Adequacy assessment of Ukrainian and Israeli international reserves

Derkach Julia
lecturer of Banking Department, Odesa National Economic University, Odesa, Ukraine, E-mail:djul@ukr.net, ORCID ID: https://orcid.org/0000-0002-5195-1821

Pohorielova Maryna
IV-year student in the Faculty of Finance and Banking, Odesa National Economic University, Odesa, Ukraine, E-mail:marinajpogorelova@gmail.com, ORCID ID:

Cite this article:

Derkach J., Pohorielova M. (2024) Adequacy assessment of Ukrainian and Israeli international reserves. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Otsinka dostatnosti mizhnarodnykh rezerviv Ukrainy ta Izrailiu; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 3-4 (316-317), pp. 48-54.

Abstract

The article analyses inter-temporal changes in the international reserves of the National Bank of Ukraine compared to the Bank of Israel. Therefore, it is aimed to identify and evaluate adequacy problems of gold and foreign exchange reserves according to different criteria under political and military tension. The following foremost methods are studied and applied in order to determine the optimal size of official reserves: the specific weight indicator in the Gross Domestic Product (GDP); the import coverage criterion; the Guidotti and Greenspan criterion; the Wijnholds and Kapteyn criterion; the Ratio of Reserve / Assessing Reserve Adequacy (ARA) metric of the International Monetary Fund (IMF). As a result of the comparative analysis of the international reserves’ adequacy in Ukraine and Israel over the period from 2011 to 2024, it is revealed that the issue of the reserves’ shortage is common for the Ukrainian economy, whereas their surplus is found within the Israeli one. Normally, both extremums are deemed unhealthy. The Israeli case is strongly connected to the precautionary motive affected by the military hazards, though. It highlights the importance of receiving global non-repayable financial and other assistance to manage international reserves in such an environment. Structural reforms could be considered for Ukraine, as well. All in all, the article’s scientific novelty is proven by utilization of the pioneering methodological framework of the ARA metric and performance of the comparative analysis between Ukraine and Israel about their international reserves’ adequacy and compliance to the scope of the national economy under the external destabilizing action. The practical significance of the obtained results is justified by establishing how growing geopolitical risks can affect the management of the international reserves’ volume in small and large economies.

Keywords

gold and foreign exchange reserves, international reserves, central bank, reserves adequacy criteria.

JEL classification: E580; F310; DOI: https://doi.org/10.32680/2409-9260-2024-3-4-316-317-48-54

UD classification: 336.743.22(477)

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