ANALYSIS OF THE FUNCTIONAL CHARACTERISTICS’ MONETARY POLICY

Abstract

The article presents approaches, which explain the transition process of the financial systems’ re–monetization, and on this basis ─ reasonable priority areas of the central bank monetary policy in Ukraine. Relevant depending modeled by using a dynamic model with rational expectations, where equation (1) describes factors that affect the price level; in equation (2) monetization dynamic is proportional to the change in the absolute value of this indicator. However, monetization is inversely proportional to the price level and inflation. Similarly, it is assumed that higher inflation limits the monetization dynamic. Likewise they are affecting currency devaluation and budget deficits. Among exogenous factors of monetization important are: efficiency of the banking system; completion of the market environment’s formation; improve conditions for foreign investment. The equation (3) presents functional dependence for the current account balance, which is improved by lowering prices, currency devaluation and improving the budget balance. As the results of the study following conclusions were made, namely—the re–monetization tempo of the Ukrainian economy is strong even among successful Eastern European economies; a significant increase monetization may lead to crisis.

Keywords

• monetary policy
• economic growth
• inflation
• monetization
• money supply
• exchange rate