Dynamic approach to monetary policy effects modeling in Ukraine

Abstract

By pursuing a balanced and rational monetary policy, the National Bank aims to ensure stable prices, which protects incomes and savings from their depreciation. However, this was not always the case, for example until 2016 in Ukraine the main purpose of the NBU was to keep the exchange rate constant, but in 2013-2014, the National Bank decided to switch to inflation targeting (IT), which proved its effectiveness in many countries of the world. The new monetary regime has changed the power of the transmission mechanism, in particular the interest rate channel and the inflation expectation channel have become more significant and perhaps one of the key ones in passing the change in the key policy rate to real sector and inflation.