Bohdan Danylyshyn’s research while affiliated with Kyiv National Economic University named after Vadym Hetman and other places

In peacetime, the main contribution of monetary policy to macroeconomic stability is to ensure the stability of price dynamics through regulating money supply. During the war, the market principles of the economy and the formation of its prices are violated, monetary transmission mechanisms do not work adequately, the role of the state in ensuring the proper functioning of commodity-money relations increases. Therefore, the purpose of this paper is to generalize approaches to the formulation of monetary policy during the wartime and to substantiate the relevant recommendations for contemporary situation in Ukraine. Theoretical sources, advisory and research materials of international organizations and national macroeconomic regulators, statistical databases were used to achieve the stated aim. The generally accepted principle of modifying monetary policy during the wartime is the use by the central bank of instruments that expand the money supply – purchasing assets on the open market, outright purchase of government bonds on the primary market, special targeted refinancing of credit institutions. The paper suggest the design of the monetary regime of the war period, which provides for the modification of such aspects of the central bank performance as the target of monetary policy, the composition of interest rates on basic operations of the central bank, foreign exchange market regulation and regulation of capital flows, the relationships of the central bank and fiscal authority. It is argued that in the conditions of military economy, the main contribution of monetary policy to macroeconomic stability is achieved through ensuring the stable functioning of the government borrowing market and controlling capital flows.

The issue of estimating the level of neutral interest rates is a central issue for theoretical foundation of decision-making on interest rate policy in the practice of central banks. As a result of studying theoretical sources, research materials of international organizations and central banks, the factors of the neutral interest rate are systematized, the methods of its estimation are generalized, their advantages and disadvantages are revealed. Factors of the neutral rate are systematized according to the principle of their influence on the demand or supply of money in the economy. It has been established that there is no single generally accepted theoretical and methodological approach to determining the neutral rate in modern practice. A wide variation of methods with varying degrees of reliance on a theoretical basis (from purely mathematical filtration techniques to complex macroeconomic general equilibrium models) extends a field for new research. It is found that a key issue in neutral rate estimating models is the formalization of the relationship between the effects of external and internal factors, which is especially important for countries with a small open economy. Attention is paid to the method for estimating the neutral rate based on the rule of uncovered interest parity, which is used in the national practice of monetary regulation. Systemic shortcomings of this method are revealed on the basis of research of its theoretical bases and results of practical application in the conditions of the Ukrainian economy. The expediency of introducing into the practice of monetary regulation in Ukraine of alternative methodological toolkit for estimating the neutral rate based on the achievements of T. Laubach and J. Williams with adaptation to the open economy settings is justified, which would enhance the role of domestic factors, in particular changes in potential GDP and savings as important determinants of neutral value of money.

Estimation of the actual and projected level of the neutral interest rate is a central issue in the application of modern monetary theory in the practical context of monetary policy. Views on the role and key drivers of neutral interest rates have evolved over time in parallel with the development of the theory of capital, money, credit and economic growth. Therefore, the paper is aimed at generalizing methods for assessing the neutral interest rate for open economies with emerging markets and formulating recommendations for improving the existing methodological tools for estimating the neutral rate in Ukraine. To achieve this goal, theoretical sources, advisory and research materials of international organizations, central banks and statistical databases were analyzed. It is established that the key issue of the current discussion about the tools for estimating the level of neutral interest rates in countries with small open economies is the relationship between the effects of external and internal factors. The paper identifies the advantages and disadvantages of the method for estimating the level of the neutral rate on the basis of uncovered interest parity rule used by the National Bank of Ukraine within the semi-structural macroeconomic model. The expediency of methodological tools introducing into the practice of monetary regulation of Ukraine for estimating the neutral rate of Ukraine based on the Laubach-Williams approach has been proved with adaptation to the conditions of an open economy, which will consider сinternal factors of economic development – changes in potential GDP and savings.

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.

Розглянуто проблеми модернізації монетарної політики в контексті формування її середньострокових пріоритетів та реагування на кризові явища. Особливу увагу приділено питанням мандата центрального банку та цільових орієнтирів його політики. Запропоновано інструментарій та оцінено ступінь жорсткості монетарних умов (RMCI) в Україні. На основі міжкраїнових порівнянь RMCI зроблено висновок про те, що Україна є лідером серед країн Центральної та Східної Європи за ступенем жорсткості монетарних умов (як за процентною ставкою, так і за обмінним курсом). Виявлено вади в дизайні поточної монетарної політики в Україні, внаслідок яких у період гострої потреби економіки в позичкових коштах у банківській системі акумулюється «надлишкова» ліквідність, що різко контрастує з ситуацією в інших країнах, де центральні банки направляють гігантські ресурси на підтримку ліквідності фінансового та кредитування реального сектору. Проаналізовано модельний інструментарій НБУ і встановлено, що пріоритетність інфляційної цілі для нього є в п’ять разів вищою порівняно з метою економічного зростання. Обґрунтовано висновок про доцільність переходу в Україні від режиму інфляційного таргетування до таргетування приросту номінального ВВП, що поєднуватиме цільові значення реального ВВП з показниками інфляції. Доведено необхідність переорієнтації монетарної політики НБУ на підтримку реальної економіки та розширення інструментарію монетарної політики в період економічної кризи: 1) довгострокового рефінансування банків за пільговими ставками з цільовою спрямованістю на кредитування реального сектору; 2) проведення операцій відкритого ринку з державними цінними паперами з орієнтацією на підтримку бюджету та недопущення колапсу фінансового ринку; 3) пом’якшення регулятивних вимог до оцінки кредитних ризиків за активними операціями банків для стимулювання їх кредитної активності.

The article covers the issues of the monetary policy modernization in Ukraine. Particular attention is paid to the issue of ensuring the optimal interrelations between the inflation target and benchmark for real GDP growth. Authors argue that strict parameters of inflation targeting through 2017-2019 were counterproductive, since they were implemented under the critically low level of household savings (in 2019 - negative savings) and, together with other factors, led to a critical reduction in aggregate demand, a slowdown in economic activity and a decrease in the GDP’s monetization ratio. Based on the empirical data, authors suggest that a reasonable benchmark for medium-term growth of real GDP in Ukraine is 6% per year. The authors elaborate a new range of tasks for the central bank, compatible with the harmonious attainment of the low inflation target, financial stability goal and economic growth goal. The authors' proposals can be incorporated into the preparation of the Basic Principles of Monetary Policy of Ukraine for 2021 and for the medium run. Keywords: monetary policy, inflation targeting, national saving, economic growth.

The new global financial and economic crisis is caused by the spread of the coronavirus epidemic, the reduction in aggregate supply, the escalation of trade wars, and the outflow of capital from emerging markets. This requires national macroeconomic regulatory authorities to take prudent measures to protect national economies from destabilizing externalities. Therefore, the purpose of the article is to justify and develop a priority system of stabilization policy and anti-crisis measures to counter the spread of external shocks in the national economy, stabilize it, and create conditions for its further recovery and sustainable economic growth. To achieve this aim, the existing theoretical sources and research materials of international organizations were systematized, the legislative and regulatory framework in Ukraine was generalized, and statistical methods, a historical method, analysis and generalization were also used. As a result, the channels of impact of external shocks on Ukraine’s economy were identified, and the areas of internal vulnerability of the national economy that could significantly increase the negative effects of externalities were determined. The knowledge gained has become the basis for formulating conceptual directions of crisis management and developing a system of measures to counteract crisis phenomena, which include the monetary policy tools of the National Bank of Ukraine, the structural and fiscal policy of the Government, as well as the banking regulation and capital control policies.

At the beginning of 2020, the world faced the most frightening threat to the population’s health – COVID-19 pandemic. For this reason, the international institutions, governments of countries and various organizations are forced to use unprecedented restrictive measures in many spheres of activity. As a result, the economies of the countries all over the world are significantly affected and are on the verge of crisis. This paper presents examples of economic consequences of COVID-19 pandemic for different countries of the world and analyzes still few scientific works, which study the influence of pandemic on their economies. The article generalizes the legislative and anti-crisis measures of the Ukrainian Government, as well as the National Bank of Ukraine and other state authorities. It is evidenced that at the end of 2019 and the beginning of 2020, Ukraine witnessed a significant decrease in GDP growth rate, reduction of industrial production and electricity production. The financial indicators also underwent significant losses, particularly the unemployment rate increased as thousands and thousands of labor migrants have returned to Ukraine from European and other countries. The article proves the inconsistency and unprofessionalism of such restrictive and regulatory measures. Finally, the necessity is substantiated to combine the methods of market economy and state regulation. The compulsory steps are offered, which would minimize the losses of the state and its population during this economic crisis.