CHANGING MONETARY POLICIES OF CENTRAL BANKS OF LEADING COUNTRIES AND THEIR IMPLICATIONS FOR EMERGING MARKET COUNTRIES

Abstract

The article examines the peculiarities of the financial instability factors transmission for developing economies under the influence of the manifestations of the collapse of non-traditional monetary policy in the countries of the economic core. It is noted that such influence is manifested in emerging markets even at the stage of expectations through official announcements. The main factors of negative impact transmission are the increase in FDI volatility and falling prices in commodity markets.
During the quantitative easing phase, small open economies have accumulated significant amounts of liquidity in the form of portfolio and foreign direct investment. Under the influence of the expected increase in interest rates in the countries of the economic core, the threat of capital outflows from emerging markets is growing. At this stage, the movement of capital flows is much more difficult to predict, as it is largely determined by short-term instruments, behavioral factors and market expectations. In these conditions, the issue of strengthening the institutional capacity of monetary regulators of small open economies to respond adequately to rapid changes in processes becomes especially relevant.
While avoiding excessive restrictions on financial and trade openness, regulators should focus on the development of macroprudential and monetary regulation policies, as well as communication policies. Modern tools of macroprudential regulation open up prospects for strengthening the prudential function of regulators with a focus on identifying systemic risk factors and harmonizing policies to prevent them. The development of currency regulation as a necessary mechanism for restricting the pro-cyclical movement of international capital deserves special attention. For Ukraine, the need to modernize approaches to financial openness is also due to the high risks of pro-cyclical impact of international capital flows given the uncertainty of interest rate prospects. Under such conditions, the policy of financial liberalization contradicts current trends in monetary regulation and facilitates the transmission of volatile ICFs and monetary shocks.