Issued since 1995
Welcome to the Finance of Ukraine site (demo).
Login | Register
ACADEMY
OF FINANCIAL
MANAGEMENT
.


№ 1/2021

№ 1/2021

Fìnansi Ukr. 2021 (1): 7–45
https://doi.org/10.33763/finukr2021.01.007

MONETARY POLICY

KORABLIN Serhii 1

1SI “Institute for Economics and Forecasting of NAS of Ukraine”
OrcID ID : https://orcid.org/0000-0002-2979-3206


Monetary security: some definitions and assessments


For almost 30 years of independence, Ukraine has experienced a number of deep economic, financial, banking, debt, currency and inflation crises. In some cases, they were extraordinary. As a result, the current real GDP of the country remains a third less than in 1990. One of the reasons for this was the unstable nature of economic recovery and currency price stabilization at the beginning of the zero years and in 2010-2013. After all, during the crises of 2008-2009 and 2014-2015, Ukraine set world anti-records due to falling its GDP up to 14.8 % and 15.8%, respectively. This was accompanied by the deep devaluation crises and the recurrence of uncontrolled inflation. In principle, the systemic relationship between the fragility of production, exchange rate and price dynamics appeared in Ukraine in the 1990s when its real GDP fell by 59%. The scale of that crisis was twice the scale of the Great Depression in the United States, accompanied by devastating devaluation and inflationary shocks. The article is devoted to the study of methodological and practical approaches to the definition of monetary security. The experience of their implementation in Ukraine is considered. The criteria of successful monetary policy applied within the neoliberal discourse are analyzed. The logic and reasons for their gradual transformation over the last 30 years are shown. The decisive role of the global crisis of 2008-2009 in the theoretical and practical changes observed in the world’s leading economies in terms of defining the goals, objectives and instruments of their monetary policy is reflected. An analysis of some outcomes of the implementation of domestic monetary strategy is given. The problematic nature of determining its priority goal is shown. The ambiguity of methods and consequences of targeted reduction of inflation in Ukraine is noted. The impossibility of maintaining its low and stable level under the conditions of free floating exchange rate of hryvnia is substantiated.

Keywords:monetary security, neoliberal doctrine, monetary policy, central bank, global crisis, inflation, exchange rate

JEL: E52, E58, E60


Korablin S. . Monetary security: some definitions and assessments / S. . Korablin // Фінанси України. - 2021. - № 1. - C. 7-45.

Article original in English (pp. 7 - 45) DownloadDownloads :126
Article original in Russian (pp. 7 - 45) DownloadDownloads :84
Article original in Ukrainian (pp. 7 - 45) DownloadDownloads :143
1. Korablin, S. O. (2017). Macroeconomic dynamics of Ukraine: trap of raw materials markets. Kyiv: NAS of Ukraine, Institute of Economics and Forecasting of NAS of Ukraine [in Ukrainian].
2. Danylyshyn, B. (2018). Main directions of monetary policy of Ukraine. Finance of Ukraine, 2, 9–25 [in Ukrainian]. doi.org/10.33763/finukr2018.02.009
3. Danylyshyn, B. (2020). Prospects for improving the monetary policy of Ukraine. Finance of Ukraine, 2020. No. 2. C. 7–24 [in Ukrainian]. doi.org/10.33763/finukr2020.02.007
4. Iefymenko, T. (2016). Fiscal and Monetary Security of National Economy. Kyiv: SESE “The Academy of Financial Management” [in Ukrainian].
5. Iefymenko, T. (2018). Monetary tools of the state economic security. Finance of Ukraine, 1, 7–30 [in Ukrainian]. doi.org/10.33763/finukr2018.01.007
6. Gasanov, S. (2018). Fiscal rules and fiscal responsibility: economic security context. Finance of Ukraine, 3, 7–23 [in Ukrainian]. doi.org/10.33763/finukr2018.03.007
7. Gasanov, S. (2017). Fiscal risks and fiscal targeting in the system of public finance management under institutional uncertainty. RFI Scientific Papers, 2, 5–24 [in Ukrainian]. doi.org/10.33763/npndfi2017.02.005
8. Kyzym, O., Ivanov, Yu., & Hubarieva, I. (2018). Evaluation of the level of economic security of Ukraine and EU countries. Finance of Ukraine, 4, 7–18. Retrieved from finukr.org.ua/docs/FU_18_04_007_uk.pdf [in Ukrainian].
9. Sharov, O. (2019). Monetary sovereignity in the globalization framework. Finance of Ukraine, 6, 93–117 [in Ukrainian]. doi.org/10.33763/finukr2019.06.093
10. Sharov, O. (2020). Problems of monetary sovereignty formation of Ukraine. Finance of Ukraine, 11, 7–34 [in Ukrainian]. doi.org/10.33763/finukr2020.11.007
11. Heyets, V. M. (Ed.). (1999). The concept of economic security of Ukraine. Kyiv: Logos [in Ukrainian].
12. Ministry for Economic Development and Trade of Ukraine. (2013). Methodical
recommendations for calculating the level of economic security of Ukraine (Order No. 1277, October 29). Retrieved from zakon.rada.gov.ua/rada/show/v1277731-13/print [in Ukrainian].
13. Dyachek, S. M., & Panasyuk, O. O. (2013). Monetary security of Ukraine: essence, threats, assessment. Bulletin of ZhSTU, 2 (64), 227–233 [in Ukrainian].
14. Dotsenko, I. O. (2015). Monetary security as a component of financial security of the state. Bulletin of Cherkasy University. Economic Sciences, 12 (345), 9–12 [in Ukrainian].
15. Koroliuk, T. (2019). The role of monetary policy in ensuring national security of Ukraine. Ekonomika ta derzhava, 6, 36–40 [in Ukrainian]. doi.org/10.32702/2306-6806.2019.6.36
16. Hudzovata, O. O. (2019). Mechanisms for the implementation of monetary policy in the system of strengthening the financial security of Ukraine (Dr. Sc. Thesis). Kyiv: NISS [in Ukrainian].
17. Verkhovna Rada of Ukraine. (1996). Constitution of Ukraine (Act No. 254k/96-VR, June 28). Retrieved from zakon.rada.gov.ua/laws/show/254%D0%BA/96-%D0%B2%D1
%80#Text [in Ukrainian].
18. Verkhovna Rada of Ukraine. (1999). About the National Bank of Ukraine (Act
No. 679-XIV, May 20). Retrieved from zakon.rada.gov.ua/laws/show/679-14#Text [in Ukrainian].
19. IMF. (2020, October). Global Financial Stability Report: Bridge to Recovery. Retrieved from www.imf.org/en/Publications/GFSR/Issues/2020/10/13/global-financial-stability-report-october-2020.
20. OECD. (2001). Policies to Enhance Sustainable Development (Meeting of the OECD Council at Ministerial Level). Paris. DOI: 10.3386/w1079.
21. Barro, R. J., & Gordon, D. B. (1983). Rules, discretion and reputation in a model of monetary policy. NBER Working Paper, 1079. doi.org/10.3386/w1079
22. Williamson, J. (Ed.). (1990). What Washington Means by Policy Reform, Chapter 2 in Latin American Adjustment: How Much Has Happened? Washington: Institute for International Economics. Retrieved from www.piie.com/commentary/speeches-papers/what-washington-means-policy-reform.
23. Williamson, J. (2004). A Short History of the Washington Consensus. From the Washington Consensus towards a new Global Governance (Paper commissioned by Fundación CIDOB for a conference, Barcelona, September 24-25, 2004). Washington: Institute for International Economics. Retrieved from piie.com/publications/papers/williamson0904-2.pdf.
24. Sachs, J. (1990). Poland and Eastern Europe: What is to be done? Retrieved from static1.squarespace.com/static/5d59c0bdfff8290001f869d1/t/5f2c1ded204e75
15126068a0/1596726767442/Poland+and+Eastern+Europe-What+is+to+be+Done%3F.pdf.
25. Passell, P. (1993, June 27). Dr. Jeffrey Sachs, Shock Therapist. New York Times. Retrieved from www.nytimes.com/1993/06/27/magazine/dr-jeffrey-sachs-shock-therapist.html.
26. Kolodko, G. W. (2005). Lessons for the Emerging Markets from Poland’s Great Change. Communist and Post-Communist Studies, 38 (3), 369–379. doi.org/10.1016/j.postcomstud.2005.06.006
27. Popov, V. (1998). Strong institutions are more important than the speed of reforms. Voprosy Ekonomiki, 8, 56–70 [in Russian].
28. Havrylyshyn, O., Meng, X., & Tupy, M. L. (2016). 25 Years of Reforms in Ex-Communist Countries: Fast and Extensive Reforms Led to Higher Growth and More Political Freedom. Cato Institute Policy Analysis, 795. Retrieved from www.cato.org/publications/
policy-analysis/25-years-reforms-ex-communist-countries-fast-extensive-reforms-led.
29. Birdsall, N., De la Torre, A., & Menezes, R. (2001). Washington Contentious: Economic Policies for Social Equity in Latin America. Retrieved from carnegieendowment.org/pdf/files/ er.Contentious.pdf.
30. Marangos, J. (2008). The Evolution of the Anti-Washington Consensus Debate: From ‘Post-Washington Consensus’ to ‘After the Washington Consensus’. Competition & Change, 12 (3), 227–244. doi.org/10.1179/102452908X320400
31. Marangos, J. (2005). Shock Therapy and its Consequences in Transition Economies. Development, 48 (2), 70–78. DOI: 10.1057/palgrave.development.1100136.
32. Naim, M. (Ed.). (1999). Fads and Fashion in Economic Reforms: Washington Consensus or Washington Confusion? Working Draft of a Paper Prepared for the IMF Conference on Second Generation Reforms (Washington, D.C., October 26, 1999). Retrieved from www.imf.org/external/pubs/ft/seminar/1999/reforms/Naim.HTM.
33. Rodrik, D. (2006). Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform. Journal of Economic Literature, XLIV, 973–987. doi.org/10.1257/jel.44.4.973
34. Stiglitz, J. (2002). Globalization and Its Discontents. London: Penguin Books.
35. Stiglitz, J. E. (1998, January). More Instruments and Broader Goals: Moving toward the Post-Washington Consensus (WIDER Annual Lectures 2. Helsinki, NU/WIDER). Retrieved from www.wider.unu.edu/sites/default/files/AL02-1998.pdf.
36. Stiglitz, J. E. (n. d.). The Post Washington Consensus Consensus. The Initiative for Policy Dialogue. Retrieved from policydialogue.org/files/events/Stiglitz_Post_Washington_Consensus_Paper.pdf.
37. Camdessus, M. (1999, November 8). Second Generation Reforms: Reflections and New Challenges. Retrieved from www.imf.org/en/News/Articles/2015/09/28/04/53/sp110899.
38. Lindauer, D. L., & Pritchett, L. (2002). What’s the Big Idea?: The Third Generation of Policies for Economic Growth. Economía, 3 (1), 1–28. doi.org/10.1353/eco.2002.0017
39. IMF Staff. (1998). The Asian Crisis: Causes and Cures. Finance & Development, 35 (2). doi.org/10.5089/9781451952780.022
40. International Monetary Fund. European Dept. (2020, June 11). Ukraine: Request for Stand-by Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Ukraine. Retrieved from www.imf.org/en/Publications/CR/Issues/2020/06/10/Ukraine-Request-for-Stand-by-Arrangement-Press-Release-Staff-Report-and-Statement-by-the-49501.
41. Mundell, R. A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economic and Political Science, 29 (4), 475–485. doi.org/10.2307/139336
42. Obstfeld, M., Shambaugh, J. C., & Taylor, A. M. (2004). The Trilemma in history: tradeoffs among exchange rates, monetary policies, and capital mobility. NBER Working Paper, 10396. doi.org/10.3386/w10396
43. Bekaert, G., & Mehl, A. (2017). On the global financial market integration “Swoosh” and the Trilemma. NBER Working Papers, 23124. doi.org/10.3386/w23124
44. Bublyk, Ye. O. (2020). Financial openness of transitive economies. Kyiv: NAS of Ukraine, Institute of Economics and Forecasting [in Ukrainian].
45. Farhi, E., & Werning, I. (2014). Dilemma not trilemma? Capital controls and exchange rates with volatile capital flows. IMF Economic Review, 62, 569–605. doi.org/10.1057/imfer.2014.25
46. Petryk, O. I. (2008). The way to price stability: world experience and prospects for Ukraine. Kyiv: UBS NBU [in Ukrainian].
47. IMF. (2020, August 10). Annual Report on Exchange Arrangements and Exchange Restriction 2019. Retrieved from www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2020/08/10/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2019-47102.
48. European Central Bank. (n. d.). Objective of monetary policy. Retrieved from www.ecb.europa.eu/mopo/intro/objective/html/index.en.html.
49. European Central Bank. (n. d.). The definition of price stability. Retrieved from www.ecb.europa.eu/mopo/strategy/pricestab/html/index.en.html.
50. Board of Governors of the Federal Reserve System. (n. d.). What are the Federal Reserve’s objectives in conducting monetary policy? Retrieved from www.federalreserve.gov/faqs/money_12848.htm.
51. Board of Governors of the Federal Reserve System. (n. d.). Statement on Longer-Run Goals and Monetary Policy Strategy (adopted effective January 24, 2012; as amended effective January 31, 2017). Retrieved from www.federalreserve.gov/monetarypolicy/files/FOMC_LongerRunGoals.pdf.
52. Boskin, M., Dulberger, E., Gordon, R. et al. (1996, December 4). Toward a More Accurate Measure of the Cost of Leaving: Final Report to the Senate Finance Committee. Retrieved from www.finance.senate.gov/imo/media/doc/Prt104-72.pdf.
53. Bernanke, B. S., & Mishkin, F. S. (1997). Inflation Targeting: A New Framework for Monetary Policy? Journal of Economic Perspectives, 1 (2), 97–116. doi.org/10.1257/jep.11.2.97
54. Gordon, R. (2000). The Boskin Commission Report and Its Aftermath. NBER Working Paper, 7759. doi.org/10.3386/w7759
55. Cabinet Office Ministry of Finance, & Bank of Japan. (2013, January 22). Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth. Retrieved from www.boj.or.jp/en/announcements/release_2013/k130122c.pdf.
56. Sarel, M. (1996). Nonlinear Effects of Inflation on Economic Growth. IMF Staff Papers, 43, 199–215. doi.org/10.2307/3867357
57. Ghosh, A., & Phillips, S. (1998). Inflation, Disinflation, and Growth. IMF Working Paper, 68. doi.org/10.5089/9781451961188.001
58. Khan, M. S., & Senhadji, A. S. (2000). Threshold Effects in the Relationship between Inflation and Growth. IMF Working Paper, 110.
59. Groshen, E. L., & Schweitzer, M. E. (1999). Inflation and Unemployment Revisited: Grease vs. Sand. CFS Working Paper, 06.
60. Christoffersen, P. F., & Doyle, P. (1998). From Inflation to Growth: Eight Years of Transition. IMF Working Paper, 99.
61. Bruno, M., & Easterly, W. Inflation Crises and Long-Run Growth. Journal of Monetary Economics, 41, 3–26. doi.org/10.1016/S0304-3932(97)00063-9
62. Korablin, S. O. (2005). Aggregate supply and optimal inflation. Economy and Forecasting, 1, 9–32 [in Ukrainian].
63. Altunyan, A. G. (2009). Monetary policy as a tool for ensuring the economic security of Russia (Dr. Sc. Thesis). St. Petersburg [in Russian].
64. Blanchard, O., Dell’Ariccia, G., & Mauro, P. (2010, February 12). Rethinking Macroeconomic Policy. IMF Staff Position Note. doi.org/10.2139/ssrn.1555117
65. Board of Governors of the Federal Reserve System. (2012, December 12). Federal Reserve issues FOMC statement (Press Release). Retrieved from www.federalreserve.gov/newsevents/pressreleases/monetary20121212a.htm.
66. Board of Governors of the Federal Reserve System. (2013, December 18). Federal Reserve issues FOMC statement (Press Release). Retrieved from www.federalreserve.gov/newsevents/pressreleases/monetary20131218a.htm.
67. Bank of England. (2013, August). Monetary policy trade-offs and forward guidance. Retrieved from www.bankofengland.co.uk/-/media/boe/files/inflation-report/2013/monetary-policy-trade-offs-and-forward-guidance.
68. Bank of Japan. (2016, September 21). New Framework for Strengthening Monetary Easing: Quantitative and Qualitative Monetary Easing with Yield Curve Control. Retrieved from www.boj.or.jp/en/announcements/release_2016/k160921a.pdf.
69. The Central Bank of the Republic of Turkey. (n. d.). Inflation targets. Retrieved from www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Core+Functions/
Monetary+Policy/PRICE+STABILITY+AND+INFLATION/Inflation+Targets.
70. Otaola, J., & Cohen, L. (2017, December 28). Argentina eases inflation target, stoking rate cut expectations. Reuters. Business News. Retrieved from in.reuters.com/article/instant-article/idINKBN1EM162.
71. Clement, D. (2006, March 8). Interview with John B. Taylor. Federal Reserve Bank of Minneapolis. Retrieved from www.minneapolisfed.org/article/2006/interview-with-john-b-taylor.
72. EU. (1992). The Treaty on European Union. Luxembourg: Office for Official Publications of the European Communities. Retrieved from europa.eu/european-union/sites/europaeu/files/docs/body/treaty_on_european_union_en.pdf.
73. Central Bank News. (n. d.). Retrieved from www.centralbanknews.info/.
74. Krogstrup, S., Kuchler, A., & Spange, M. (2020, October 2). Negative interest rates: The Danish experience. VoxEU. Retrieved from voxeu.org/article/negative-interest-rates-danish-experience.
75. European Central Bank. (n. d.). Key ECB interest rates. Retrieved from www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html.
76. Bank of Japan. (2016, January 29). Introduction of “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate”. Retrieved from www.boj.or.jp/en/announcements/release_2016/k160129a.pdf.
77. Haldane, A. G., Roberts-Sklar, M., Wieladek, T., & Young, C. (2016). QE: The story so far. Bank of England Staff Working Paper, 624. doi.org/10.2139/ssrn.2858204
78. Federal Reserve Bank of St. Louis. (n. d.). Retrieved from fred.stlouisfed.org/.
79. The Dutch Disease. (1977, November 26). The Economist, 82–83.
80. Frankel, J. A., & Rose, A. K. (1996). Currency crashes in emerging markets: An empirical treatment. Journal of International Economics, 41 (3-4), 351–366. DOI: 10.1016/S0022-1996(96)01441-9.
81. European Commission. (n. d.). ERM-II – the EU’s Exchange Rate Mechanism. Retrieved from ec.europa.eu/info/business-economy-euro/euro-area/introducing-euro/adoption-fixed-euro-conversion-rate/erm-ii-eus-exchange-rate-mechanism_en.
82. IMF. (2016, June 3). Guidance Note on the Assessment of Reserve Adequacy and Related Considerations. Retrieved from www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Guidance-Note-on-the-Assessment-of-Reserve-Adequacy-and-Related-Considerations-PP5046.
83. Greenspan, A. (n. d.). Currency reserves and debt. The World Bank Conference on Recent Trends in Reserves Management (Washington, D.C., April 29, 1999). Retrieved from www.federalreserve.gov/BoardDocs/Speeches/1999/19990429.htm.
84. IMF staff. (2014, December 19). Assessing Reserve Adequacy – Specific Proposals. doi.org/10.5089/9781498342445.007
85. IMF staff. (2011, February 14). Assessing Reserve Adequacy – Supplementary Information. doi.org/10.5089/9781498339377.007
86. IMF staff. (2013, November 13). Assessing Reserve Adequacy – Further Considerations. doi.org/10.5089/9781498341110.007
87. Board of the National Bank of Ukraine. (2015). About the Main ambush of the penny-credit policy for 2016-2020 (Decree No. 541, August 18). Retrieved from zakon.rada.gov.ua/laws/show/v0541500-15#Text [in Ukrainian].
88. Council of the National Bank of Ukraine. (2018). Monetary policy strategy of the National Bank of Ukraine (Decision, July 13). Retrieved from bank.gov.ua/admin_uploads/article/Strategy_MP.pdf?v=4 [in Ukrainian].
89. Council of the National Bank of Ukraine. (2017). Basic principles of monetary policy for 2018 and the medium term (Decision, September 12). Retrieved from bank.gov.ua/admin_uploads/article/OsnovZasad-2018_sr-per.pdf?v=4 [in Ukrainian].
90. State Statistics Service of Ukraine. (n. d.). Retrieved from www.ukrstat.gov.ua/ [in Ukrainian].
91. World Bank. (n. d.). World Development Indicators. Retrieved from databank.worldbank.org/source/world-development-indicators#.
92. Grui, A., Lepushynskyi, V., & Nikolaychuk, S. (2018). A Neutral Real Interest Rate in the Case of a Small Open Economy: Application to Ukraine. Visnyk of the National Bank of Ukraine, 243, 4–20 [in Ukrainian]. doi.org/10.26531/vnbu2018.243.004
93. National Bank of Ukraine. (n. d.). Retrieved from bank.gov.ua/ua/statistic [in Ukrainian].
94. IMF. (n. d.). Ratio of reserve (ARA metric). Retrieved from www.imf.org/external/datamapper/Reserves_ARA@ARA/UKR.
95. IMF Staff. (2000, September). The Logic of Debt Relief for the Poorest Countries. Retrieved from www.imf.org/external/np/exr/ib/2000/092300.htm#box1.
96. IMF. (2020, March 25). Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative. Retrieved from www.imf.org/en/About/Factsheets/Sheets/2016/ 08/01/16/11/Debt-Relief-Under-the-Heavily-Indebted-Poor-Countries-Initiative.