Transmission of the Key Policy Rate To Commercial Bank Interest Rates: VAR-Based Evidence from Ukraine

Hanna Telnova, Serhii Smerichevskyi, Alla Ivashchenko and Olena Rybak

Economic Studies journal, 2026, issue 5, 114-130

Abstract: The purpose of the article is to assess the direct and indirect impact of the discount rate on credit and deposit rates in the Ukrainian banking system, taking into account inflation dynamics and monetary transmission time lags. The methodological basis of the study is a vector autoregression (VAR) model, supplemented by impulse response analysis (IRF) and forecast error variance decomposition (FEVD), which made it possible to reproduce the time structure of monetary shock transmission through the interest rate channel. The results show that an increase in the policy rate raises lending rates with a lag of about two months, while deposit rates respond more gradually, and inflation exhibits a weaker and slower short-term reaction. It was found that the key channel for transmitting the monetary impulse to inflation is the deposit rate. The scientific novelty lies in the comprehensive combination of IRF and FEVD analysis to reconstruct the time architecture of monetary transmission and in substantiating the role of the deposit channel in shaping inflation dynamics. The practical significance of the results lies in the possibility of using them for macroprudential analysis and improving price stability policy.

JEL-codes: E31 E42 E43 E52 E58 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2026:i:5:p:114-130

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