Monetary Policy In Ukraine Research Articles

Сoordination of fiscal and monetary policy in Ukraine

In the conditions of uncertainty and economic instability, the issue of researching approaches to strengthening the coordination of fiscal and monetary policy is becoming relevant. The aim of the research is to justify directions for strengthening the coordination of fiscal and monetary policy of Ukraine. It is hypothesized that the level of fiscal and monetary policy coordination determines the country’s ability to ensure macroeconomic stability. Special and general scientific methods were used: system approach, theoretical generalization, induction and deduction, statistical, scientific abstraction. Strengthening the coordination of fiscal and monetary policy is an important stabilization tool for ensuring the adaptation of the economy to social and economic conditions, curbing inflation in order to maintain exchange rate stability, reducing fundamental price pressure and directly overcoming inflationary processes. The toolkit of fiscal and monetary policy must be considered in an inseparable unity, taking into account the synergistic effect of ensuring macro­economic stability, which cannot be achieved exclusively by the tools of only one of the policies. The main directions of strengthening the coordination of the fiscal and monetary policy of Ukraine at this stage include: combining the tools inherent in both directions of policies, strengthening its flexibility and adaptability to socio-economic processes; sy­ner­gy of policy instruments in the context of ensuring debt sustainability and reducing fiscal risks; substantiation of the common strategic goals of policies, which will contribute to strengthening their coordination, in particular by developing an appropriate strategy; the development of a financial toolkit for prevention and response, within the framework of which policy instruments are used together, in particular by improving the traditional practice of applying macroprudential measures; streng­thening the independence of state institutions that ensure the formation and implementation of fiscal and monetary policy by continuing institutional and legislative reforms in the relevant areas.

Specific of transmission mechanism of monetary policy in Ukraine in the conditions of martial law

Introduction. The current state of the Ukrainian economy is determined by the unfolding of crisis as a result of full-scale military aggression, which determines the need to optimize the regulatory influence of monetary policy in order to ensure the stability of the economy against the negative consequences of the war, minimize and localize the impact of the negative consequences of the crisis for the real sector of the economy. Under such circumstances, the study of problems related to the choice of the most optimal monetary policy strategy, which is implemented in practice through the appropriate channels of monetary transmission, which operate on the basis of the selected targeting regime, is especially relevant. At the same time, military actions determine the need to reassess the system of economic coordinates, in which the central bank, defending its institutional independence, could focus monetary regulation exclusively on price stability, ignoring other strategic goals of state influence on the economy, related to the urgent need to save economic activity and prevent unfolding recession precisely with the help of monetary policy instruments. Goal. The purpose of the study is to find out the features of practical implementation and to identify problematic aspects of the transmission mechanism of monetary regulation, as well as to determine on this basis the most optimal channels of monetary transmission, suitable for use in conditions of martial law, external shocks and the unfolding of the economic crisis. Methodology. General scientific techniques and tools, methods of analysis and synthesis, comparison, summary and grouping, scientific abstraction are used. The results. The article examines the action of the main monetary transmission channels and their impact on key macroeconomic parameters. The features and effectiveness of the transmission mechanism of monetary policy in the conditions of unfolding economic crisis during the period of martial law are analyzed. Problematic aspects of the practical implementation of the channels of monetary policy transmission mechanism have been identified. The fallacy of certain actions of the NBU regarding use of interest rate channel and inflation targeting regime while rejecting the exchange rate stability is emphasized. The advantages of using the exchange rate channel as more effective in the system of central bank transmission of monetary impulses to the economy in order to achieve the goals of financial stabilization, maintenance of economic growth and employment are substantiated.

ПОВОЄННЕ ТАРГЕТУВАННЯ ІНФЛЯЦІЇ: КЛЮЧОВІ ВИКЛИКИ

На період воєнного стану НБУ призупинив таргетування інфляції, але анонсував повернення до нього в найближчий час з усіх можливих моментів. Повоєнна нормалізація монетарної політики в Україні є історично безпрецедентною, оскільки більшість відомих випадків стосується перезапуску грошового обігу і налагодження банківської діяльності, створення центробанку як інституції, що покликана елімінувати макроекономічні передумови внутрішньокраїнних конфліктів. Водночас воєнні конфлікти характеризуються емісійним фінансуванням бюджету, сплеском інфляції і посиленням доларизації, а сеньйораж може бути оптимальною формою компенсації раптової втрати податкових надходжень виключно в обмежених обсягах. Відновлення інфляційного таргетування в Україні наражатиметься на ряд загальних макроекономічних викликів у вигляді: прискорення інфляції, затримки коригування компонентів небазової інфляції, невизначеності щодо обсягів емісійного фінансування дефіциту після припинення воєнного стану; деградації монетарної трансмісії; погіршення інфляційних очікувань та імовірного посилення ефектів перенесення. Однак дані виклики, радше, впливатимуть на таймінг повернення до таргетування інфляції. З технічної точки зору цей процес наражатиметься на проблеми, пов’язані: із специфікацією інфляційної цілі (новий «похилий» коридор, актуалізація старої цілі в різних формах); імовірним оптимальним зниженням її рівня через євроінтеграцію; погіршенням критеріальних значень ВВП-розриву і рівня нейтральної ставки при оцінюванні стану монетарної політики; поновленням процесу нагромадження валютних резервів з відповідним продовженням тенденції до підтримки структурного профіциту ліквідності. Незалежність НБУ відіграватиме ключову роль для нейтралізації проблеми довіри в умовах потенційної альтернативності між швидкістю стабілізації інфляції і акселерацією темпів економічного відновлення.

Strengthening monetary policy and managing inflation expectations in Ukraine in conditions of maritime

The article considers the current problem of strengthening monetary policy in Ukraine. Competent monetary measures of the NBU in the first months of the war ensured the smooth functioning of the banking system and payments in the economy. Fixing the exchange rate was ensured by currency restrictions, as well as foreign exchange interventions. The gradual adaptation of Ukraine's economy to the war and the replacement of psychological shock by economic logic require a change in approaches to monetary policy.
 The article substantiates the need to strengthen the monetary policy of the NBU. Strengthening the monetary policy of the NBU is aimed at compressing the money supply, and its effectiveness depends on the coordination of measures with the government.
 The way in which inflation expectations are formed influences the consequences of monetary policy. Therefore, the NBU, which aims at price stability, should take into account the inflation expectations of economic agents when planning monetary measures.
 Adaptive and rational hypotheses of inflation expectations are estimated. It is established that the reasons for the differences in the mechanisms of inflation expectations are explained by rational expectations and ways of disseminating information. It is concluded that the main focus in assessing monetary policy is to determine the characteristics of the factors shaping inflation expectations in Ukraine. The NBU can increase the effectiveness of monetary policy by developing and implementing measures to strengthen the impact on inflation expectations of economic agents.

МЕХАНІЗМ РЕГУЛЮВАННЯ ІНФЛЯЦІЙНИХ ПРОЦЕСІВ ЗА ДОПОМОГОЮ ІНСТРУМЕНТІВ ФІНАНСОВОГО РИНКУ

The article is devoted to topical issues of the impact of the central bank's monetary policy on the economy, including its financial sector (financial markets) and inflation through the transmission mechanism. Its purpose is to study the essence and the effectiveness of the implementation of the monetary policy of the central bank from the point of view of its impact on inflation and the development of the financial market in Ukraine. Attention is focused on the wide use of inflation targeting policy and its components in the world. The transmission mechanism of the influence of monetary policy on the economy and inflation is considered. The approaches to the transmission mechanism of monetary policy and its main channels through which it affects the activation of the functioning of the financial market, the economy and inflation is considered. It is noted that the main channel for the transmission of monetary policy in Ukraine is the interest rate channel. Its action is based on changes in interest rates. Such changes contribute to a wider placement and attraction of funds by business entities. As a result of effective placement and attraction of funds, they can solve the issues of consumption, accumulation and investment. Thus, they affect the level of aggregate demand, economic activity, the development of financial markets and inflation. Statistics from the central bank of Ukraine confirm the effectiveness of the transmission mechanism of its monetary policy in resuming the development of the financial market and controlling inflation. The "de-dollarization" of loans and deposits has been steadily progressing in Ukraine in recent years. It contributes to weakening the influence of external factors on the domestic financial sector and increases the importance of domestic interest rates in decision-making by households and enterprises. The continuation of this trend in the future, which will be facilitated, among other things, by maintaining price and financial stability, will have a positive impact on the effectiveness of the monetary policy transmission mechanism. At the same time, it was concluded that it is necessary to take into account non-monetary factors influencing inflation and take them into account in changing the operating procedure of monetary policy. This will effectively limit the impact of the changing liquidity situation in the banking sector on the cost of resources in the financial market, and therefore on all other rates in the economy.

THE STATE OF THE FOREIGN EXCHANGE MARKET AND THE NBU’S FOREIGN EXCHANGE POLICY DURING THE WAR IN UKRAINE

Continuous monitoring of the functional structure of the foreign exchange market, especially during hostilities, is very important because of its significant impact on economic processes taking place in Ukraine. The article considers the current state of the foreign exchange market and the effectiveness of monetary policy in Ukraine during the war. Today, there is uncertainty about the macroeconomic situation regarding the fluctuations of the hryvnia against major world currencies. Due to such conditions, control over the stability of the hryvnia exchange rate in the foreign exchange market of Ukraine becomes relevant. In addition, consideration of the degree of influence of gold and foreign exchange reserves, public debt, exports and imports, foreign direct investment in and out of Ukraine, as well as gross external debt will determine their contribution to the exchange rate. Therefore, the state of the foreign exchange market is an indicator that most accurately shows the presence of problems in the economy. The war changed the situation of many processes that take place in the foreign exchange market or affect its state. Therefore, monetary policy now plays an important role in creating a stable situation in the foreign exchange market of Ukraine. Rebuilding a full-fledged foreign exchange market in Ukraine and its effective monetary policy is a necessary condition for the further formation of an open market economy with all the necessary means to stimulate the work of economic entities in the foreign economic sphere.

МІСЦЕ ГРОШОВО-КРЕДИТНОЇ ПОЛІТИКИ У ЗАБЕЗПЕЧЕННІ ФІНАНСОВОЇ БЕЗПЕКИ УКРАЇНИ

The research identifies the role of monetary policy in ensuring financial security in martial law. The economic essence of the term «monetary policy» and the defined main participant of this sector is given. It is noted that the National Bank of Ukraine is considered as the main state institution that complements the state power in the sphere of influence on the banking and non-banking capital of the society. The National Bank of Ukraine performs the main function of controlling the banking sector, which ensures the implementation of monetary policy, and therefore it can be assumed that the central bank is responsible for the monetary security of the state. The article highlights the main purpose of monetary policy in Ukraine. An analysis of the current state of monetary policy of the National Bank of Ukraine during 2018–2021. The dynamics of the US dollar and the euro against the Ukrainian national currency during 2015–2021 has been studied. It is proved that monetary policy is a catalyst for ensuring the financial security of our state and plays an important role in this process. The economic essence of the concept of «monetary security» is highlighted. The place of monetary security in the national security system has been determined. The basic conditions for ensuring monetary security are described. An analysis of the dynamics of monetary security of Ukraine during 2018–2021. In particular, the speed of circulation, inflation rate, volume of foreign currency deposits, monetary multiplier, and others were studied. The dynamics of the level of monetization and the level of dollarization of the economy of Ukraine for 2018–2021 has been studied. The main reasons for the process of dollarization of the economy in Ukraine are identified. The greatest threats to Ukraine’s monetary security were noted. The key tool used by the National Bank of Ukraine to ensure price stability, which will contribute to the growth of monetary security of the state. Measures that are appropriate to implement to address this situation in the context of economic and national security are proposed.

Key interest rate in optimal monetary policy in Ukraine

In the paper, the empirical examine of Taylor rule use in case of Ukraine has presented. The obtained results has shown that the most significant influence on interest rate makes inflation rate and interest rate in previous period. It had been found that 1% change of consumption prices and interest rate in previous period increases interest rate by 1,28 and 0,71% respectively. Instead 1% change in GDP gap causes only 0,04% change in interest rate. The obtained results has shown that 1% change of inflation gap provoke National Bank of Ukraine to increase interest rate by 0,8%.

Грошово-кредитна політика в умовах економічних перетворень

The purpose of this article is to improve the theoretical, methodological and practical grounds of monetary policy in the context of economic transformations. The main tasks of monetary regulators in transformational economies are the following: 1) to ensure long-term stability of the national currency; 2) to guarantee the stability of the state financial system; 3) to stimulate economic development indirectly. The necessity to continually improve the methodological tools for implementing monetary policy, as the use of original tools for quantitative and credit easing, has been substantiated. The role of interest rate policy has been identified as the main tool of monetary regulation in countries with advanced and transformational economies. The expediency of using the Taylor rule to increase the effectiveness of monetary policy in Ukraine has been substantiated. The article proves that in order to strengthen the monetary policy efficiency in the strategic perspective, and to approach intermediate and end goals, such policy should be based on a combination of floating exchange rate (of various types), inflation targeting, and adaptive use of other tools (interest rates, monetary aggregates, etc.). The methodological and application-specific peculiarities of implementing restrictive and incentive monetary policy have been outlined. It has been established that the monetary regulator mainly applied restrictive monetary policy in Ukraine in 2005-2020, but loosened it, when the socio-economic situation became challenging. The main features of inflation targeting have also been indicated, with the substantiation of its application in transformational economies, and in Ukraine, in particular.

ГРОШОВО-КРЕДИТНА ПОЛІТИКА В КРИЗОВИХ УМОВАХ

The article is devoted to the study of conditions of application and influence of non-traditional monetary policy of central banks of developed countries on national economies and economies of emerging market countries. Based on critical analysis and systematization of basic research on the analysis of non-traditional monetary policy and its impact on the economies of different countries, it is substantiated that non-traditional monetary policy is a set of measures aimed at restoring the transmission mechanism and eliminating financial market imbalances. The main tools of non-traditional monetary policy are - previous management, quantitative easing; credit easing; negative interest rates, qualitative mitigation. Relevant areas of research on the financial performance of economies were also justified, as monetary policy directly affects interest rates, money supply, exchange rates, availability of credit, and through the financial sector to other sectors of the economy. During the aggravation of the economic and debt crisis, which had a negative impact on the Eurozone countries, investors' interest in CEE countries increased due to higher interest rates and the opportunity to make more profits. The study of the impact of the ECB's monetary policy on the financial indicators of Central and Eastern Europe revealed that the ECB's unconventional policy, including quantitative easing aimed at lowering long-term interest rates, affected the yield on government bonds of almost all EU countries, not only member states. euro area, which generally declined after 2014. Non-traditional monetary policy and an increase in the ECB's balance sheet also affect investment flows to CEE countries, but are mainly debt instruments in both direct and portfolio investment. The opposite situation is observed in the Eurozone countries with a high debt burden, especially in Greece and Italy. Despite the fact that the ECB's policy has led the euro area countries with a high level of debt to reduce the debt-to-GDP ratio, there is a tendency to increase the share of public debt payments to GDP. In this situation, the ECB simply cannot significantly change the purpose of its monetary policy, because any, even small, increase in the discount rate will lead to a new debt crisis in the Eurozone with its epicenter in Italy and Greece. The study of the impact of non-traditional policies of the Bank of Japan, the Fed and the ECB on the economy of Ukraine confirms the hypothesis that the actions of the ECB have the greatest impact on the financial performance of Ukraine. The analysis shows the impact of non-traditional monetary policy on the exchange rate of the Ukrainian hryvnia to the euro, US dollar and Japanese yen, but it was not significant. This is due to the fact that monetary policy in Ukraine only in 2015 actually moved from a fixed exchange rate to a floating exchange rate and began to apply inflation targeting. Announcements of non-traditional monetary policy have also affected government bond yields and stock indices, but the Ukrainian stock market is underdeveloped and has little effect. The main influence was the first programs of non-traditional monetary policy of the ECB, the USA and the Bank of Japan. In times when non-traditional measures were just being introduced and difficult to regulate and predict. Thus, it was proved that, on the one hand, unconventional monetary policy can stimulate economic growth, and on the other hand, create significant risks for further monetary policy opportunities to counter future crises.

Емпірична оцінка внутрішнього та міжнародного ефектів Фішера для економіки України

The article works out the essence of theoretical concepts of both the internal and the international effects named after I. Fisher. A review of professional publications gave reason to conclude that in the countries with higher levels of marketing of the economy, the strength of these effects is higher, which indicates a higher level of integration of their national financial markets into the global financial market. Based on the results of an econometric analysis, the authors have concluded about the relative weakness of the internal Fisher Effect and, consequently, on the need to use multifactor analysis in the study of the dynamics of the real interest rate in Ukraine. The empirical evaluation of the dependencies of monetary variables in the model describing the international Fisher Effect gave reason to conclude about the relative weakness of this effect, in particular for the currency pair of «dollar – hryvnia», and therefore, the differential of national interest rates is not sufficient basis for forecasting the dynamics of the foreign exchange rate. The article uses a number of statistical criteria and tests to examine the used econometric model, which gave grounds to conclude about its adequacy and statistical significance of variables. The authors elaborated the factors that have a restrictive impact on the international movement of capital and therefore can cause differences in the real interest rates, especially in emerging markets, namely: asymmetry of market information, psychological barriers, national legislative restrictions that quota the international capital flows, high transactional costs, peculiarities of the tax system, currency risks, political risks, etc. The thesis that the presence of weak Fisher Effects for the Ukrainian economy is one of the reasons for the low effectiveness of the interest channel of the transfer mechanism of monetary policy in Ukraine is substantiated.

STRATEGIC DIRECTIONS AND MEASURES FOR REFORMING UKRAINE'S ECONOMIC POLICY

Topicality. The task of growth of the gross domestic product of the state necessitates the implementation of processes of demonopolization and deregulation of the economy, creation of conditions for free fair competition, effective functioning of strategic commodity markets, expanded reproduction of the labor potential of the country. Nowadays, the issue of development and implementation of the new economic policy of Ukraine taking into account specific factors of influence on the national economic system in the context of its stable reproduction development is of particular relevance and importance. Aim and tasks. The purpose of the article is to substantiate the strategic directions, measures and instruments of reforming the economic policy of Ukraine, as the basis of the national platform of the new economic course of the state. During the research the following methods were used: dialectical, theoretical generalization and comparison, graphical, structural-logical method. Research results. In the article the author substantiates the expediency of creation of multidisciplinary All-Ukrainian associations and their main tasks. Proposals for systematic reformation of the most important taxes have been worked out: personal income tax, single social contribution, value added tax and income tax. Attention is drawn to the need to achieve a rational level of aggregate tax burden in Ukraine. The expediency of risk insurance in business lending, the use of international principles and practices in the formulation of antitrust and monetary policy in Ukraine is substantiated. Based on the analysis of the commodity structure of domestic exports, the necessity to support the production and export of high value-added processing products has been proved. The need for educational reform, changing the paradigm of cheap labor, conducting a high-quality multidimensional analysis of the labor market and adopting an updated labor code were emphasized. Conclusion. The proposals developed in the article form the conceptual basis of the national platform of Ukraine's new economic course. The development of a step-by-step plan of action, changes to legislation and the legal framework, a system of mechanisms and measures for their practical implementation determine the prospects for further research in this area.

Modeling Outcomes of Unconventional Monetary Policy

The paper presents a study of the outcomes of the unconventional monetary policy methods that the central banks of developed countries have been applying during and after the global financial crisis. Before the crisis central banks used the interest rate policy as their main tool. But the recent financial crisis has demonstrated the inefficiency of traditional methods (especially after the base interest rate has reached zero). Therefore in response to the global financial crisis, central banks of many countries have taken unconventional measures to overcome the crisis. The paper aims to study the main outcomes of unconventional monetary policy measures of the developed countries and formulate the recommendations for the developing countries. The following objectives are being met in the paper:to reveal the essence of the main mechanisms for implementing the unconventional monetary policy; to evaluate the efficiency of unconventional monetary policy in the US, Japan, United Kingdom;to model the impact of monetary policy of the European Central bank on the consumer price index in the Eurozone countries. Research methods: method of comparative analysis is usedto evaluate the efficiency of the unconventional monetary policy in the US, Japan, European Union and the United Kingdom.The model of themonetary policy impact on the consumer price index is based on econometric analysis and is constructed using the least squares method. The studied model includes both traditional and non-traditional methods.Observation period - quarterly data from 1999 to the second quarter of 2019. The results of the analysis show that unconventional monetary policy methods of the central banks of the developed countries reached major goals - to prevent bankruptcies of large financial institutions in national economies. Moreover, the results of the suggested model show that the European Central Bank policy has also reached its inflation target that supposed to stimulate economic growth; the most significant effect is observed in the first years after the launch of an unconventional monetary policy. At the same time the unconventional tools of monetary policy stimulate the extreme increase of the securities prices, which led to the “overheating” of the US stock market and the EU national bonds markets with the negative yield on government securities of several countries, which may become a trigger for a new global crisis in the future. The result of the analysis of monetary policy in Ukraine shows the limitations of the use of non-traditional measures for the developing countries.

ВПЛИВ ВАЛЮТНОЇ ЛІБЕРАЛІЗАЦІЇ НА ВОЛАТИЛЬНІСТЬ ВАЛЮТНОГО КУРСУ В УКРАЇНІ

Розглянуто питання впливу валютної лібералізації в Україні, що посилилася за останній рік, на волатильність курсоутворення гривні. Такі дії регулятора були одними з кроків реалізації політики інфляційного таргетування і заходом, який сприяв досягненню цілей цінової стабільності, у тому числі й валютної. Наведено аргументи стосовно позитивного і негативного впливу валютної лібералізації за допомогою векторно-авторегресійного моделювання монетарного трансмісійного механізму для двох модифікацій моделей, одна з яких ураховує вплив інтервенцій на валютний курс та облікову ставку.

The main directions of reduction of debt risks in the medium-term perspective

The principles of forming the main directions of policy in the sphere of public debt, aimed at reducing debt risks in the medium term, are considered. The influence of macroeconomic factors on the formation of administrative decisions in the debt sphere is determined and the consequences of measures implemented to support the banking sector in the conditions of the global economic crisis are analyzed. A forecast model has been formed, which provides an assessment of policy changes in the area of public debt under different scenarios ofUkraine's economic development in the medium-term perspective. In order to increase the effectiveness of measures to reduce debt risk, considerable attention should be paid to the formation of an automated system that provides the process of managing the public debt with the necessary statistical data. At the same time, such a system should regularly undergo an external audit, and the organization of the formation and dissemination of reporting is constantly improved. Legal norms in the debt area should ensure the regular publication of data on the state debt, as well as the results of public administration in this area. Public risk assessment is of great importance for strengthening trust not only for the state debt policy, but also for the public finance system as a whole. It is also important in this direction to establish an exchange of information between the Ministry of Finance ofUkraineand the National Bank ofUkraine. Such cooperation will promote the necessary coordination during the formation of financial and monetary policy inUkraine. Although such tasks are defined in a number of normative acts ofUkraine, these goals are not realized in practical terms. Another area of reduction of public debt risks is the establishment of a permanent dialogue between the Ministry of Finance ofUkraineand national and foreign investors. This dialogue is needed to inform about the characteristics of the country's debt portfolio and to get information about the benefits and expectations of investors. Debt managers should try to provide investors with information on borrowing transactions, methods for calculating government debt, interest rate and refinancing risk, maturity structure, derivative instruments, and government guarantees. Central level bodies should be organized in order to assess the impact of the risks associated with contingent liabilities. Such an assessment can be an integral part of the medium-term public debt management strategy, which is developed annually by the Ministry of Finance and approved by the government. Contingencies represent potential financial requirements for the government, which may become real requirements in certain circumstances. This primarily concerns financial support measures, state-owned enterprises or other public administration bodies. Other commitments, such as the support of pension funds, should also be taken into account. Deposit Guarantee Funds for individuals, etc. Experience has shown that these contingent liabilities can be very large, especially when they involve recapitalization of the banking system. In order to minimize costs and risks in the medium to long term, the finance ministry and the government as a whole should take adequate measures to create an efficient government securities market. Such a market will help form a mechanism for financing the state budget without relying on the central bank. In addition, by expanding the capacity and liquidity of the government securities market, the Ministry of Finance, together with the National Bank and public oversight bodies and market participants, can reduce the cost of debt servicing in the medium and long term by reducing the premium for liquidity.

ANALYSIS OF THE FUNCTIONAL CHARACTERISTICS’ MONETARY POLICY

The article presents approaches, which explain the transition process of the financial systems’ re–monetization, and on this basis ─ reasonable priority areas of the central bank monetary policy in Ukraine. Relevant depending modeled by using a dynamic model with rational expectations, where equation (1) describes factors that affect the price level; in equation (2) monetization dynamic is proportional to the change in the absolute value of this indicator. However, monetization is inversely proportional to the price level and inflation. Similarly, it is assumed that higher inflation limits the monetization dynamic. Likewise they are affecting currency devaluation and budget deficits. Among exogenous factors of monetization important are: efficiency of the banking system; completion of the market environment’s formation; improve conditions for foreign investment. The equation (3) presents functional dependence for the current account balance, which is improved by lowering prices, currency devaluation and improving the budget balance. As the results of the study following conclusions were made, namely—the re–monetization tempo of the Ukrainian economy is strong even among successful Eastern European economies; a significant increase monetization may lead to crisis.

THE RATIONALE FOR THE APPLICATION OF THE INFLATION TARGETING REGIME IN UKRAINE

The purpose of the paper is the consideration of the basic choices of a monetary regime of monetary policy, which include the monetary targeting regime, the regime of exchange rate targeting, the inflation targeting regime, and a strategy without an explicit nominal anchor. The article also discusses their implementation in various countries of the world and the resulting consequences. The subject of research is the consideration of the existing monetary regimes and the rationale for the selection of one of them to ensure sustainable development of the economy of Ukraine. This research examines, among other things, such unresolved parts of the general problem as the search for ways how to increase the degree of the Central Bank influence on the economy by changing the existing monetary regime to more optimal. Methodology. The research is based on a comparison of data on the effectiveness of monetary policy in different countries in specific time periods. Given the consequences of the implementation of certain monetary regimes in different countries, there are drawn conclusions about the appropriateness of the choice of a specific regime for the Ukrainian economy. The results of the comparison showed that the most suitable choice for the economy of Ukraine is the choice of the inflation targeting regime, since it generates the inflation expectations at a low level, in most cases allows reducing inflation in the short term, contributes to strengthening the Central Bank independence and credibility, allows overcoming internal and external shocks, eliminates the contradictions connected with the objectives of monetary policy, reduces the likelihood of crises, as well as creates positive conditions for the development of the economy as a whole. Practical implications. Thoroughly examined the advantages and disadvantages of the underlying monetary regimes, conclusions were drawn concerning the promising directions of development of monetary policy in Ukraine, as well as recommendations on further actions of the state bodies of Ukraine. Value/originality. The conclusions of the research substantiate the benefits of inflation targeting regime to enhance the effectiveness of monetary policy, as well as provide recommendations concerning the further implementation of the inflation targeting regime in Ukraine.

Монетарна політика та відновлення економічного зростання в Україні

The article deals with international experience and methods of central banks that contributed to the economic development of their countries. The author provides an analysis of principles and results of the current monetary policy of the National Bank of Ukraine in the context of the opportunities for monetary support of economic recovery. It is shown that the peculiarities of modern monetary policy in Ukraine and in particular the qualitative change in the nature of the hryvnia's emission led to decreased amount of real money in the economy, slower lending, lower confidence and growing inflation expectations. To analyze the stabilization function of monetary policy, the author estimates potential GDP (trend 1993-2014), obtained with Hodrika - Prescott filter by separating the trend and cyclical components. To assess the impact of the changes in the real money supply on real GDP rate, the author carried out model based calculations, which, based on elasticity coefficient, made it possible to obtain estimates of GDP in 2015. The article justifies the necessity of adjustment of the current policy and identifies various guidelines, which, within the implementation of inflation targeting, would not raise the price dynamics but rather support economic growth.

Inflation Targeting Experience: Lessons for Ukraine

In the past three decades, many advanced market and emerging market economies have modernized their monetary policy frameworks. We research the experience of these economies for lessons relevant to the monetary policy in Ukraine, which has recently embarked on a similar modernization program. Most countries we study have adopted some form of inflation targeting, given unfavorable experiences with previous regimes based on money and exchange rate, however with the exchange rate continuing to play an important role. Most of the pillars of effective IT monetary policy developed over time through determined efforts led by central banks, and the initial conditions did not matter for success. Countries have experienced numerous challenges with regards to communication, credibility, policy transmission, and fiscal dominance. Overcoming these challenges gave rise to new practices, which now form the stateof- the art monetary policy, irrespective of whether it is called an IT regime. A general lesson for Ukraine (as well as other future modernizers and IT adopters) is that determination and speed in building the pillars of IT policy is paramount for success and credibility of the new framework.

Using Macroeconomic Models for Monetary Policy in Ukraine

An important precondition for successful implementation of inflation targeting is the ability of the central bank to forecast inflation given the fact that the inflation forecast has become an intermediate target. Certainly, this means there should be clear understanding of the monetary policy transmission mechanism functioning within the bank, because it is precisely through transmission channels that a central bank has to ensure convergence of its inflation forecast to the target. And it is almost impossible to pursue inflation targeting without a set of macroeconomic models that describes the monetary policy transmission mechanism and helps to analyse the current state of the economy as well as forecast (simulate) short- and medium-term macroeconomic scenarios. This article provides a review of the current state of macroeconomic modelling at central banks and describes the history of development and actual stance of the National Bank of Ukraine’s system of macroeconomic models. The existing system provides quite reliable support for the current monetary policy decision-making process, but it has to be improved by implementing a more sophisticated model (such as a dynamic stochastic general equilibrium model) and enhancing the set of econometric models for shortterm forecast purposes in the future.