The Impact of Inflation Targeting on Macroeconomic Indicators in Ukraine

Mykhailo Kuzheliev, Dmytro Zherlitsyn, Ihor Rekunenko, Alina Nechyporenko and Guram Nemsadze (2020). Banks and Bank Systems, 15(2), 94-104. doi:10.21511/bbs.15(2).2020.09

12 Pages Posted: 12 Jun 2020

See all articles by Dmytro Zherlitsyn

Dmytro Zherlitsyn

National University of Life and Environmental Sciences of Ukraine; Zaporizhzhya Institute of Economics and Information Technologies

Date Written: May 18, 2020

Abstract

The correlation between macroeconomic dynamics and the inflation rate is the subject of many economic studies. The principles of monetary policy are developed in classical economics studies, which are based on the theories of Keynes, Phillips, Campbell, etc. However, classic approaches require practical validation, especially with regard to modern economic trends in times of crisis and emerging economies. Therefore, the purpose of the paper is to investigate and summarize the impact of inflation targeting and other key monetary policy instruments on fundamental economic indicators in Ukraine during periods of stability and crises. An empirical analysis is based on official statistics from Ukraine for 2011–2019. This study uses econometric methods (multivariate regression and simultaneous equation model), which are applied for the general and transmission impact of inflation on the estimation of economic growth. The results prove that inflation does not affect (less than 0.46 linear correlation) fundamental economic indicators during periods of real GDP growth and a quarterly CPI level of less than 2%. On the other hand, there are significant simultaneous regressions (more than 0.8 coefficients of determination) between unemployed, spending on real final consumption, hryvnia exchange rate and monetary policy instruments (discount rate, international reserves, amount of government bonds, M3 monetary aggregate) for periods when the quarterly CPI (consumer price index) is more than 2%. Therefore, the traditional monetary policy implications are discussed for emerging economies.

Keywords: inflation, monetary policy, growth, emerging economy, regression, simultaneous equation

JEL Classification: E31, E52, E58

Suggested Citation

Zherlitsyn, Dmytro, The Impact of Inflation Targeting on Macroeconomic Indicators in Ukraine (May 18, 2020). Mykhailo Kuzheliev, Dmytro Zherlitsyn, Ihor Rekunenko, Alina Nechyporenko and Guram Nemsadze (2020). Banks and Bank Systems, 15(2), 94-104. doi:10.21511/bbs.15(2).2020.09, Available at SSRN: https://ssrn.com/abstract=3604948

Dmytro Zherlitsyn (Contact Author)

National University of Life and Environmental Sciences of Ukraine ( email )

Heroiv Oborony St, 15
Kyiv, 02000
Ukraine

Zaporizhzhya Institute of Economics and Information Technologies ( email )

Zaporizhzhya
Ukraine

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