Inflation targeting in Ukraine: some aspects, results and conclusions

Abstract

Introduction. The large-scale war against Ukraine caused a radical change in its economic policy, including in the monetary sphere. However, this did not affect the plans of the National Bank of Ukraine to return to the inflation targeting (IT) regime after the end of the martial law period. Problem Statement. The introduction of IT in Ukraine was caused by chronic exchange rate and inflation problems that occurred despite many attempts to fix the exchange rate of the hryvnia to the US dollar. However, its application in Ukraine did not fully take into account the international experience accumulated by that time. In addition, the challenges caused by the start of military aggression against Ukraine did not receive the necessary attention. Purpose. Analysis of some features and results of inflation targeting in Ukraine. Determination of possible areas of improvement of its monetary policy. Methods. Abstract-logical method, methods of comparisons, graphical and statistical analysis, theoretical generalization are used. Results. The conceptual provisions of IT in Ukraine have left without proper attention the world experience gained during the overcoming of the global financial crisis of 2008-2009, as well as the corona crisis caused by COVID-19. In addition, the challenges caused by the start of military aggression against Ukraine in 2014 were not taken into account. As a result, the practical properties of IT in Ukraine corresponded to its rigid version, which was common before the crisis of 2008-2009. Conclusions. The transition of leading central banks to flexible IT was a forced move caused by their inability to promote economic growth by supporting price stability alone. This led to the expansion of the target orientation of monetary policy, as a result of which it began to focus not just on price stability, but "a rational balance between the stability of inflation and the stability of the use of resources." In Ukraine, this qualitative transformation did not attract due attention. As a result, a number of problematic issues arose regarding the determination of the disinflation schedule, the speed of institutional reforms, target inflation, potential rates of economic growth, the effectiveness of using one (main) monetary instrument, the timeliness and validity of currency liberalization, the inability of the central bank to comply with IT without attracting stabilization loans from international organizations.