tag:blogger.com,1999:blog-6673614740187623740.post8334827982376658998..comments2023-02-08T13:57:06.352+02:00Comments on VoxUkraine: VoxUkrainehttp://www.blogger.com/profile/04789272652945537005noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6673614740187623740.post-54924206972337384162014-08-28T16:52:21.680+03:002014-08-28T16:52:21.680+03:00That is interesting approach to oblige the central...That is interesting approach to oblige the central bank to use the strict rules approved in advance. But I doubt that such approach could be used in the developing country with small open economy like Ukraine (at least I have never met something similar except of MP rules in the published models). Usually such countries do not follow the "full-fledged" inflation targeting, but rather "flexible" one. Except of inflation (and output volatility) targets external sustainability and financial stability are the important goal of the central banks in such countries. I suppose Ukraine is not the exception here. I agree that the National Bank of Ukraine should follow some monetary policy rule in general, but most likely Ukrainian economy will be hit by severe macroeconomic shocks which will require the "flexible" reaction from authorities. However, I agree with the overall suggestion of author that the autonomy and independence of the NBU from the Government should be raised in order to achieve the credibility for its monetary policy. It’s a crucial issue for the success of the new monetary regime of inflation targeting.Sergiy Nikolaychukhttps://www.blogger.com/profile/04708907863360689069noreply@blogger.comtag:blogger.com,1999:blog-6673614740187623740.post-76368063924476866522014-08-26T12:03:19.018+03:002014-08-26T12:03:19.018+03:00While the council of the NBU is both installed and...While the council of the NBU is both installed and fired by the president and parliament, the true power is not in the council but in the board, which is responsible for day-to-day action. And where we have a problem not with legislation but with its execution. Say in late 2002, in order to ‘free’ the seat of the NBU governor for Tihipko (whose faction in return supported Yanukovych for the PM), then-governor Stelmakh was pressed to leave the seat voluntarily because he cannot be fired. Similarly in 2005 Tihipko had to leave the seat and so on. As long as this seat is a part of political bargaining process, the problem persists.<br />I may be wrong, for a quick google search hasn’t supplied me with data, but formally the NBU ranking in Cukierman’s central bank independence index is in par with many central banks of CEE, so while the law can be improved, it is not that bad if it was adhered to.<br />Taylor rule is an option, but remember that when the decision is taken, the level of GDP is not known, so an estimate is used, with is then compared with another estimate, namely potential GDP. Thus there can be notable error margin and if the NBU is the one, which supplies both estimates, it can be biased.<br />Zhttps://www.blogger.com/profile/07064077480502267877noreply@blogger.comtag:blogger.com,1999:blog-6673614740187623740.post-71247045476645406982014-08-22T16:12:46.497+03:002014-08-22T16:12:46.497+03:00I think Ukraine is unfortunately too open economy ...I think Ukraine is unfortunately too open economy with extremely high dependency on global commodity price to allow NBU to use rules and simple monetary policies. Neither inflation targeting nor having rules on how-to-adjust target interbank rates would not work in the economy, where 1) Exports in half of GDP and half of exports comprises of commodities, 2) 44% of corporate debt is denominated in foreign currency.<br /><br />And here is once again the argument why inflation targeting would not work in Ukraine: 20% drop in metal and agriculture prices (which could easily happen) would cause current account gap of 5% of GDP but only 3-4pp deflation. If NBU follows inflation targeting it would devaluate hryvnya by no more than 6-8% to adjust inflation to the trend. This would leave current account unbalanced given that elasticity of import to devaluation is much less <1. <br /><br />Before we get to have our economy less dependent on commodity export we would not be able to follow inflation targeting. Or any other strict rules which would limit national bank’s flexibility. Yegorhttp://ua.linkedin.com/in/ysamusenko/noreply@blogger.com