Financial Policy of Ukraine for the Maintenance of Macroeconomic Stability

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Analysis of the expenditures of the state budget of Ukraine
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
For many years, the budget system of Ukraine has been characterized by instability and constant reforms, budget deficits, a significant amount of national debt, and imperfections in intergovernmental relations (Figure 5.1). In 2014-2015, after a major budget crisis triggered by military actions in the east, reforms in the budgetary system and relations began.
Assessment of the sources and magnitude of income in Ukraine's state budget
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
It is important to pay attention, that in 2022 the income of the state budget amounted to 115,1 % of the approved by the Parliament in the beginning of the year, the excess amounted to 234 billion UAH [12]. In the conditions of war government was searching for new income. At the same time, the amount of the biggest article of income- tax income in comparison to 2021 decreased for 14,21%. If the part of tax income in the general structure of the budget amounted to 85% in 2021, so in 2022 it accounted only 53%.
Budget deficit management and budget-balancing strategies
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
An important element of fiscal policy is the timely response to economic cycles, the prevention of economic crises, adherence to maximum limits for the budget deficit and public debt. Issues of medium-term and strategic budget planning hold priority importance. Formulating a long-term strategy and identifying target areas is crucial. However, given the limited budget funds, it is necessary to determine the priority areas of financing to ensure the functions of the state and the socioeconomic development of the country [4]. Managing a budget deficit and developing strategies to balance a budget are crucial aspects of fiscal policy, particularly for governments aiming to maintain financial stability and promote economic growth.
Conclusions
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
In light of the profound transformations occurring in the Ukrainian economy, this study of financial policy, the analysis of individual instruments, and the effectiveness of their implementation become particularly relevant. The thorough analysis and systematic use of econometric tools presented in this work define the key aspects and trends of contemporary state regulation of socio-economic processes. Therefore, the main directions and prospects for forming an effective financial policy strategy aimed at achieving macroeconomic stability and sustainable economic growth are outlined. Below are conclusions that distinguish the main vectors of this study and define strategic recommendations for the development of Ukraine's financial policy.
Conclusions to chapter 1
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
In the proposed study, the theoretical and methodological foundations of macroeconomic stability and its crucial component - financial stability - are examined. A list of endogenous and exogenous factors influencing financial stability is provided, parameters of macroeconomic and macro-financial stability are determined, and benchmarks for effective management of the national economy are substantiated. The study also explores the activities of the Financial Stability Council of Ukraine, the "Strategy for the Development of the Financial Sector of Ukraine," and the proposed "Post-War Macroeconomic Architecture for Ukraine."
Conclusions to chapter 2
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
It has been determined that in case of favorable and stable macroeconomic conditions, a moderate liberalization of financial markets and return to an inflation targeting regime and a floating exchange rate are important. The necessity of continuing technological development of financial services as a prerequisite for further expansion of financial inclusion and ensuring cybersecurity is also substantiated. Important measures also include the restoration of financial infrastructure in de-occupied territories, ensuring accessibility and inclusiveness of the financial sector. Additionally, for Ukraine, the development of financial markets is a crucial task, as they play a significant role in determining the level of interest rates and credit conditions, which affects the size of investments, expenditures of enterprises and citizens, and overall economic development of the country. The development of financial markets entails creating effective financial instruments, such as stocks, bonds, derivatives, and others, allowing for the attraction of more capital and creating favorable conditions for doing business in Ukraine. Furthermore, the creation of financial instruments will help reduce risk for investors and enable the attraction of funds for long-term investments in Ukraine. Directions for the development of financial markets include the advancement of the banking system, securities market, stock market, insurance market, pension market, and derivatives market. Successful development of financial markets in Ukraine can enhance the effectiveness of monetary policy and positively impact the development of the real sector of the economy.
Conclusions to chapter 3
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
Any crisis has a negative impact on the strength of the national currency. Therefore, a balanced exchange rate policy ensures the supporting effect of the national currency, and in particular, the position of national producers (export and import facilities). Currency interventions are a crucial means to influence the volatility of the foreign exchange market. There exist different types of currency regulation regimes, each with its own set of pros and cons. Selecting the appropriate currency regime involves considering various factors such as the characteristics of the domestic financial market, the level of economic growth, and the country's overall development. In times of crisis such as during a war, fixing the exchange rate is often the most appropriate solution.
Conclusions to chapter 4
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
In this Chapter analysis on financial dollarization in Ukraine was conducted. The overall dollarization of economy is difficult to measure due to limited control over cash transactions, it can be classified also between financial dollarization and real dollarization, which covers the use of foreign currencies by the real sector in forms of wages nominated in foreign currency, rents, and consumption, etc. Deposit and loan dollarization serves as a pretty accurate proxy for analysis of financial dollarization. Conducted analysis of the available literature revealed high emphasis on deposit dollarization, especially in terms of undeveloped financial markets.
Conclusions to chapter 5
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
This Chapter analyses the influence of full-scale invasion on the budget system of Ukraine. The state budget is a fundamental tool that enables governments to allocate financial resources strategically across various sectors for social and economic development. Through the state budget, a government can allocate resources to key areas such as healthcare, education, infrastructure, defense, and social welfare. This prioritization reflects the government's policy objectives and socio-economic goals.
Conclusions to chapter 6
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna
Effective usage of borrowed resources can become a factor in economic growth, while unwarranted increases in debt levels may have a destabilizing effect on the economy and create risks to a country's economic security. In the absence of a comprehensive system for regulating the formation, repayment, and servicing of public debt at the legislative level, and without clearly defined directions of debt policy, recent years in Ukraine have seen a rapid increase in the volumes of gross public debt. Consequently, this situation poses a threat to the economic and financial security of our country. The volumes of public borrowings, their dynamics, and structure directly or indirectly influence all spheres of the state's financial and economic activities, which is why statistical analysis of the structure and volumes of the country's debt burden acquires special importance in the process of managing financial security. One of the main summarizing indicators of the state of indebtedness is the ratio of the total volume of public debt to Gross Domestic Product (GDP). This ratio enables an assessment of the level of debt burden on the state's economy and also reflects its ability to settle with creditors based on its economic potential.
De-dollarization policies and prospects for the de-dollarization of the Ukrainian economy
(Kyiv-Mohyla Academy Publishing House, 2023) Slaviuk, Nataliia
De-dollarization policies are becoming increasingly important for many countries as they seek to reduce their dependence on foreign currencies and promote economic stability. While the specific strategies for de-dollarization may vary, it is generally recognized that reducing dollarization can help countries avoid financial crises and currency shocks. However, the success of de-dollarization policies can depend on a range of factors, such as the strength of a country's financial institutions, the degree of public trust in the national currency, and the effectiveness of government policies in promoting alternative investment options. Therefore, it is important for policymakers to carefully consider the various approaches to dedollarization and choose those that are most likely to be successful in their specific economic and political context.
Defining financial dollarization: approaches to assessment and categorization
(Kyiv-Mohyla Academy Publishing House, 2023) Slaviuk, Nataliia
Financial dollarization is a phenomenon in which a foreign currency, most often the US dollar, is used for financial transactions and is held as a store of value in place of the national currency. It can be present in various forms, including deposit dollarization (DD), loan dollarization (LD), and portfolio dollarization. The measurement and classification of financial dollarization have been an ongoing topic of interest for economists and policymakers, as high levels of dollarization can negatively affect the financial system's stability and the monetary policy's effectiveness. Various methods of assessing the degree of financial dollarization include ratio analysis, regression analysis, and portfolio optimization models. Additionally, financial dollarization can be classified based on its source, such as natural or induced dollarization, as well as its duration, whether it is short-term or long-term.
The essence and classification of the exchange rate regimes
(Kyiv-Mohyla Academy Publishing House, 2023) Slaviuk, Nataliia
The exchange rate plays a crucial role in the system of national settlements. In Ukraine, the exchange rate is formed on the interbank market. The Central bank can influence the demand and supply of foreign currency through interventions. According to the definition from the Corporate Finance Institute, an exchange rate is a amount at which one currency can be exchanged for another between countries or economic zones. This rate is important to define trade and capital dynamics of the flow and the values of currencies to each other. This rate influences trade conditions and movement of the capital between the countries-trading partners.
The essence of government debt and its management instruments
(Kyiv-Mohyla Academy Publishing House, 2023) Donkohlova, Nataliia; Slaviuk, Nataliia
Government debt is the normal phenomenon of the economic system. All countries of the world use the government borrowings. Though, during the centuries many questions arise regarding the influence of the government debt on the economies of countries. The opinions of scholars have varied significantly, and every economic school has its opinion about the government indebtedness.
Evaluation of the effectiveness of monetary policy in Ukraine
(Kyiv-Mohyla Academy Publishing House, 2023) Veremiienko, Vitalii; Primierova, Olena
Throughout the war period, the NBU's monetary policy was adaptive, focusing on crisis management and the stabilization of the financial system while laying the groundwork for post-conflict economic recovery. The unique challenges posed by the war necessitated a departure from conventional monetary policy practices, emphasizing the need for flexibility and responsiveness in central banking during times of crisis. Based on the information provided above, Ukraine followed a similar path to other countries when the NBU chose to peg the exchange rate of hryvnia to USD during the onset of the invasion. This move was made by the regulator to maintain stability in economic agents' expectations and thereby ensure macro-financial stability during the war. In addition, the fixed exchange rate played a vital role in controlling inflation.
An examination of government debt and analysis of debt sustainability indicators in Ukraine
(Kyiv-Mohyla Academy Publishing House, 2023) Lepekha, Kateryna; Slaviuk, Nataliia
Since the moment of proclaiming the independence of Ukraine in 1991, the management of government debt was made by different methods. The government debt of Ukraine during the period of 1991-2000 was characterized by the higher amount of external borrowings and the increasing of government indebtedness. After the 10 years of independence it was accumulated 14,1 billion USD (10,3 billion USD of external debt and 3,8 billion USD of internal debt). The main goal of usage the government borrowings was the coverage of budget deficit.
Exchange rate of Ukraine: tendencies and problems
(Kyiv-Mohyla Academy Publishing House, 2023) Slaviuk, Nataliia
In this section, the main dynamics of the exchange rate of the Ukrainian national currency, the hryvnia, will be considered. From 1996 to 2014 the exchange rate regime in Ukraine was fixed, from 2014 to March 2022 - floating, and after the start of a full-scale war (24.02.2022) since March 2022 to October 2023 - fixed. In October 2023 National Bank of Ukraine announced change of the exchange rate to the managed floating.
Exploring the relationship between exchange rate dynamics and trade competitiveness of Ukraine
(Kyiv-Mohyla Academy Publishing House, 2023) Mordas, Olena; Slaviuk, Nataliia
The main relationship between exchange rate dynamics and trade competitiveness of Ukraine is represented by Vector Autoregressive model (VAR). This model is based on the reproduction of the dynamics of the time series based on its historical values, and long-term memory of series. Thus, a feature of these models is a high empirical level. Since it was important to investigate the short-term forecast and analyze the relationships between the variables, therefore, the VAR model was chosen. Let's move on to the first stage of building the model - data selection and preparation.
Financial Policy of Ukraine for the Maintenance of Macroeconomic Stability : the collective monograph
(Kyiv-Mohyla Academy Publishing House, 2023) Lukianenko, Iryna; Galytska, Eleonora; Primierova, Olena; Slaviuk, Nataliia; Nasachenko, Mariia; Donkoglova, Nataliia; Lepekha, Kateryna; Mordas, Olena; Orlovska, Oleksandra; Tomilina, Mariia; Nesterenko, Anastasiia; Veremiienko, Vitalii; Lukianenko, Iryna
The development of theoretical and methodological foundations in the field of state financial policy has been the subject of numerous works by both domestic and foreign scholars. Despite this, in contemporary conditions, the issues of state regulation require further resolution. The relevance of this research is strengthened by the complex socio-economic situation arising in Ukraine since the onset of a full-scale invasion, the growth of external and internal risks, social and financial instability, the increasing outflow of skilled labor, and the economic decline, significantly limiting the application of classic macroeconomic regulation tools. The significance and complexity of these problems, both in theoretical and practical aspects, underline the importance and value of research in this direction, which should make a substantial scientific and practical contribution to enhancing the effectiveness of management decisions to ensure the macroeconomic stability of the state. Accordingly, the research aims to develop theoretical and methodological provision and contemporary economic-mathematical tools to form a financial policy strategy, which has the goal to ensure economic stability, to increase the competitiveness of the national economy, and restore economic growth in Ukraine. For students of economic specialties, graduate students, teachers, civil servants, specialists and everyone who seeks to master the theoretical and practical aspects of building dynamic macroeconomic and simulation models for the formation of medium-term and longterm economic policy of the state, aimed at achieving macroeconomic stability even under unpredictable conditions of rapid development of external and internal crisis phenomena.
The implementation of financial policy as an instrument of state regulation
(Kyiv-Mohyla Academy Publishing House, 2023) Galytska, Eleonora; Lukianenko, Iryna
In the current stage, under martial law conditions, achieving sustainable economic development is unfeasible without comprehensive economic regulation and an effective state financial policy. Precisely, effective state regulation of the economy, its targeted impact in the economic management sphere with the objective of directing economic processes in line with the goals, tasks, and interests of the country, is a key factor in macroeconomic shifts needed by the country. The concept of "state economic regulation" should take into account the unstable state of the country's modern economy, its dynamism, instability, and align with the changing directions, aims, and objectives of the state's economic policy. Hence, this mechanism must be unique, adapted to any changes in directions, goals, and objectives of the state's economic policy.

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