The cyclicity of fiscal and monetary policy in Ukraine
In the proposed article, the author analyzes the relation of fiscal and monetary policy to the cycles in economic activity of Ukraine. In the process, he conducts a detailed econometric analysis of the time series of macroeconomic variables to identify the characteristic trend type. The purpose of this research is to determine the characteristics of cyclicality for the discretionary measures of fiscal and monetary policy in Ukraine. The object of research is the formation of financial policy under the cyclical fluctuations in the economy. Unlike previous researches, the author indicates the high probability of the presence of stochastic trend in Ukraine’s GDP. As a result, in the article, the decomposition of Ukrainian GDP cycles is conducted not through the deterministic linear or polynomial trend, but with the help of Hodrick-Prescott filter. Using econometric methods, the author calculates the coefficients of the correlation between the detected cyclical component of GDP and various instruments of fiscal and monetary policy. As instruments of financial policy, the author considers: balance of the NBU interventions on the foreign exchange market, the NBU discount rate, the average rate for all NBU instruments, overnight loans rate, net liquidity injections of NBU, and discretionary budget deficit. As a result of the analysis, it is detected that fiscal policy in Ukraine is acyclic, and monetary policy has a heterogeneous nature of cyclicity depending on the instruments. Summarizing the presented study, the author notes that, in the light of the recent years’ increasing controversy concerning the coordination of fiscal and monetary policy, the conclusion on a low and ambiguous correlation between the macroeconomic instruments indicates that they are neither complementary nor substitutive relative to each other. The main conclusion is a neutral fiscal policy in Ukraine and an active use of the NBU’s monetary instruments as a response to cyclical fluctuations, which, however, has a sterilizing character. The neutrality of discretionary budget deficit raises the question of the very existence of fiscal policy in Ukraine as an instrument of economic regulation. This problem requires a deeper analysis. Due to space limitations, the author pays no attention to some points that could better highlight this aspect; however, he outlines the main areas for further analysis. The results of the estimation of the fiscal policy cyclicality parameters may depend on the variable used to identify discretionary fiscal policy. An alternative approach would be to use a cyclically adjusted budget balance. In addition, the author highlights a number of issues that may have a significant impact on the results of econometric estimates and require a detailed consideration in subsequent studies.