, in spite of the pervasive corruption, formidable political and economic challenges faced by the Ukrainian Republic over this sample period, the results are quite surprising.
Highlights
Second to Russia, Ukraine had the second largest economy in the former U.S.S.R
The estimation results for Perron's (1997) endogenous unit root test function with the intercept, slope, and the trend dummy are summarized in Exhibit 2
This endogenously determined structural break may be attributable to the lingering impact of the disputed presidential election that precipitated the Orange Revolution, which had a negative impact on the Ukrainian economy and banking sector
Summary
Second to Russia, Ukraine had the second largest economy in the former U.S.S.R. The CIAWorld Factbook (2019) articulated that the Ukrainian economy was diversified, produced about four times the output of Kazakhstan -- the distanced third ranking republic in the former U.S.S.R. The Ukrainian economy contributed significantly to the former U.S.S.R in agriculture, large diameter pipes, vertical drilling apparatus and raw materials. The Ukrainе has suffered the most severe political and economic turmoil since the outset of its independence on August 24, 1991. Karatnycky (2001) argued that, despite of turmoil and unrests, “the rudiments of democracy and a market economy did manage to take root, and by 1999 Ukraine had begun to right itself.”. In the face of difficult political conditions and economic turmoil, Ukraine transformed its banking system. This transformation process included the formation of the Central Bank; the
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