The first scientific conference for students and young researchers Banking Sector and Monetary Policy: Future Prospects, organized jointly by the National Bank of Ukraine and the Kyiv School of Economics, was held in Kyiv on 21 April 2017.
In opening the conference, NBU Deputy Governor Mr Roman Borysenko told the participants about how the central bank has changed for the better since 2014 by implementing an organizational transformation, improving and upgrading its core functions and embarking on a large-scale financial sector reform.
“In spite of drawing wide criticism for unpopular reforms, the NBU has become a role model for other public authorities in terms of transformation since it has proved that fundamental changes are possible. The NBU managed to launch one of the most crucial economic reforms in a very complicated sector and underwent transformation as regulator and organization,” stressed Mr Borysenko. “I am glad that young researchers who have already put in tremendous research efforts and delivered an academic paper covering micro- and macroeconomic aspects of the banking sector and monetary policy – gathered together in the conference room. This is also a contribution to the banking sector reform effort”.
62 entries were submitted to participate in the conference, including 47 research papers submitted by students and 15 entries submitted by young researchers.
The largest number of participants represented Vadym Hetman Kyiv National Economic University - 14 candidates, the National University of Kyiv-Mohyla Academy and the Banking University (Kyiv) – six candidates from each institution, the Kyiv School of Economics and Taras Shevchenko Kyiv National University - 4 entries from higher educational institution. Overall, papers were submitted by students and young researchers from higher educational institutions located in the following cities and regions of Ukraine: Kyiv, Kharkiv, Lviv, Sumy, Khmelnytskyi, Zhytomyr, Zaporizhia, Cherkasy, and Odesa.
Most papers dealt with the monetary policy issues and the functioning of the transmission mechanism, as well as risk assessment and the efficient operation of financial institutions. The search of stimuli to boost lending and its impact on the economic activity prompted intense discussions. 16 best papers in two categories (students and young researchers) were selected to participate in the final stage of the conference.
The first place prize among young researchers was awarded to the paper on “Monetary Policy in Ukraine in the Aftermath of the Minimum Wage Increase” by Pervin Dadasheva, PhD in Economics, Assistant Professor of the Finance Department at the National University of Kyiv-Mohyla Academy. In her paper, the researcher investigates the consequences of the twofold increase in the minimum wage since the beginning of 2017 and raises the issue of consistency between monetary and fiscal policy.
The young researcher points out that raising the minimum wage will have both positive and negative consequences. On the one hand, this step by the government will reduce the size of the shadow economy and increase revenues to the State Budget. However, a sharp increase in household incomes will boost aggregate demand, and therefore increases risks of heightened inflation pressures.
The author uses an econometric macro-model to assess the impact of the minimum wage increase the key macroeconomic variables and analyzes certain monetary policy measures aimed to address possible negative consequences for price stability in Ukraine.
The simulation findings suggest that the risks of accelerating inflation arising from the minimum wage increase can be mitigated by monetary policy measures. However, this does not counteract the trend toward monetary policy easing while keeping the key interest rate on a downward trend.
The second place prize among young researchers was awarded to the paper on “An Assessment of the Impact of the Monetary Policy Transparency on Inflation” by Alyona Zakutnya, Assistant Professor of the Accounting and Taxation Department at the Education and Research Institute for Business Technologies “UAB”, Sumy State University.
Overseas experience in monetary policy implementation and banking regulation suggests that the transparency of the central bank achieved through the establishment of a well-functioning system of communications with economic agents ensures a high level of confidence in the central bank and helps the regulator to achieve its targets.
Based on econometric modeling, the researcher assesses the impact of the monetary policy transparency on inflation in 20 countries across the world, where inflation targeting is implemented, as well as in Ukraine. The research findings suggest an inverse relationship between the monetary policy transparency and the level of inflation in advanced economies. However, this correlation is not observed in Ukraine, which underlines the importance of further transformation of the monetary policy framework and the need to enhance communication channels of the NBU.
Among the entries submitted by students, the best papers were presented by the students from the National University of Kyiv-Mohyla Academy.
The first place prize among students was awarded to the paper on "Conditional Value-at-Risk as Quantitative Measure of Systemic Risk Contribution of Ukrainian Banks” by Pavlo Shykin, a student from the National University of Kyiv-Mohyla Academy.
In his paper, the researcher applies a CoVaR approach (Conditional Value-at-Risk) to identify those banks that contribute most to generating risks to the domestic system, thereby expanding modeling capabilities to asses systemic risks in the domestic banking system.
The research findings are broadly in line with the findings made based on the methodology applied by the NBU. However, the author points out that the methodology applied by the NBU assesses weighted average indicators while disregarding the density of interconnections between banks. This research is valued for the methodology applied by the author that provides greater input for decision-making in banking regulation.
The second place prize among students was awarded to the paper on “The factors Affecting Banks' Insolvency”, a joint research by Bohdan Salagub, Mykhailo Dmytro Vynnychuk and Viktoriia Basun, students from the National University of Kyiv-Mohyla Academy.
In their paper, researchers apply probit and logit models to assess the impact of factors affecting banks’ insolvency. The research is valued for its ability to deliver the qualitative parameters of banks’ performance that should be incorporated by the NBU when designing prudential supervision measures.