NBU key policy rate efficiency in terms of existential shocks

Sheludko Sergii
Ph.D. in Economics, Associate Professor, Leading Specialist of the Department of Valuation and Collateral Operations, Pivdenny Bank PJSC, Odesa, E-mail:s.szeludko@gmail.com, ORCID ID: https://orcid.org/0000-0003-0636-4940

Cite this article:

Sheludko S. (2022) NBU key policy rate efficiency in terms of existential shocks. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Efektyvnist oblikovoi stavky NBU v umovakh ekzystentsiinykh potriasin; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 5-6 (294-295), pp. 49-55.

Abstract

The study aims to assess velocity of key policy rate impact on the cost of capital in terms of existential shocks (in case of Ukraine during macroeconomic shocks in 2014–2015 and 2020–2022). In the course of the study, it is used both general economic research methods (analysis and synthesis, heuristic extrapolation, ideographic representation etc.) and econometric approaches (Granger causality). The information base consists of official statistics and communiqué of National Bank of Ukraine. It is introduced the concept of an existential shock as a set of specific external factors under which an economic recession is clearly or partially exists, and regulatory decisions are made to eliminate negative consequences. The main sign of such an event is an imaginary or real threat to life, regardless of a magnitude of net economic losses. The first studies of retail market rates response to changes in key rates level appeared only in the last two years because of the end of coronavirus pandemic. Central banks of advanced countries, as a reaction to the existential shock, primarily involved the mechanisms of open-market operations (lending and asset purchases). The situation in developing countries was more complicated: tough administrative instruments, as the reserve ratio, the official exchange rate, the key rate, were used. In the context of the monetary transmission mechanism the key rate has a direct impact on three indicators: credit supply, interbank market rates and interest rate expectations. To determine shock periods for the empirical analysis of the velocity of market rates response to changes in the key rate, it is considered the dynamics of Financial Stress Index for Ukraine. It is selected data for two periods: escalation in the East (15.04.2014 – 04.03.2015) and 1st and 2nd lockdown (13.03.2020 – 09.06.2021). The estimated velocity of the impact of the key policy rate on the cost of capital in Ukraine in terms of existential shocks is 1-2 days for short-term transactions. The practical significance of the results is in its use for the adjustment of NBU monetary strategy in the conditions of the current war and future existential shocks.

Keywords

crisis, deposit, interest rate, key policy rate, monetary policy, transmission mechanism.

JEL classification: E430, E520, G010; DOI: 10.32680/2409-9260-2022-5-6-294-295-49-55

UD classification: 338.23:336.781.5

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