The Effectiveness of the Monetary Transmission Mechanism in Ukraine since the Transition to Inflation Targeting

Zholud, Oleksandr; Lepushynskyi, Volodymyr; Nikolaychuk, Sergiy

doi:10.26531/vnbu2019.247.02

Cited by 5 publications

(3 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…However, in Ukraine, the discount rate has a limited effect on economic processes. The paper's findings do not confirm the results of previous research (Zholud et al, 2019), which states that "the central bank has sufficient control over short-term interest rates in the interbank market". This can be explained by the important caveat to the VAR modelling, that it is fraught with disagreements on identifying monetary policy shocks (Iddrisu & Alagidede, 2020).…”

Section: Discussioncontrasting

confidence: 99%

On the effectiveness of the interest rate channel within inflation targeting in Ukraine: a VAR approach

Bublyk,

Korablin,

Shapoval

2023

Banks and Bank Systems

View full text Add to dashboard Cite

Assessing the effectiveness of the inflation targeting framework via the interest rate channel remains crucial in the current monetary policy debate. For Ukraine, the relevance of this discussion is enhanced by the adoption by the National Bank of a rigid inflation targeting policy since 2016, as well as by the challenges of price stability during war. The aim of the study is to identify how the discount rate affects the money market rates and how this affects inflation in Ukraine. Employing a VAR model on monthly data spanning 2016 – Q1 2022, the analysis demonstrates weak empirical evidence for the interest rate channel effectiveness. The impulse response indicates that the discount rate’s initial effect does not provide long-term inflation dynamics control. Variance decomposition analysis highlights the minimal influence of the NBU’s discount rate, primarily evident in the refinancing rate, followed by its impact on the rate of term deposits made by individuals, followed by the inflation, followed by the rate of new loans granted to residents, and finally the rate of government bond yields. Addressing the limitations of a rigid inflation targeting approach, the study recommends adopting a balanced approach, considering both price stability supported by exchange rate control measures and fostering economic growth. Additionally, a viable strategy for deepening the financial sector should be developed.

show abstract

Section: Discussioncontrasting

confidence: 99%

On the effectiveness of the interest rate channel within inflation targeting in Ukraine: a VAR approach

Bublyk,

Korablin,

Shapoval

2023

Banks and Bank Systems

View full text Add to dashboard Cite

show abstract

“…Other authors point out that after the NBU switched to inflation targeting and introduced a new operational design of monetary policy, the central bank has sufficient control over short-term interest rates in the interbank market and through them influences other financial market indicators. The exchange rate channel remains the most powerful in monetary transmission (Zholud et al, 2019). As a result of prudent exchange rate and interest rate policies and strong external assistance, international reserves increased to 40.5 billion USD.…”

Section: Analysis Of Recent Research and Publicationsmentioning

confidence: 99%

Ukraine’s Monetary Policy Under Martial Law

Khokhych,

Tkachenko,

Svystun

2024

BJES

View full text Add to dashboard Cite

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.

show abstract

“…У цих роботах розкрито концептуальні засади формування монетарної політики, у тому числі в умовах інфляційного таргетування, а також основні підходи до оцінювання, аналізу та прогнозування параметрів монетарної політики та її впливу на макроекономічні показники. Слід також виокремити праці, в яких оцінюється ефективність трансмісійного механізму та його окремих каналів: [14][15][16][17][18][19][20].…”

Section: економіко-математичне моделюванняunclassified

The Impact of Monetary Policy on the Financial Stability of the Banking System: Setting a Modeling Problem

Pilko¹,

Kramar²

2021

View full text Add to dashboard Cite

The publication is concerned with highlighting the results of the carried out analysis of the existing practice of developing macroeconomic models directed towards determining the main parameters of monetary policy of central banks, as well as assessing their impact on the indicators of financial stability of the banking system. Given the low efficiency of the traditional approaches to the formation of the monetary rule both in countries with developed market economies and in countries with small open economies (in particular, Taylor rule), possible ways to solve this problem are proposed taking into account the existing experience in shaping monetary policy parameters in the context of inflation targeting, which is already available at the NBU. The strengths and weaknesses of the main approaches to the modeling of the monetary transmission mechanism, as well as the forecasting of its impact on the financial stability of the banking system, which are used in the formation of basic and auxiliary models of the central bank, are analyzed. Particular attention is paid to structural econometric models, vector autoregression models and dynamic stochastic models of general equilibrium. As a result, a possible variant for developing an approach to macroeconomic modeling is proposed, in the framework of which assessment and analysis of the impact of monetary policy on the indicators of financial stability of the banking system is envisaged. The practical implementation of this approach makes it possible to develop models for assessing and analyzing the efficiency of the current monetary policy, projecting macroeconomic development scenarios in the short and medium term, which will both directly and indirectly determine the indicators of financial stability of the banking system.

show abstract

The Effectiveness of the Monetary Transmission Mechanism in Ukraine since the Transition to Inflation Targeting

Cited by 5 publications

References 26 publications

On the effectiveness of the interest rate channel within inflation targeting in Ukraine: a VAR approach

On the effectiveness of the interest rate channel within inflation targeting in Ukraine: a VAR approach

Ukraine’s Monetary Policy Under Martial Law

The Impact of Monetary Policy on the Financial Stability of the Banking System: Setting a Modeling Problem

Contact Info

Product

Resources

About