Abstract

http://ssrn.com/abstract=938469
 
 

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Exchange Rate Management in Ukraine: Is There a Case for More Flexibility?


Bas Van Aarle


KU Leuven - LICOS - Centrum voor Transitie-economie; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Eelke De Jong


Radboud University Nijmegen - Department of Economics

Robert Sosoian


Pricewaterhousecoopers, Australia


Economic Systems, Vol. 30, No. 3, 2006

Abstract:     
Since 2000 the Ukraine has followed a successful stabilization policy. Stabilizing the value of the hryvnia against the US dollar has been an important ingredient of this policy. However, the resulting unsterilized interventions fuel the domestic money supply and might lead to high levels of inflation later on. Therefore, some questioned the sustainability of the hryvnia peg. In a first step to more exchange rate flexibility, the Ukrainian monetary authorities implemented a one-shot revaluation of 5% against the dollar in April 2005. This paper estimates a small macro-economic model of the Ukrainian economy. Simulations of alternative exchange rate paths are undertaken and the resulting macro-economic adjustments compared to analyze the effects of different exchange rate strategies. These simulations suggest that in the current conditions allowing the exchange rate of the hryvnia to appreciate in an orderly manner might be a good alternative for a rigid peg to the dollar or irregular ad-hoc exchange rate changes.

Keywords: Ukraine, Macro-economic adjustment, Macro-economic models, Exchange rate policy

JEL Classification: E42, E47, E51, E61, F41

Accepted Paper Series


Not Available For Download

Date posted: October 19, 2006  

Suggested Citation

Van Aarle, Bas and de Jong, Eelke and Sosoian, Robert, Exchange Rate Management in Ukraine: Is There a Case for More Flexibility?. Economic Systems, Vol. 30, No. 3, 2006. Available at SSRN: http://ssrn.com/abstract=938469

Contact Information

Bas Van Aarle (Contact Author)
KU Leuven - LICOS - Centrum voor Transitie-economie ( email )
Deberiotstraat, 34
Leuven, B-3000
Belgium
+32 16 326591 (Phone)
+32 16 326599 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.cesifo.de
Radboud University Nijmegen - Department of Economics ( email )
P.O.Box 9108
6500 HK Nijmegen
Netherlands
+31 24 3616172 (Phone)
+31 24 3611846 (Fax)
Eelke De Jong
Radboud University Nijmegen - Department of Economics ( email )
Room #50114
6500 HK Nijmegen
Netherlands
+31 24 3611974 (Phone)
+31 24 3611846 (Fax)
Robert Sosoian
Pricewaterhousecoopers, Australia ( email )
Melbourne VIC 3000
Australia
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