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

Author

Listed:
  • Anton Grui

    (National Bank of Ukraine)

  • Nicolas Aragon
  • Oleksandr Faryna

    (National Bank of Ukraine
    National University of Kyiv-Mohyla Academy)

  • Dmytro Krukovets

    (National Bank of Ukraine)

  • Kateryna Savolchuk

    (National Bank of Ukraine)

  • Oleksii Sulimenko
  • Artem Vdovychenko

    (National Bank of Ukraine)

  • Oleksandr Zholud

    (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.

Suggested Citation

  • Anton Grui & Nicolas Aragon & Oleksandr Faryna & Dmytro Krukovets & Kateryna Savolchuk & Oleksii Sulimenko & Artem Vdovychenko & Oleksandr Zholud, 2023. "Between russian Invasions: The Monetary Policy Transmission Mechanism in Ukraine in 2015-2021," Working Papers 02/2023, National Bank of Ukraine.
    • Handle: RePEc:ukb:wpaper:02/2023
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    References listed on IDEAS

    as
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    2. Cletus C. Coughlin & Patricia S. Pollard, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers 2003-029, Federal Reserve Bank of St. Louis.
    3. Anastasiia Antonova, 2019. "Price-Setting in Ukraine: Evidence from Online Prices," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 248, pages 4-10.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monetary policy transmission mechanism; inflation targeting; interest rate channel; exchange rate channel; expectations channel;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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