№ 9/2018

№ 9/2018

Fìnansi Ukr. 2018 (9): 25–44

MONETARY POLICY

BASHKO Vasyl ¹

¹State Educational and Research Organization “Academy of Financial Management”

Fundamental factors of the foreign exchange course in Ukraine

A real effective exchange rate is an important indicator of the economic cycles, which indicates the likelihood of a correction of the REER by the devaluation of the national currency. The first part of the research analyzes the theoretical concept of the theory of absolute parity of purchasing power and the factors that determine deviation from parity. This article reveals that even taking into account the difference in productivity (GDP per PPP per capita), the price level ratio of PPP conversion factor (GDP) to the market exchange rate is under a fitted theoretical level and varies from -2 to -22 %. There are provided possible explanations for such deviations. Taking into account the complexity of accounting all factors in determining the equilibrium exchange rates based on absolute purchasing parity, there are calculated three alternatives to official data versions of REER based on: 1) price level ratio of PPP conversion factor (GDP) to the market exchange rate; 2) data of the deflator of domestic absorption; 3) data on the unit labor cost. The results of the REER data, calculated according to the above three methods and the metho­dology used by the NBU, show that the REER calculated by the NBU reflects an increasing underestimation of the national currency of Ukraine. This can be explained by a reduction in trade barriers, a change in the consumer basket in favor of goods that tend to lower prices relative to the prices of other goods, and the underestimation of official inflation data. The relationship between the REER based on CPI, calculated by the NBU, weakly correlates with the trade balance. The highest level of correlation is observed in the REER, calculated using the World Bank data on PPPs and REERs, based on the price per unit labor. In addition, the dynamics of these two indicators is very similar, in contrast to the previous two indicators of REER. The peculiarity of the labor cost index is that there is the increasing difference in trends between this indicator and the CPI. This is due to the opposite effects of globalization and the opening of markets to wages and prices.

Keywords:exchange rate, labor productivity, salary, price level, purchasing power, devaluation of the national currency

JEL: Е52, Е58, F31

BASHKO V. . Fundamental factors of the foreign exchange course in Ukraine / V. BASHKO // Фінанси України. - 2018. - № 9. - C. 25-44.

Article original in Ukrainian (pp. 25 - 44)

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