№ 4/2021

Fìnansi Ukr. 2021 (4): 7–23https://doi.org/10.33763/finukr2021.04.007

MONETARY POLICY

DANYLYSHYN Bohdan ¹, BOHDAN Ivan ²

¹Kyiv National Economic University named after Vadym Hetman
OrcID ID : https://orcid.org/0000-0002-4058-1191
²National Bank of Ukraine
OrcID ID : https://orcid.org/0000-0002-1752-0198

Evolution of views on the role of central bank policy: conclusions for Ukraine

The effects of COVID-19 pandemic resulted in modification of the goals and instruments of central banks activities in the context of strengthening their responsibility for supporting aggregate demand, more effective financial intermediation, smooth functioning of financial markets and creating conditions for inclusive economic growth. The purpose of the article is to elaborate proposals for changing the priorities of monetary policy in an economy with emerging markets in the post-crisis economic recovery. The article criticizes the concept of money supply neutrality from the standpoint of its simplified interpretation of the impact of the interest rate on activities with different duration and complexity of the technological process, as well as its detachment from the principles of inclusive economic growth. The authors reveal the factors that reduce the effectiveness of the application of the monetary regime of inflation targeting in countries with emerging markets, which consist in the dominance of non-monetary inflation factors, high import dependence of the economy etc. Based on empirical data for 1990-2019, they prove that low inflation is not a sufficient and necessary prerequisite for achieving economic success by a country. Authors suggest that the share of components of the inflation basket in Ukraine with high non-monetary effects is 62%, which indicates the presence of high risks of failures of the monetary policy transmission mechanisms. They argue that under the Ukrainian conditions at the beginning of 2021 an increase in the central bank’s key rate will appear to be counterproductive: the access to critically needed borrowed resources will go down, economic agents will spend more of their savings, and the pace of economic recovery will slow down. The recommendations for improving the NBU policy have been devised; they consist in ensuring the flexibility of the monetary inflation targeting regime, introducing targeted refinancing instruments to increase the efficiency of the financial intermediation, developing effective coordination of monetary and fiscal policy, and implementing measures aimed at creating conditions for inclusive economic growth.

Keywords:monetary policy, central bank, inflation, inflation targeting, financial intermediation, inclusive growth

JEL: E42, E52, E58

Danylyshyn B. . Evolution of views on the role of central bank policy: conclusions for Ukraine / B. . Danylyshyn, I. . BOHDAN // Фінанси України. - 2021. - № 4. - C. 7-23.

Article original in Ukrainian (pp. 7 - 23)

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