Formation of domestic currency policy on the basis of international experience

Abstract

The issues of the monetary policy of the state, its methods and tools are considered. The methodologies and results of the currency policy are studied. Two real banking systems are distinguished: the Federal Reserve System (Fed) and the European Central Bank (ECB). The dynamics of interest rates of the US Federal Reserve, the US consumer price index, the interest rates of the ECB, the consumer price index of the ECB, the interest rates of the NBU and the consumer price index of Ukraine in 2022–2024 have been studied. The problems of positive and negative dynamics of changes in the instruments of formation of domestic currency policy on the basis of international experience are analyzed. The goals of formation of foreign exchange reserves and the policy of currency intervention are allocated. It is shown how the methods and instruments of currency policy work: interest rates, exchange rate, foreign exchange reserves, foreign exchange interventions. It is noted that with an excessively fast inflation rate, a change in interest rates will not be effective. The functions of the exchange rate and its dependence on interest rates are revealed. The function and significance of the country's foreign exchange reserves during foreign economic changes and fluctuations are determined. The functions of currency interventions as a method of currency policy in the short term are revealed. The real example of the United States shows the successful experience of the Federal Reserve System during the global crisis of the Covid-19 pandemic. The work of the European Central Bank is studied. The combination of all the above instruments of currency policy is the key to a balanced budget of the state. No economy in a country can exist without a constant cash flow, where both foreign and government currencies are in constant circulation and exchange. The difference in the period of implementation of both systems and the nearest possible prospects for the implementation of their policy is reflected. Proposals have been made to improve the currency policy of Ukraine by adapting to foreign economic conditions and establishing the actions of foreign exchange interventions.