Chomiak V. Modeling and forecasting the Balance of Payments crisis in Ukraine.

Paper pointed out the main theoretical concepts of the Balance of Payments crisis, the evolution of the Balance of Payments crisis models from "Generation I" to "Generation III" model as well as hidden and untypical forms of crisis. The contagion effect of the Balance of Payments crisis is researched. Diversity of approaches to the Balance of Payments crisis modeling based on the worldwide expertise studied. Particular emphasis has been placed on signal approach, econometrics tools and factor analysis. The exchange market pressure index was chosen as a measure of the Balance of Payments crisis. It designates the Balance of Payments crisis and consists of weighted sum of changes in international reserves, exchange rate and interest rate. The estimation and analysis is based on econometrics models and signal approach, which both allow to predict the Balance of Payments crisis. Both methods pointed out similar indicators that inform about an upcoming crisis: current account deficit to GDP, core inflation, loans to GDP ratio, CRU index, EMBI index, impact of trading partners' Balance of Payments crisis etc. Crisis warning threshold is defined for each indicator. Aggregated warning index for signaling of upcoming crisis has been calculated. It is based on selected variables by signal approach and shows increasing risk of crisis in case of crossing threshold by majority of indicators. The main channels of spreading the Balance of Payments crisis are defined as well as main indicators signaling that country is at risk of the crisis are designated. The share of international trade to GDP, the level how imports exceeds exports, availability of substitutes for imported goods and competitiveness of exports, diversity of international borrowings proves that Ukraine is in a risk zone of the Balance of Payments crisis. External stability maps are built, and allow graphically illustrates how large external imbalances are and pointed out tendency of their growth. The procedure of response function estimation on one standard deviation shock is based on VAR models. It allows to measure impact of the one standard deviation shock of changes in exchange rate, GDP growth and CRU steel index on changes in exports and imports. These estimations are made based on Ukrainian data, as well as on pool data of emerging countries that experienced the Balance of Payments crisis. Mentioned above tools were used to out-sample forecast of the Balance of Payments crisis for 2013 year. Results of estimation based on signal approach and econometrics models are in line with calculated values of the exchange market pressure index for 2013. It proves effectiveness of the proposed tools that allowed to highlight increasing external imbalances leading to the upcoming crisis in 2014. The importance of taking into consideration political turbulences is analyzed. It is proved in the paper that political crisis usually becomes a trigger of the Balance of Payments crisis in a country with open economy and accumulated external imbalances. The system of the indicators and tools proposed in the paper signals about an upcoming crisis and can be used for preventing unexpected crisis shocks and minimizing its negative impact.