Year: 2024 | Month: February | Volume 69 | Issue 1Special
Efficiency of Fiscal and Monetary Policy in the Challenging Economic Environment
Dmytro Zakharov
Halyna Kryshtal
Anatolii Lutsyk
Halyna Vasylevska and Alla Chornovol
DOI:10.46852/0424-2513.1.2024.25
Abstract:
In order to ensure the effectiveness of fiscal and monetary policy in the challenging economic environment, it is important to ensure coordination, coherence and consistency of the work of state regulators. Fiscal and monetary instruments and tools should help overcome short-term macroeconomic shocks and achieve long-term macroeconomic stability. The purpose of the academic paper is to study the effectiveness of fiscal and monetary policy in the challenging economic environment on the example of Ukraine. The research methodology included methods of structural analysis of the basic instruments of fiscal and monetary policy used in conditions of macroeconomic instability and war. The results demonstrate the effectiveness of fiscal policy in the time of challenging economic conditions in Ukraine. It’s crucial to move swiftly to government initiatives and regulatory mitigation during a macroeconomic shock. Reducing the tax burden on the private sector is one of the most significant budgetary tools. At the same time, the budget execution was ensured by tax and non-tax revenues (domestic taxes, income taxes, taxes on profits, market value, and income from property and business activities, official transfers). The effectiveness of monetary policy in the context of a rapid decline in GDP and rising inflation has been ensured by the exchange rate fixation, foreign exchange interventions, and a systemic inflation targeting policy. The effectiveness of the NBU’s monetary policy is achieved through the formation of sufficient capital in the financial sector, provisions to cover non-performing loans in the 2022 crisis, and maintaining operating profitability through interest income.
Highlights
- In challenging economic conditions, Ukraine effectively employed fiscal policies, including tax reduction and external borrowing, to maintain budget execution and stimulate economic activity during the war-induced decline of 29.1% in GDP in 2022.
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