ECONOMIC TRANSFORMATIONS DURING MARTIAL LAW: THE TACTICS OF EVOLUTIONISM AND MODERNIZATION

Abstract

In a war economy, ensuring the stability of price dynamics by the regulation of money supply faces a number of fundamental obstacles that significantly reduce the effectiveness of traditional monetary instruments. During the war, the market principles of economy’s functioning weaken, the monetary transmission mechanisms do not work adequately, the role of the state in ensuring the functioning of commodity-monetary relations increases. This calls for a revision of the macro-stabilizing role of monetary policy. Taking into account the above, approaches to the formulation of monetary policy directions during martial law are summarized, relevant recommendations for the current conditions of Ukraine are substantiated using theoretical sources, advisory and research papers of international organizations and national macroeconomic regulators, as well as statistical databases. Based on the generalization of theoretical principles and world experience, the design of the wartime monetary regime is substantiated, which involves the modification of such aspects as: the target-oriented monetary policy; the composition of interest rates for the central bank’s basic operations; harmonization of monetary policy decisions with fiscal policy priorities; establishment of a fixed exchange rate regime; enhanced control over the cross-border movement of capital. It is concluded that in a war economy, the main contribution of monetary policy to the achievement of macroeconomic stability should be made by the effective interaction with the government in ensuring the stable functioning of government borrowing market, controllability of capital movements, support for the creation of new jobs and generators of new added value for effective closure of new money supply.