Currency liberalization and its impact on the economy of Ukraine

Abstract

Examining the transformation of financial relations in Ukraine, in the previous article the authors analyzed the impact of foreign capital on the economic development of this country’s economy and found that its concentration in certain economic activities contributed to consolidating its raw material orientation. The authors conclude that due to the distorted model of Ukraine's economic development, successful practices of developed countries to attract foreign investment and reform the financial sector are ineffective in this country’s economy. Continuing the study of the transformations of financial relations in Ukraine, which are taking place under the influence of the approximation of domestic legislation to European standards, the authors could not leave aside the question of impact of the liberalization of currency legislation on the economy. Given that currency liberalization significantly affects the behavior of foreign investors, the authors conducted an in-depth analysis of legislative changes in the financial sector, and described the main results of their implementation. The positive and negative consequences of currency liberalization in Ukraine for business entities and the economy in general are analyzed. Particular attention is paid to the risks associated with the liberalization of operations related to the movement of capital and the behavior of non-residents in the financial market of Ukraine. It is concluded that Ukraine’s economy with its distorted development model belongs to the financially and institutionally weak ones, hence is not presently ready to liberalize its monetary relations, which could only deepen the deformations and reduce resilience to macroeconomic imbalances.