MONETARY POLICY

MISHCHENKO Volodymyr ¹

¹Institute for Economics and Forecasting of the NAS of Ukraine
OrcID ID : https://orcid.org/0000-0002-8565-2686

The role and functions of monetary transmission mechanism in ensuring price stability

The role and functions of monetary transmission mechanism in ensuring price stability are examined, international experience is analyzed and differences in central banks of England, USA, Japan and ECB approaches are characterized. The particularities of the Ukrainian mone­tary transmission mechanism are specified and reasons of its low efficiency are defined. The problem of interest rate trap emerging in Ukraine is proved. The main channels of the monetary transmission mechanism are scrutinized, criteria of their efficiency and measures for efficiency improvement are suggested. The influence of irregular monetary policy measures like “credit and quantitative easing” on the monetary transmission mechanism channels is analyzed. The structural-logical scheme of the monetary transmission mechanism action in Ukraine which reflects the impact of monetary policy instruments on macroeconomic parameters and money market development indicators and relationship between selected channels of this mechanism is developed. It is explained that primary measures to enhance the action of the monetary transmission mechanism channels in Ukraine in the transition to inflation targeting should be: strengthening the macroeconomic stability; development of the monetary policy strategy and improvement of operating system of banks’ liquidity regulation; financial recovery of the banking system and increasing its resistance to internal and external shocks; improving the central bank communication policy and anchoring the market players inflation expectations in line with the inflation target level.

Keywords: monetary policy, monetary transmission mechanism, monetary transmission mecha­nism channels, inflation targeting, price stability.

JEL: E50, E58, E59.

Mishchenko V. . The role and functions of monetary transmission mechanism in ensuring price stability / V. . Mishchenko // Фінанси України. - 2015. - № 1. - C. 29-46.