monetary policy rule, central bank

What is it about?

The paper explains the expediency of developing an explicit rule of monetary policy for the economy of Ukraine. It studies the stages of its development, proving the expediency of formation of monetary rules for money aggregates, evaluates equilibrium values of the rule’s parameters based on the use of the modified Hodrick-Prescott filter, and determines the possible parameters of the monetary rule and their estimated coefficients by developing multivariate regression models.

Featured Image

Why is it important?

The findings of this study can be used by the National Bank of Ukraine to develop a monetary rule. It should be noted that an explicit monetary policy rule will have a limited sphere of application until the full implementation of inflation targeting regime in Ukraine. It should be used only as an additional instrument for analyzing the effectiveness of the monetary policy. However, after the transition to inflation targeting and the renewal of stable relationships between the money supply and price dynamics in the economy of Ukraine (which will cause the inclusion of inflation indicator in the monetary rule for money supply) this rule can become one of the main instruments in the development and implementation of the monetary policy.