Ensuring Macroeconomic Stability under the Martial Law
DOI:
https://doi.org/10.15407/scine19.01.003Keywords:
monetary policy, martial law, macroeconomic stabilityAbstract
Introduction. In peacetime, the main contribution of monetary policy to macroeconomic stability is to ensure the stability of price dynamics through regulating money supply. During the war, the market principles of the economy and the formation of its prices are violated, monetary transmission mechanisms do not work adequately, the role of the state in ensuring the proper functioning of commodity-money relations increases. The new reality that the entire civilized world has faced since the beginning of Russia's armed aggression against Ukraine requires reconsideration of the macrostabilizing role of monetary policy in the event of military shocks.
Problem Statement. The generally accepted principle of modifying monetary policy during the wartime is the use by the central bank of instruments that expand the money supply – purchasing assets on the open market, outright purchase of government bonds on the primary market, special targeted refinancing of credit institutions.
Purpose. The purpose of this paper is to generalize approaches to the formulation of monetary policy during the wartime and to substantiate the relevant recommendations for contemporary situation in Ukraine.
Materials and Methods. Theoretical sources, advisory and research materials of international organizations and national macroeconomic regulators, statistical databases were used to achieve the stated aim.
Results. The paper suggests the design of the monetary regime of the war period, which provides for the modification of such aspects of the central bank performance as the target of monetary policy, the composition of interest rates on basic operations of the central bank, foreign exchange market regulation and regulation of capital flows, the relationships of the central bank and fiscal authority.
Conclusions. It is argued that under the conditions of military economy, the main contribution of monetary policy to macroeconomic stability is achieved through ensuring the stable functioning of the government borrowing market and controlling capital flows.
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