The Dissertation for the degree of Doctor of Philosophy in the specialty 051 – Economics – Private Higher Educational Institution “European University” of the Ministry of Education and Science of Ukraine, Kyiv, 2025.
The dissertation is devoted to the study of the inflation targeting regime and its role in ensuring the economic stability of the country. The work analyzes the concept of inflation targeting, its theoretical foundations, key determinants, its advantages and disadvantages in comparison with other types of monetary policy. The emphasis is on the necessary prerequisites for this regime, institutional reforms that ensure its implementation and successful further course.
Economic balance is important not only for the state as a whole, but also for each person, since only a stable economic environment creates conditions for income growth, enterprise development and ensuring the effective implementation of social programs and infrastructure investments by the state. Inflation is one of the key determinants of well-being - since its level directly affects the purchasing power of the population, the price level and economic confidence.
The first section reflected the theoretical foundations of the inflation targeting regime, its place in monetary policy regimes, the key instruments used by the regime, namely the discount rate and currency interventions. Special attention is also paid to the list of prerequisites necessary for the transition to this monetary regime, its advantages and disadvantages. The prerequisites necessary for the successful implementation of the inflation targeting regime are the following: independence of the central bank, flexibility of credit rates, stability of the national economy, the presence of a transparent policy of communication with the population.
The paper highlights the following advantages of the inflation targeting regime: reducing inflation expectations, increasing confidence in financial institutions (not only the central bank), the possibility of combining several monetary policy instruments (the discount rate and currency interventions), ensuring long-term economic growth, as well as disadvantages: high sensitivity to shocks, the existence of a significant time lag - reactions to changes in monetary policy, the risk of changing the regime in the event of deep economic crises.
The second section analyzes the experience of implementing the regime in countries with different levels of development and geopolitical situation, the prerequisites for its implementation, the difficulties that the regime had to face on its way to formation, the dynamics of the regime, its ability to counteract crises, etc.
In addition, the second section outlines the entire path of the Ukrainian economy from the moment of independence to the present, and within this framework, the path of the formation of the National Bank of Ukraine as a financial institution - from the moment of its establishment to its current functioning - is consistently highlighted.
In the third section, a method was developed and implemented to group countries that have introduced inflation targeting into countries that actively use currency interventions and those that resort to this tool only occasionally. Based on the grouping of countries described above, econometric models were built for 30 countries that have introduced inflation targeting (including Ukraine) to assess the following hypotheses:
– the use of currency interventions as an auxiliary instrument of monetary policy while adhering to the inflation targeting regime ensures a better functioning of the transmission mechanism and more theoretically sound relationships between factors in the economy;
– countries that combine the instrument of currency interventions with the discount rate while adhering to the inflation targeting regime recover from crises faster.
The inflation targeting regime is the most effective regime of monetary policy today, as it allows countries to effectively manage economic policy, ensuring its transparency and openness, resistance to economic shocks, coherence and complexity of the measures taken. Although Ukraine currently has no opportunity to return to this monetary regime, the chosen strategy of the National Bank of Ukraine, combined with sufficient amounts of assistance from partner countries, appropriate fiscal policy, and balanced amounts of currency interventions, will allow it to do so in the near future.
Keywords: inflation targeting regime, discount rate, inflation, exchange rate, foreign exchange interventions, GDP, transmission mechanism, central bank, monetary policy, inflationary processes, economic growth, stability, macroeconomic modeling, international reserves, autoregressive model.
