Three Seas Economic Journal (Feb 2022)
CURRENCY MARKET AND MECHANISMS OF ITS REGULATION IN THE SYSTEM OF ECONOMIC SECURITY OF THE STATE
Abstract
The aim of the work is to improve the system of indicators to assess the economic security of the state in the foreign exchange market and ways to develop mechanisms of its regulation. Methodology. The study is based on a statistical evaluation of currency security indicators in the period 2008-2021, which allowed to establish that: first, the ratio of loans in foreign currency to total gross loans is a clear indicator of currency crises, when the value of the indicator increases to 60%, while in the pre-crisis period it is almost two times lower; secondly, the dollarization of the money supply changed in the range of 25%-33%, that is, the range of variation is insignificant, but in the post-crisis period, its level drops below 30%; thirdly, the level of dollarization of GDP, which is almost two times lower than the level of dollarization of the money supply, is characterized by greater variability and tends to increase in the crisis period and tends to decline in the post-crisis recovery period. The results of the work include a systematization of approaches to the interpretation of currency security and the factors that determine it. According to the narrow approach, currency security is reduced to the state of exchange rate, ensuring the stability of the national currency. Foreign exchange security in a broad sense also implies the ability to automatically set the balance of payments, sufficiency of official foreign exchange reserves, ensuring a stable inflow of foreign exchange into the domestic market with a high export potential and investment attractiveness of the country. Statistical evaluation of currency security indicators in the period 2008-2021 allowed to establish the peculiarities of their interrelation with the signs of currency crises. Proposals aimed at strengthening economic security in the foreign exchange market were substantiated. The practical implication is to improve the methodological recommendations for a comprehensive assessment of the level of currency security of the state based on supplementing the current system of six indicators with two additional indicators – the difference between interest rates on deposits in U.S. dollars and in hryvnias, the level of dollarization of the gross domestic product. The advantage of the first is less informational asymmetry compared to the difference between the forward and official hryvnia exchange rates, the advantage of the second is the demonstration of how much of the gross domestic product is served by the money supply in foreign currency. It is advisable to strengthen economic security in the foreign exchange market through the coordinated implementation of monetary, currency, fiscal, structural and investment policies, soft dedollarization, the use of financial derivatives and international lending. Value/originality. The proposed mechanisms of currency market regulation in the system of national economic security are based on the separation of narrow and broad approaches to the interpretation of currency security of the state, as well as on the clarification of conditions for the use of currency liberalization tools in the system of formation of a full-fledged competitive currency market and deregulation of currency control.
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