The policy papers are the joint product of the German Advisory Group for Economic Reforms in Ukraine and the IER aimed at providing economic policy recommendations to Ukraine’s policy makers. The recommendations are based on the careful analysis of Ukraine’s situation, state-of-the-art economic theory, and best international practices. The papers are available for policy makers and – with some time lag – for general public.
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In April 2008 the National Bank of Ukraine abandoned its policy of a (de facto) fixed exchange rate to the US dollar. The change towards a flexible exchange rate was the right move for fighting inflation back in April 2008 and has since November 2008 become an indispensable and effective instrument for combating the negative effects of the global financial crisis in Ukraine.
The recent international financial crisis has also hit the Ukrainian banking system. The withdrawal of deposits, a weakening of the hryvnia (UAH) and ownership conflicts around Ukraine's sixth largest bank, Prominvestbank, caused liquidity problems and led to panic purchases of foreign currency in the population. As an answer to these problems, the NBU issued a legal act that brought important temporary changes to the system, among them a suspension of early deposit withdrawal.
Ukraine lacks an efficient system of social assistance. Most social benefits are provided either as in-kind benefits or on a universal basis. The urban population benefited more from the strong economic growth in recent years than the rural population. Poverty became more rural.
In a recent Memorandum of Understanding between the Prime Ministers of Ukraine and the Russian Federation, both side accepted adjustments of gas import prices towards the level of "European gas prices" within a transition period of three years, in exchange for "European fees" for gas transit through Ukraine. Against this background, this paper argues that "European gas prices" in Ukraine should be determined by the replacement value of gas shipments in Europe minus the transit costs from Ukraine to EU markets.
The paper presents the results of empirical models of inflation dynamics in Ukraine over 1999 - 2008. Its objective is to shed light on the sources of inflation during this period, as there is widespread disagreement among policy makers and analysts about the concrete underlying reason(s).
Since the year 2000 the housing construction sector in Ukraine enjoyed very favourable macroeconomic conditions. High liquidity led to relatively low interest rates, while real incomes increased rapidly, thus supporting strong demand for housing. On top, ever increasing housing prices ensured an additional speculative demand for housing. As a result of this particular macroeconomic constellation, the housing construction sector performed very well.
WTO accession and the expected free trade agreement with the EU pose significant challenges for Ukrainian agriculture, implying structural changes for the sector as well as adaptations at the farm level to improve efficiency and competitiveness. However, a recent study by von Cramon- Taubadel and Nivievskyi demonstrates a clear lack of competitiveness. This directs attention to the forces that drive competitiveness in Ukrainian agriculture.
Agriholdings are leasing about 17.6% of arable land used by agrarian enterprises in 2008 in Ukraine. This figure will most likely rise to about 25% in 2009.
Ukraine has a good potential to become a player on dairy export markets. However, today there are various bottlenecks in the dairy value chain to increase efficiency and sector performance. Russia and the CIS countries remain the main importers of Ukrainian dairy products.
Monetary and fiscal policies have a strong influence on each other. In most cases, policies of central banks and government are of a complementary nature. Most actions taken by central banks to pursue price stability contribute to long-term fiscal stability, while a solid fiscal policy as a rule equally supports price stability.