Between russian Invasions: The Monetary Policy Transmission Mechanism in Ukraine in 2015-2021

Anton Grui (), Nicolas Aragon, Oleksandr Faryna (), Dmytro Krukovets, Kateryna Savolchuk (), Oleksii Sulimenko, Artem Vdovychenko () and Oleksandr Zholud ()
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Anton Grui: National Bank of Ukraine
Oleksandr Faryna: National Bank of Ukraine
Kateryna Savolchuk: National Bank of Ukraine
Artem Vdovychenko: National Bank of Ukraine
Oleksandr Zholud: National Bank of Ukraine

No 02/2023, Working Papers from National Bank of Ukraine

Abstract: This report evaluates the monetary policy transmission mechanism in Ukraine during the early years of inflation targeting. It assesses both the overall strength of the policy interest rate transmission, and its channels. Furthermore, it addresses the stabilizing role of forward guidance, foreign exchange interventions, and monetary policy credibility. The National Bank of Ukraine abandoned its fixed exchange rate regime in 2014 in response to an economic crisis ignited by the initial invasion by russia. Under inflation targeting, the short-term interest rate became the main monetary policy instrument, while the exchange rate remained floating. The full-scale russian invasion in 2022 forced the National Bank of Ukraine to temporarily shelve its policy interest rate, fix the exchange rate and impose administrative restrictions. However, it remains committed to returning to conventional inflation targeting when economic conditions normalize. This report could become a point of reference for future policy decisions by the Ukrainian central bank.

Keywords: monetary policy transmission mechanism; inflation targeting; interest rate channel; exchange rate channel; expectations channel (search for similar items in EconPapers)
JEL-codes: E37 E43 E52 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2023-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis, nep-mac, nep-mon and nep-tra
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