ECONOMIC AND LEGAL ANALYSIS OF THE RESTRICTIVE MONETARY POLICY OF STATE

Series "Law": Theoretical and practical issues of development of the law system of Ukraine

Abstract

The article is devoted to the economic and legal analysis of the restrictive monetary policy of the state. It proven that modern monetary policy is conducted in violation of the principle of social equity and economic efficiency. Switching to inflation targeting (in line with the Monetary Policy Principles for 2017 and the medium term), raising the Central Bank’s discount rate and high yields of government securities all have a destabilizing effect on the public economic order and contribute to unfair redistribution. This is reflected in the reduction of lending, production development, jobs and increased migration processes. Wages that are rising against this backdrop (mainly among public sector executives) are exacerbating inequality processes in the country and are pushing for inflation, since growth is not due to productivity gains. The deepening of inequality processes, in turn, exacerbates inflationary processes and inhibits economic development. The absence of a statutory portfolio limit on government bonds owned by banking institutions and the National bank of Ukraine (NBU) leads to the overburdening of the assets of banks (in particular, state-owned ones) and the Central Bank by public debt. This, in turn, impedes the development of the capital market and lending, as well as contributes to the gradual loss of NBU control over the money supply and its own economic independence from the Government. It is found that the weakening of the principle of responsibility paralyzes the incentives for the NBU to pursue an effective monetary policy and for the economic entities (banks) to profit from innovation and efficiency. In the course of the analysis of the case law and the modern legislation, the absence of mechanisms for the implementation of its separate legal norms has been established. In this regard, ways of solving this and other problems identified during the study are proposed.

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