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The Impact of Anticipated and Unanticipated Exchange Rate Variability in Ukraine

Author

Listed:
  • Viktor Shevchuk

    (Lviv University of Trade and Economics)

Abstract

This article studies the impact of the anticipated and unanticipated components of the nominal effective exchange rate on Ukraine's main macroeconomic indicators. The study uses quarterly data from 1999 to 2016 and considers the relationship with the budget balance, incomes of trading partner countries, global interest rates, and global raw material prices. Using the time-varying coefficient model (the Kalman filter), the research shows that a depreciation of the hryvnia accelerates wholesale price inflation and negatively affects the performance of GDP and industrial output - these effects were clearly visible after the financial crisis of 2008-2009). However, the research found that only unanticipated changes in the exchange rate have an impact on agricultural production. The results are justified by means of a modified AD-AS model with rational expectations that accounts for the main mechanisms of the influence of the exchange rate on aggregate demand and supply amid a high level of dollarization in the economy.

Suggested Citation

  • Viktor Shevchuk, 2017. "The Impact of Anticipated and Unanticipated Exchange Rate Variability in Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 241, pages 34-47.
    • Handle: RePEc:ukb:journl:y:2017:i:241:p:34-47
    DOI: 10.26531/vnbu2017.241.033
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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