MONETARY POLCIY AND THE EXCHANGE RATE REGIME IN UKRAINE SINCE 2014

Since the beginning of 2013, Ukraine has experienced a range of social, political, and economic shocks, including revolution, change of political elite, loss of part of the territory, military conflict, the epidemic of Covid-19, and all the supporting economic consequences. The country has entered a period of a deep economic and financial crisis, which has been supported by the financial system’s volatility and imbalances in the external area. The result has been the devaluation of a national currency, which has a crucial impact on the main macroeconomic indicators. A choice of an exchange rate regime in a small open national economy has a defining impact on the mentioned indicators and macroeconomic equilibrium, in general. Since 2015, the National Bank of Ukraine (the NBU) has declared a transition to the policy of inflation targeting in the conditions of the floating exchange rate regime. Nonetheless, the practice has shown that the regulator partially follows the stated policy, influencing the exchange rate via currency interventions. Adjustment of fluctuations of the exchange rate is often performed for political and business purposes, lowering the degree of flexibility of the exchange rate and moving against the existing market conditions, which causes significant losses for economic agents, in particular, and a whole national economy, in general. Individuals and businesses have high devaluation expectations in Ukraine. They are more sensitive and vulnerable to the oscillations of the exchange rate. Monetary policy, which does not meet market realities in the conditions of the floating exchange rate regime, exposes economic signals for businesses and individuals and does not lead to the realization of the stated goals