Central Banks are one of the most crucial entities in a macroeconomic scale. Their decisions and actions have a real impact on the economy and the wealth of citizens. How did the Central Banks of Ukraine and of Poland react to the Russian invasion of Ukraine? Were their wartime decisions different than usual? How did they adapt their strategies to the abnormal circumstances? How did they communicate the strategies to other entities and societies? The scholars that assess the wartime activities’ assessment of the Central Banks of Ukraine and of Poland were Magdalena Szyszko, Associate Professor at the WSB Merito University in Poznań, and Olena Motuzka, Assistant Professor at the National Academy of Statistics, Accounting, and Audit in Kyiv. They study the topic as part of grant programme FOR UKRAINE conducted by the Foundation for Polish Science.
A central bank is an institution responsible for conducting the monetary policy of a state and supporting the functioning of a banking system. Central banks formulate monetary policy goals, primarily related to maintaining stable price levels and controlling the economy with available instruments.
“Our project concentrates on the monetary policies of the National Bank of Ukraine (NBU) and the National Bank of Poland (NBP). Even though these two entities play no direct role in managing the crisis related to the Russo–Ukrainian War, they play a key role in ensuring the proper functioning of the economies by ensuring the stability of prices and supporting state-led economic policies. Their role in mitigating the economic crisis resulting from the War is particularly important as it ensures stability. There are studies showing that central bank support in wartime can strongly influence the course of history,” says Magdalena Szyszko.
Changing Tools and Communication
The researchers aim to identify and assess the change in monetary policies in terms of communication with the society, tools, and short-term effect during the Russian invasion of Ukraine. The project presents a case study of Ukraine the defending country and Poland the supporting country.
“The period under analysis is very short: from the February 2022 Russian invasion of Ukraine until today. We must face a limited access to data. We dispose a short time series of maximum two years that cover the war, so our assessment will be made on an ongoing basis. In this short period of time, we may already notice a clear change of communication language in banks. For example, in all official documents in the English-language version of the Central Bank of Ukraine, Russia is written in lower case. Although our project is mainly scientific and its primary goal is to fill the gap in the literature, we do not exclude some important and practical results. Even such an ongoing assessment of Central Banks’ activities allows us to spot mistakes and propose alternative actions,” emphasizes Olena Motuzka, who initiated the collaboration.
Two Perspectives
The project provides two perspectives, the Ukrainian being the most important one. From 2019, the National Bank of Ukraine has pursued a new strategic inflation targeting, largely adapted to the requirements of the European Union. Preparation in terms of monetary policy framework is one of the conditions for Ukraine’s accession to the EU. One the most important prewar challenges faced by the National Bank of Ukraine was the continuation of the disinflation process. In this scope, the NBU applied standard political and communication tools. After the Russian invasion, the NBU’s role significantly deviated from a standard one. Military actions coupled with a humanitarian crisis and an glaring economic collapse forced the NBU to reorient its activities toward providing the economy with money and ensuring macroeconomic stability. “The Russian invasion of Ukraine created the first historical possibility to observe monetary policy actions conducted by the Central Bank regarding inflation targeting and its consequences,” explains Magdalena Szyszko.
The second perspective of the project is the Polish one. The Russo–Ukrainian War also challenged the National Bank of Poland, even if the difficulties of the Polish nation and economy are incomparable to those of the Ukrainian. Since the Russian invasion, the policy of the Polish state was mainly driven by the large-scale Ukrainian refugees’ influx and the energy crisis. Both factors significantly influenced the Polish economy and raised many concerns at the NBP. “The current exceptional conditions for shaping monetary policy are related to the direct influence of the Russo–Ukrainian War on prices of energy, commodities, and food, thus indirectly affecting wage increases, exchange rates, as well as changes in inflation expectations and forecasts. All this affects financial market stability,” remarks Olena Motuzka.
Dr Hab. Magdalena Szyszko is a graduate of the Poznań University of Economics and Business, where she also obtained a doctorate in Economics and a habilitation degree. Since 2009, she has been working at the WSB Merito University in Poznań; since 2018, as Associate Professor at the Faculty of Finance and Banking. Her research interests include inflation forecasts and the transparency and communication of central banks. Author of many scientific publications and principal investigator in research projects financed by the NBP and Poland’s National Science Centre, Szyszko spends her free time with her family, taking care of her four cats and pursuing her passions.
Dr Olena Motuzka is a graduate of production management at the Kyiv National Economic University, the Faculty of Production Management and of international law at the Ukrainian Academy of Foreign Trade. She obtained her doctoral degree in Statistics at the Kyiv National Economic University. Currently Assistant Professor at the Faculty of Economy and Management of Foreign Economic Activities at the National Academy of Statistics, Accounting, and Audit in Kyiv, Motuzka studies trends and prospects for the development of international investment policy and inflation, along with their influence on consumers under conditions of economic instability, also by analyzing state budget revenues. Author of over 70 scientific publications, Motuzka spends her free time travelling, reading, and listening to music, particularly developing her passion for cats.
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