THE RATIONALE FOR THE APPLICATION OF THE INFLATION TARGETING REGIME IN UKRAINE

Abstract

The purpose of the paper is the consideration of the basic choices of a monetary regime of monetary policy, which include the monetary targeting regime, the regime of exchange rate targeting, the inflation targeting regime, and a strategy without an explicit nominal anchor. The article also discusses their implementation in various countries of the world and the resulting consequences. The subject of research is the consideration of the existing monetary regimes and the rationale for the selection of one of them to ensure sustainable development of the economy of Ukraine. This research examines, among other things, such unresolved parts of the general problem as the search for ways how to increase the degree of the Central Bank influence on the economy by changing the existing monetary regime to more optimal. Methodology. The research is based on a comparison of data on the effectiveness of monetary policy in different countries in specific time periods. Given the consequences of the implementation of certain monetary regimes in different countries, there are drawn conclusions about the appropriateness of the choice of a specific regime for the Ukrainian economy. The results of the comparison showed that the most suitable choice for the economy of Ukraine is the choice of the inflation targeting regime, since it generates the inflation expectations at a low level, in most cases allows reducing inflation in the short term, contributes to strengthening the Central Bank independence and credibility, allows overcoming internal and external shocks, eliminates the contradictions connected with the objectives of monetary policy, reduces the likelihood of crises, as well as creates positive conditions for the development of the economy as a whole. Practical implications. Thoroughly examined the advantages and disadvantages of the underlying monetary regimes, conclusions were drawn concerning the promising directions of development of monetary policy in Ukraine, as well as recommendations on further actions of the state bodies of Ukraine. Value/originality. The conclusions of the research substantiate the benefits of inflation targeting regime to enhance the effectiveness of monetary policy, as well as provide recommendations concerning the further implementation of the inflation targeting regime in Ukraine.