GLOBAL MONETARY INTEGRATION AND DETERMINATION OF STRATEGIC PRIORITIES FOR THE EXCHANGE RATE POLICY IN UKRAINE

Abstract

The internationalization and fragmentation of the world’s production, distribution, exchange and consumption is reflected in the currency system, which has long since been not exclusively determined by political boundaries. The purpose of the research is justification of the process of global monetary integration and determining in this context the priorities of exchange rate policy in Ukraine. Two types of monetary integration that fits best to developing countries are heighlighted: dollarization and currency board. The types and evolution of dollarization models are described. The accent is focused on advantages and disadvantages of dollarization for developing countries. The essence and theoretical backgrounds of currency board are considered. A classification of exchange rate regimes according to IMF is presented. The social and economic development of Ukraine and monetary factor in shaping the welfare of the state are marked. After twenty-five years of efforts, Ukraine seems to have encountered the same challenges that it had faced twenty-five years ago: the challenges of integration and participation in the globalized world. Even though the country has made substantial progress, there is still much to be done. Judging from the couple of crises the country has suffered, one is inclined to say that participation of the country in the international financial markets is a point which matters much for Ukraine. The country did not manage to reap the advantage of capital mobility. Today, the country suffers again from a severe currency and banking crisis, where the national currency, hryvnya, devalues on a daily basis, and many people see their balances deteriorating. The policy-makers, the authorities and especially the National Bank of Ukraine (NBU) have used measures that did not work. The society is anxious and frustrated; it has even started to think about solutions like those on the hard side of the ‘Bipolar View’ theory, such as the currency board and dollarization. Weighing the impact of voting for or against one of the models of the exchange rate regime in the Ukrainian economy reform, one must realize that they are not universal. However, choosing the currency board regime allows stabilizing the financial market and quickly offsetting the fall in the standard of living, which resulted from miscalculations, abuses and possibly fraudulent decisions in favour of certain corrupt oligarchic groups in the system of exchange rate policy.