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Rogovaya T.

Pogrebnyak. A

Scientific supervisor: Vlasova I.A.

Donetsk National University of Economics and Trade

Named after Mikhailo Tugan-Baranovsky



Bankruptcy of the biggest American investment bank Lehman Brothers was the new stage of financial crisis that caused the fall of stock markets all around the world (30% drop in China, 20% drop in the USA, and 15% drop in the Western European countries, on the average). This problem didn't pass over Ukraine, thus, the national currency devaluation and the output fall continue, the rate of unemployment increases and the inflation rate is growing. One of the ways to solve these problems is the improvement of the money and credit policy.

The world financial crisis caused economic condition worsening in almost all of the countries: enterprises shut down, outturn falls, real personal income decreases, and bank system condition becomes aggravated. According to Euro-stat data, by November 1,2009 the unemployment rate in the countries of Euro area reached 8%.

Though Ukraine is not much integrated into the world economic area, it is among the countries, upon which the financial crisis has the biggest impact. It has already been in October that the index of the Ukrainian stock market First Fund Trading System (FFTS) decreased by 65.7%, which was the biggest drop among the other countries. Today, exchange rate of the US dollar towards the national currency is characterized by galloping increase; the number of bad loans is growing, the liquidity of banking system is decreasing, enterprises lack the opportunity to take on credits at commercial banks; metallurgical companies (that are providing 40% of all foreign currency receipts) use only one half of their production capacities, and the demand for their products has been decreased, etc.

In order to solve these problems different approaches of state financial policy are used, money and credit policy is among them.

Money and credit (monetary) policy is a complex of the governmental actions and measures in the area of money and credit markets, for example, regulation of inflation and national currency, guarantee of timely payments by means of regulation of banking system functioning, and of stability of money circulation by means of emission management and further extension of banks' clearing operations with physical persons in various consumer services, etc.

The basic goal of money and credit policy is the support of economy to attain to common production level that is characterized by full employment and firmness of prices.

Strategic goals are the key ones in national economic policy. They consist in securement of the GDP growth and high employment rate, in inflation rate decrease, and in settlement of balance of payments. It is noteworthy that within the frame of monetary policy these tasks are incompatible and cannot be fulfilled simultaneously.

Transitional goals are the changes in certain economic processes that aim at facilitating the achievement of strategic goals, for example, targeting of monetary aggregates, exchange rate, or inflation; absence of actual nominal constant. Management of legal reserves, operations at the open and exchange markets, and refunding of commercial banks are the operative tasks of the banking system aimed at achievement of transitional goals that make up the tactical foundation for money and credit policy.

Monetary market and banking system are traditionally considered to be institutional foundation for monetary policy. The National Bank that develops the basic principles of the monetary policy is the principal agent of money and credit policy. The Government, the Ministry of Finance, the Ministry of Economics and the Supreme Council (Verkhovna Rada) are also engaged in the process of monetary policy design.

It is relevant to transform money and credit policy into more tough and consistent one in order to improve the condition of the Ukrainian financial market. In particular, the following steps should be taken: 5-6% should be taken off the rate of commercial banks refinancing (that accounts for 12% at the moment). This will make credits more available. At the same time, it is necessary to impose control over credits allotted by banks in order to avoid the situation when banks obtain 6-7% interest credits and allot 20-30% credits to enterprises.

It is noteworthy that the foundation for stable functioning of Ukrainian financial market, as well as Ukrainian economy in general, is made up by the following: political stability, consent of all branches of power concerning the government state economic policy (that includes both, money and credit, and fiscal policies), abandoning of populism, decision making that may be unpopular among the citizens, however indispensable.

Thus, the world financial crisis showed how vulnerable Ukrainian economy is to exogenous (external) shocks. The Ukrainian Government and the National Bank should use all possibilities for regulation. The money and credit policy, in its turn, should use system-structural approach in order not to allow further exacerbation of the crisis, to avoid further devaluation of the national currency, to contain growing unemployment rate, and to increase reliance on the banking system.


1. Frederic Mishkin. Exchange Rate Pass-Through And Monetary Policy. -April 2008. - http://www.nber.org/papers/wl 3889.pdf.

2. Mervyn King. Monetary policy developments (Central Bank Articles and Speeches). -21.10.08. - http://www.bis.org/review/r081024a.pdf.

3. Roste O. Monetary Policy and Macroeconomic Stabilization: The Roles of Optimum Currency Areas, Sacrifice Ratios, and Labor Market Adjustment. -

Publisher Transaction Publishers)), 2008. - p. 214.