Verbal interventions of the central monetary authorities in the conditions of new normality: the benchmarks for the NBU

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Article(UKR)(.pdf)

The role of transparency of the central bank as a prerequisite for increasing the confidence of economic agents in the policy is highlighted. The essence of verbal interventions as an instrument for the hitting of fixed targets of the monetary policy of the regulator in the conditions of “new normality” is determined, and their classification is generalized. Authors analyze the role and effectiveness of verbal interventions use and their influence on the achievement of the desired benchmarks in the financial markets, in particular regarding the exchange rate. Paper investigates general approaches to communication policy of the central monetary authorities of the developed countries: the European Central Bank (ECB), the Federal Reserve System (Fed), the Bank of England (BoE). It is noted that the use of “non-traditional” monetary policy instruments has strengthened the role of verbal interventions of central banks. It was found that if in the early 2000s verbal interventions of the ECB and the BoE were ineffective, then the GFC of 2008 increased the intensity of communications’ use, namely concerning fiscal policy, quantitative easing programs. It is traced that the Fed in its communication policy turns over the priorities between targeting inflation and stimulating economic activity. It is shown that verbal interventions of central banks of developed countries rarely relate to foreign economic activity and exchange rate fluctuations. The attention is focused on the insufficient transparency of the NBU monetary policy. Paper highlights trends in domestic communication policy are and reveals main communication channels of the NBU. The state of NBU’s compliance with the principles of the IMF on transparency in monetary and financial policies is illustrated. According to the results of the survey of indicators of confidence in the monetary policy of the NBU, which correlate with the main indicator in the focus of expectations of market participants – the exchange rate, the uncertainty of economic agents regarding the prospects of the banking regulator policy is argued. The measures of trust support are proposed, the introduction of which will strengthen the influence of NBU’s verbal interventions and provide predictability of the economic agents behavior. The certain recommendations for the improvement of the communication policy of the NBU are substantiated.

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