on “Monetary policy of the National bank of Ukraine ”
By: Wombat Mazambi
List of contents
Monetary policy of the National bank of Ukraine
1. What is a monetary policy
2. Aims of the monetary policy
3. Instruments of themonetary policy
4. Ways of solving the monetary policy problems
Monetary policy of the National bank of Ukraine (NBU)
1.What is a monetary policy
Money play an enormous role in economy. They cause the circulation of income and goods, promote an efficient production and exchange. Money are sold and bought on money market, which elements are the demand formoney, offer of money and price of money.
The credit system is used to circulate money. Exactly through the credit system Central bank of a country realizes the monetary policy. It is one of the main instruments of the government regulation of macroeconomics.
2. Aims of the monetary policy
The aim of the monetary policy depends on many components. In particular, on differentstages of the country's monetary system development it can greatly differ.
The monetary policy of the independent Ukraine can be divided into several stages [1, p.10]:
- first stage (1992-1996) - creation of the money system on base of the introduction in turn of the Ukrainian coupons and preparation to introduction of national currency. The main problem of this period was thestabilization of the coupon and overcoming inflation. Monetary policy of this period was directed on emission support of the economic system without fundamental structured realignment. As a result of this period NBU itself started to control the emission and money flows, and the need of cash-money in the economy was satisfied.
- second stage (September 1996 - 1998) is connected with the issue of theconstant national currency - hryvna. This stage was called to the formation of the money-credit market of Ukraine and its regulation by means of monetary instruments. The achievements of this stage:
• introduction of constant national currency;
• development of government stock market, which were emitted in the form of bonds of internal government loan;
• lowering of the deficit ofthe budget;
• weakening of the inflation pressure of the deficit of the budget on economy;
• lowering of money expansion.
Monetary policy of this period was directed on:
❖ maintenance of the purchasing power of hryvna;
❖ stabilization of financial markets;
❖ support of the bank system.
The positive results of the third stage (1998-2008) are possible to consider:comparatively low rate of inflation; an increase of real money in economy and gradual recovering the re-monetization process.
The big risk of the persisting monetary policy is connected with that that revaluation of the national currency unit in the dollarized economy instantly brings about devaluation of the savings. The population falls into a trap: for a long time it did not believe inhryvna so it has found the alternative source of the savings in the manner of foreign exchange. After several years of the stable exchange rate, the confidence to national currency was not yet restored completely, we got revaluation... It is necessary to remember, economy does not like shocks.
Fighting with dollarization of the economy must occur gradually and this is possible due to therevaluation. If simultaneously there is and inflation, and revaluation, then, except real estate and valuable metals there is nowhere to go with your savings. And this problem corresponds not only to the NBU, government also must think about that that overweening budgetary expenses on social oriented nature would not provoke the inflation and not to create the additional favorable conditions for import....