The Impact of REER Volatility on Economic Activity in Ukraine

Bohdan Chepyha ()
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Bohdan Chepyha: National Bank of Ukraine

Visnyk of the National Bank of Ukraine, 2025, issue 04, 1-21

Abstract: This study examines the nonlinear impact of the volatility of the real effective exchange rate (REER) on economic activity in Ukraine. In it, we use a threshold vector autoregression (TVAR) model for the period from June 2009 to December 2021. Our results indicate that there is a threshold for REER fluctuations of 1.8%. Below this threshold, volatility stimulates economic activity, but above 1.8% the effect is negative. This nonlinear effect is more noticeable for industries involved in foreign trade and with elastic demand for their own goods. Therefore, the National Bank of Ukraine should strive to keep REER volatility below 1.8% so that exchange rate fluctuations do not harm the economy.

Keywords: VAR-TVAR; REER volatility; economic activity (search for similar items in EconPapers)
JEL-codes: C30 E23 E52 F31 F43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ukb:journl:y:2025:i:04:p:1-21

DOI: 10.26531/vnbu2025.op04

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