Curtailing unconventional monetary policy: limitations and prospects

Abstract

The paper considers the monetary policy of leading world central banks that were used to overcome the global financial and economic crisis in 2008–2009. Advanced developed countries managed to overcome this crisis, primarily through monetary mechanisms. For this purpose, a non-traditional monetary policy was invented and applied for the first time. It included the following: quantitative easing with a corresponding rapid growth of central bank liabilities; de facto maintaining a plurality of their objectives, including ensuring financial stability and reducing unemployment; and expanded participation of central banks in financing governments' budget deficits. The measures taken helped to overcome the recession in developed countries and promoted the transition to a trajectory of economic growth. The current practice of monetary policy normalization, initiated in the United States, involves a gradual increase in the key interest rate and a curtailment of central bank balances. However, in many developed countries (EU), the practice of non-traditional monetary policy is still persistent and is an important factor for determining the trends of the global economy. In general, the results of this policy can be evaluated differently, but it is important for Ukraine to conclude on the relevance of monetary policy to stimulate economic development. Global volatility, increasingly determined by trade wars and other forms of protectionism in global economies, poses challenges (primarily in terms of maintaining/enhancing export and production capacity). For the economy of Ukraine, which is vulnerable to external shocks, these factors, combined with internal centres of instability, form a bunch of complicated tasks, in particular in terms of the cessation of further loss of investment potential, which should be addressed rationally by the monetary policy instruments.