Оlha Hlushchenko


The article reveals flaws in the interest rate channel of the monetary transmission mechanism in Ukraine. By building a regression-correlation equation there has been determined a failure in the causal link between changes in the money supply and the discount rate. There is a direct link between the money growth and the discount rate that makes it impossible to effectively pursue a policy of inflation targeting to affect the discount rate. Weak responses to changes in macroeconomic indicators are proved by applying a vector autoregression method (VAR Models) indicating time uncertainty in achieving declared results of the monetary and credit policy. There has been further developed flaws identification in building-up monetary transmission mechanism in Ukraine in terms of disclosing its dysfunctions and deformities breaking the relationship between controlled and variable macroeconomic indicators, endowing other channels of monetary transmission mechanism with speculative attributes and disturbing financial architectonics of the national welfare.


interest rate channel; monetary transmission mechanism; monetary and credit policy; inflation targeting; financial architectonics


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