Independence of Central Bank: New Challenges

Kyrylenko, V.; Kulaga, I.; Tkachenko, Olena; KHOKHYCH, Dmytro

doi:10.18371/fcaptp.v4i39.238455

Cited by 4 publications

(2 citation statements)

References 14 publications

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“…Personnel changes in conditions of insufficient institutional independence is one of the reasons for changes in the preferences of central bank boards (Kyrylenko et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

Inflation Targeting As a Tool for Maintaining Price Stability of The National Bank of Ukraine

KHOKHYCH

Kulaga

Melnyk

et al. 2023

ees

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Introduction. Inflation targeting is a tool for ensuring price stability in the economy and therefore requires harmonious coordination and communication among government institutions. At the same time, the central bank must adhere to a certain policy instrument, the established legal rules, which are fixed in its mandate, or act at its discretion. Nowadays, the most common rule of monetary policy is inflation targeting. Aim and tasks. The purpose of the article is to explain the expediency of using the inflation targeting regime to keep inflation at a certain target level, which is determined by the central bank taking into account the current state of the economy. Results. The theoretical model of Taylor is considered, which is based on inflation assessment in the form of a simple interest rate rule based on monetary policy instruments that ensure convergence of the inflation forecast to the target value in the medium term. The obtained results reflect the volatility of the indicators of the objective function in the data range of 2015 Q3–2021 Q2 and confirm the weight of the gap of variable values that are estimated to be insignificant (95%). Using the GMM method, the relationship between the indicators of the objective function and their impact on the inflation rate through the use of the inflation targeting regime was verified. In particular, the volatility of variables such as the inflation gap, short-term interest rate, output gap, and exchange rate gap and their impact on the target inflation rate was revealed on the time horizon of monetary policy. Smoothing out gaps in variables is one of the goals of the central bank's reaction function under the inflation targeting regime. The use of the GMM method confirms the validity of the application of Taylor's rule regarding the feasibility of choosing an objective function with predetermined variable parameters at different sampling intervals. Conclusions. The increase in the volatility of variable parameters in the objective function of central banks under the inflation targeting regime is explained by global crises and the sensitivity of macroeconomic indicators to fluctuations in the economic situation. This is the main reason why central banks strictly follow the rules of monetary policy, which allow the timely smoothing of exogenous shocks in the economy.

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“…Personnel changes in conditions of insufficient institutional independence is one of the reasons for changes in the preferences of central bank boards (Kyrylenko et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

Inflation Targeting As a Tool for Maintaining Price Stability of The National Bank of Ukraine

KHOKHYCH

Kulaga

Melnyk

et al. 2023

ees

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“…Second, democracies have the vulnerability associated with populism. Thirdly, central bank independence is not a presumption of a country's democratic status because of the differences between its political and formal status [14].…”

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confidence: 99%

Міжнародні Резерви Центральних Банків: Критерії Адекватності Та Нагромадження

Хохич,

Любіч,

Бортніков

et al. 2023

ФКДПТП

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Дослідження присвячене визначенню структури міжнародних валютних резервів центральних банків із погляду критеріїв адекватності та нагромадження. Автори доводять, що режим обмінних курсів не є нейтральним до політичних режимів. Автократії більше тяжіють до фіксованоорієнтованих режимів обмінних курсів, а демократії навпаки – до плаваючих валютних курсів. Із цим також пов’язана проблема незалежності центральних банків. Авторами проведене дослідження еволюції метрик, за допомогою яких оцінювали адекватність валютних резервів. Визначено особливості показників оцінки валютних резервів (критерії Редді, Гвідотті-Грінспена, ARA), які акцентують увагу на питанні врахування потоків капіталу у визначенні адекватності резервів та їх гіпертрофії. Наведено переваги критерію ARA, що проявляються в прагненні країн нагромаджувати валютні резерви із завбачливою метою. Розбіжності в оцінці обсягу та структури валютних резервів полягають у високій волатильності глобальних потоків капіталу, що породжує феномен «завеликих переливів капіталу».Проаналізовано теоретичні підходи, що пояснюють процес нагромадження валютних резервів. Зокрема, ухиляння від структурних реформ, «новий» або монетарний меркантилізм, фінансовий меркантилізм, завбачливе та конкурентне нагромадження. В Україні, наприклад, існує попит на структурні реформи, але політичний ліміт часового горизонту часто є перешкодою на шляху їх ефективного впровадження. Акцентовано увагу на питанні незалежності центральних банків у розрізі політичних режимів, що проявляється в особливостях структури та нагромадження валютних резервів. Оригінальність статті обумовлена необхідністю визначення нових теоретичних підходів щодо оцінки адекватності валютних резервів з огляду на політичний устрій, що визначає режим обмінних курсів та дизайн інститутів макрофінансової стабільності.

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Monetary policy committees in the conditions of the coronavirus pandemic outbreak

BORTNIKOV,

LYUBICH,

KHOKHYCH

2023

Fìnansi Ukr.

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Introduction. In conditions of systemic shocks, such as the coronavirus pandemic, monetary policy decision-making requires collegiality. Monetary policy committees (MPCs) are a successful institutional solution in the conditions of information asymmetry and available alternatives for responding with monetary measures to dynamic changes in the economy and shocks. Problem Statement. In Ukraine, at the level of the central bank and in the scientific opinion, the role and status of the MPCs in ensuring financial stability is underestimated, which is perceived more as a working body of the Board of the National Bank of Ukraine (NBU). The formation of its composition which includes only top managers of the NBU does not guarantee against the adoption of biased or short-sighted decisions, which can lead to negative consequences for economic growth. There is a need to bring the principles of this collegial body into line with the best practices of central banks. Purpose.To generalize international experience in the institutional development of national central banks in the direction of the corporate structure of the monetary policy committee to ensure greater efficiency of its work and the application of best practices in Ukraine. Methods. Content analysis, methods of scientific abstraction, comparative analysis of statistical information published by central banks of countries that are not part of the European Central Bank system were used. Results. The coronavirus pandemic did not cause significant changes in the organization of committee activities, but it increased the importance of involving external experts to assess and forecast the situation. The analysis of the biographical data of such persons showed that they are highly qualified specialists, recognized in the country and by the international community. In the decisions of individual political bodies the reference to the expectations of the market participants (for example, the prediction of the decision related to maintainance , increase or decrease of the discount rate) deserves special attention as well as the requirement for the members of the body to observe a period of “silence” for at least one week, which means refraining from comments on the statement of position before the meeting. Of course, the practice of involvement the representatives of the Ministry of Finance in meetings of the committee without voting rights is of interest. Conclusions. Monetary policy committees work primarily to ensure price stability, but with a perspective for economic development. The main functions of MPCs in most European countries are not limited to setting the discount rate, but cover reserve requirements, approval of liquidity support programs and refinancing of banks, operations of the central bank in the foreign exchange market and with securities. For Ukraine, it is considered optimal to form MPCs not under the Board, but under the National Bank itself in order to raise its status to the level of a decision-making body. For this amendments should be made to the Law “On the National Bank of Ukraine” and regulations or provisions on the MPCs should be developed. The participation of external experts in the committee is necessary for making informed decisions. Their level of qualification should be confirmed by a doctorate in economics or finance and the status of professor, a solid list of scientific publications and experience of participation in international research. Management experience in public financial corporations, central banks and departments or large financial institutions is desirable. In our opinion, the participation of politicians in the committee is inappropriate, because in the current conditions it will only undermine the independence of the central bank.

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Independence of Central Bank: New Challenges

Cited by 4 publications

References 14 publications

Inflation Targeting As a Tool for Maintaining Price Stability of The National Bank of Ukraine

Inflation Targeting As a Tool for Maintaining Price Stability of The National Bank of Ukraine

Міжнародні Резерви Центральних Банків: Критерії Адекватності Та Нагромадження

Monetary policy committees in the conditions of the coronavirus pandemic outbreak

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