COORDINATION OF MONETARY AND FISCAL POLICIES DURING CRISIS

Abstract

Abstract. The global crisis of 2020, caused by the spread of the COVID-19 coronavirus disease, has led to decline of the Ukrainian economy and contraction in the welfare of society. To overcome the effects of the crisis, the monetary and fiscal authorities have provided strong incentives, primarily to support the most vulnerable social groups and businesses most affected by quarantine restrictions, as well as to facilitate the financial stability of the banking sector. In conditions of limited government resources, to minimizing the negative effects of the crisis requires the highest efficiency of monetary and fiscal policies, which can only be achieved through proper coordination between monetary and fiscal authorities. The present article examines the peculiarities of the conduct and direction of monetary and fiscal policies before crisis processes arose in Ukraine and identifies the factors that constrain the effectiveness of both policies: shadow economy; permanent budget deficit; excessive public debt service costs; the dominance of non-monetary inflation factors in taking monetary policy decisions. Anti-crisis measures of monetary and fiscal authorities are described and analysed. It was determined that the stock exchange channel of money issuance stood inactive during the crisis, which led to a significant imbalance in the interest rate environment in Ukraine and to the increase in the cost of government borrowing in the domestic market, what was caused by poor coordination between monetary and fiscal policies. It has been established that the dominance of the state in the banking system of Ukraine has a negative impact on bank lending during the crisis, and the government’s program to stimulate lending restrains the reduction of interest rates on new loans through market mechanisms. To ensure post-crisis sustainable economic development, the following measures are advised: ensure a gradual reduction in public debt service costs; make the transition to a countercyclical fiscal policy, which will allow for an expansionary monetary policy; implement measures aimed at reducing the concentration of the state in the banking sector and endorse lending to the real sector of the economy rather than government, through state-owned banks; stimulating lending through monetary rather than fiscal mechanisms. Keywords: monetary policy, fiscal policy, monetary-fiscal policy coordination, economic development, central bank, corona crisis, Ukraine. JEL Classіfіcatіon E52, E62, E63, H12 Formulas: 0; fig.: 4; tabl.: 1; bibl.: 37.