Inflation (from the Latin inflatio) is a long-term increase in the general level of prices, which reflects a decrease in the purchasing power of a monetary unit.
Inflation not only leads to severe socio-economic consequences, but under its conditions, the effectiveness of action is lost and the instruments of macroeconomic regulation are deformed, and therefore there must be a state of "manageability" of inflationary processes.
Formulation of the problem. The importance of properly designed and integrated anti-inflation policy measures cannot be underestimated. After all, inflation is one of the most acute problems of modern economic development in Ukraine and in many countries of the world, negatively affecting all aspects of society. A high level of inflation destroys the monetary system, provokes the flight of national capital abroad, weakens the national currency, contributes to its displacement in domestic circulation by foreign currency, and undermines the state budget financing possibilities. Due to the fact that inflation has a negative impact on the life of society as a whole, it occupies one of the first places among the most acute and urgent problems related to the economic development of Ukraine.
The result of its progression is the devaluation of labor, the destruction of savings of legal entities and individuals, the hindrance of long-term investments and general economic growth. That is why the chosen topic should be considered relevant.
Inflation in practice. For January-February, inflation in the consumer market amounted to 2.3%. This means that the prices of consumer goods increased by 2.3% in two months. That package of products, which at the beginning of the year cost UAH 1,000, as of the end of February cost UAH 1,023. This seems like a small increase in prices, but it is only a short-term measure of inflation. If you look at this phenomenon over a longer period, its true essence is revealed. So, for example, for the years 2016-2020, the total inflation is exactly 45%. This means that the prices of consumer goods have increased by 45% over the past 5 years. A package of products, which at the beginning of 2016 cost UAH 1,000, will cost UAH 1,450 at the end of 2020.
Against the background of military and political threats and weak economic growth of Ukraine, in order to minimize inflationary risks, it is necessary to:
-stop attempts to suppress inflation by changes in the key rate, which do not yield results in conditions of weak monetary transmission and the dominance of non-monetary factors of inflation;
-direct the efforts of monetary policy to the development of the monetary transmission mechanism (involvement of operations of real economy subjects in the sphere of monetary relations of the banking system), including using the tools of targeted refinancing of bank loans and changes in the design of interest rates for deposit and credit operations of the central bank;
-ensure balanced communications regarding the state of the foreign exchange market in order to prevent its destabilization and the generation of pro-inflationary influence on the part of the exchange rate;
-conduct negotiations with international partners regarding Ukraine's access to external loans from official creditors at an acceptable cost in order to level debt risks of the exchange rate;
-resume operations of the central bank on the secondary market of government bonds with the aim of normalizing the quotation of OVDP rates and bringing them into line with the level of risk. Create an institute of market makers in the government bond market (modeled on the model of primary dealers of government bonds launched in Georgia in 2020 as a result of the technical assistance mission of the IMF)
At the same time, rather moderate GDP growth is laid down in the memorandum on cooperation between Ukraine and the IMF - 1%. Since in 2022 the economy of Ukraine could shrink by a third, such growth is on the verge of statistical error.
Ultimately, whether economic recovery will begin in 2023 depends on a number of non-economic factors: terrorist attacks by Russia, prospects for a diplomatic settlement, the availability of sufficient weapons in the Armed Forces, new waves of mobilization in the aggressor country, and Belarus' potential participation in the war.
References:
1.Keynes J.M. The general theory of Employment, іnterest and мoney / J.M. Keynes . – М.: Gеліоs АРВ, 2002. – 352 р.
2.Friedman Milton. (1996) Quantity theory of money / Milton Friedman. – M.: Deal. – 109 p.
3.Gal`chinskiy A.S. (2002) The basics of economical knowledge: course book / A.S. Gal`chinskiy, P.S. Eshchenko, Y.I. Palkin: ‒ 2nd edition, revised and supplemented. ‒ K.: High. ‒ 543 p.: ill.
4.Savluk M.I.( 2011) Money and credit: handbook. ‒ 6th ed., revised and supplemented. / M.I. Savluk, A.M. Moroz, I.M. Lapenko and others. K.: KNEU ‒ 589 p.
5.Krush P.V. (2010) Inf lation: essence, form and evaluation: handbook / P.V. Krush, O.V. Klimenko. K.: The centre of educational literature. – 288 p.
6.Martsin V.S. (2013) A few concepts of regulation of inflationary processes at the present stage of economy development / V.S. Martsin // Economy of development. ‒ No1(65). ‒ Р.42-48.
7.Baranovskiy O.I. (2004) Financial security in Ukraine (methodology of evaluation and mechanism of providing): [monograph] / O.I. Baranovskiy. – K.: Kyiv national trade and economic university. – 759 p.
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Language advistor: Natalia Zjubanova, senior lecturer of Foreign Languages Department, National Aerospace University named after N. E. Zhukovsky “Kharkiv Aviation Institute”
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