Authors: Anton Grui, Nicolas Aragon, Oleksandr Faryna, Dmytro Krukovets, Kateryna Savolchuk, Oleksii Sulimenko, Artem Vdovychenko, Oleksandr Zholud.
Abstract: This report evaluates the monetary policy transmission mechanism in Ukraine during the early years of inflation targeting. It assesses both the overall strength of the policy interest rate transmission, and its channels. Furthermore, it addresses the stabilizing role of forward guidance, foreign exchange interventions, and monetary policy credibility.
The National Bank of Ukraine abandoned its fixed exchange rate regime in 2014 in response to an economic crisis ignited by the initial invasion by russia. Under inflation targeting, the short-term interest rate became the main monetary policy instrument, while the exchange rate remained floating.
The full-scale russian invasion in 2022 forced the National Bank of Ukraine to temporarily shelve its policy interest rate, fix the exchange rate and impose administrative restrictions. However, it remains committed to returning to conventional inflation targeting when economic conditions normalize. This report could become a point of reference for future policy decisions by the Ukrainian central bank.
Cite as: Grui, A., Aragon, N., Faryna, O., Krukovets, D., Savolchuk, K., Sulimenko, O., Vdovychenko, A., Zholud, O. (2023). Between russian Invasions: The Monetary Policy Transmission Mechanism in Ukraine in 2015-2021. NBU Working Papers, 2/2023. Kyiv: National Bank of Ukraine. Retrieved from https://bank.gov.ua/admin_uploads/article/WP_2023-02_Grui_et_al.pdf.
