Monetary Policy in the Context of Economic Transformations

Abstract

The purpose of this article is to improve the theoretical, methodological and practical grounds of monetary policy in the context of economic transformations. The main tasks of monetary regulators in transformational economies are the following: 1) to ensure long-term stability of the national currency; 2) to guarantee the stability of the state financial system; 3) to stimulate economic development indirectly. The necessity to continually improve the methodological tools for implementing monetary policy, as the use of original tools for quantitative and credit easing, has been substantiated. The role of interest rate policy has been identified as the main tool of monetary regulation in countries with advanced and transformational economies. The expediency of using the Taylor rule to increase the effectiveness of monetary policy in Ukraine has been substantiated. The article proves that in order to strengthen the monetary policy efficiency in the strategic perspective, and to approach intermediate and end goals, such policy should be based on a combination of floating exchange rate (of various types), inflation targeting, and adaptive use of other tools (interest rates, monetary aggregates, etc.). The methodological and application-specific peculiarities of implementing restrictive and incentive monetary policy have been outlined. It has been established that the monetary regulator mainly applied restrictive monetary policy in Ukraine in 2005-2020, but loosened it, when the socio-economic situation became challenging. The main features of inflation targeting have also been indicated, with the substantiation of its application in transformational economies, and in Ukraine, in particular.

Keywords

• economic development
• exchange rate
• inflation
• inflation targeting
• monetary policy
• monetary strategy