Ensuring Macroeconomic Stability under the Martial Law





monetary policy, martial law, macroeconomic stability


Introduction. In peacetime, the main contribution of monetary policy to macroeconomic stability is to ensure the stability of price dynamics through regulating money supply. During the war, the market principles of the economy and the formation of its prices are violated, monetary transmission mechanisms do not work adequately, the role of the state in ensuring the proper functioning of commodity-money relations increases. The new reality that the entire civilized world has faced since the beginning of Russia's armed aggression against Ukraine requires reconsideration of the macrostabilizing role of monetary policy in the event of military shocks.
Problem Statement. The generally accepted principle of modifying monetary policy during the wartime is the use by the central bank of instruments that expand the money supply – purchasing assets on the open market, outright purchase of government bonds on the primary market, special targeted refinancing of credit institutions.
Purpose. The purpose of this paper is to generalize approaches to the formulation of monetary policy during the wartime and to substantiate the relevant recommendations for contemporary situation in Ukraine.
Materials and Methods. Theoretical sources, advisory and research materials of international organizations and national macroeconomic regulators, statistical databases were used to achieve the stated aim.
Results. The paper suggests the design of the monetary regime of the war period, which provides for the modification of such aspects of the central bank performance as the target of monetary policy, the composition of interest rates on basic operations of the central bank, foreign exchange market regulation and regulation of capital flows, the relationships of the central bank and fiscal authority.
Conclusions. It is argued that under the conditions of military economy, the main contribution of monetary policy to macroeconomic stability is achieved through ensuring the stable functioning of the government borrowing market and controlling capital flows.


Download data is not yet available.


Fischer, S. (1992). Macroeconomic Stability and Growth. Cuadernos de Economía, 29(87), 171-186. URL: http://www. jstor.org/stable/23830518 (Last accessed: 12.10.2022).

Clarida, R., Gali, J., Gertler, M. (2000). Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory. The Quarterly Journal of Economics, 115(1), 147-180. URL: http://www.jstor.org/stable/2586937 (Last ac cessed: 12.10.2022).


United Nations (UN). (2016). Development and Globalization: Facts and Figures 2016. URL: https://stats.unctad.org/ dgff2016/DGFF2016.pdf (Last accessed: 12.10.2022).

European Union (EU). (2012). Consolidated version of the Treaty on European Union (Official Journal of the European Union, 2012/C 326/01). URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12012M (Last accessed: 12.10.2022).

Corbo, V., Fischer, S., Webb, S. (1992). Adjustment lending revisited: policies to restore growth. Washington, D.C., World Bank Group. URL: https://documents1.worldbank.org/curated/en/761181468739238754/pdf/multi-page.pdf (Last accessed: 12.10.2022).

International Monetary Fund (IMF). (n.d.a). Monetary Policy and Central Banking. (IMF Factsheet). URL: https:// www.imf.org/~/media/Files/Factsheets/English/MonetaryPolicy.ashx (Last accessed: 12.10.2022).

Patel, I. (1953). Monetary Policy in Postwar Years. IMF Staff Papers, 3(1), 69-131. URL: https://www.elibrary.imf.org/ view/journals/024/1953/001/article-A003-en.xml (Last accessed: 12.10.2022). https://doi.org/10.2307/3866210

Poast, P. (2015). Central Banks at War. International Organization, 69(1), 63-95. (Last accessed: 12.10.2022). https://doi.org/10.1017/S0020818314000265

International Monetary Fund (IMF). (n.d.b). Foundations of Central Bank Law (FCBLx). URL: https://www.imf.org/ en/Capacity-Development/Training/ICDTC/Courses/FCBLx#:~:text=The%20course%20covers%20the%20legal,and %20operations%20of%20central%20banks (Last accessed: 12.10.2022).

Whittlesey, C. (1943). The Banking System and War Finance. NBER. URL: https://www.nber.org/system/files/ chapters/c9925/c9925.pdf (Last accessed: 12.10.2022).

Hall, G., Sargent, T. (2022). Three World Wars: Fiscal-Monetary Consequences. PNAS, 119 (18), e2200349119. (Last accessed: 12.10.2022). https://doi.org/10.1073/pnas.2200349119

Kandil, E. (2000). Demand-Side Stabilization Policies: What is the Evidence of their Potential? IMF Working Paper, 00/197. (Last accessed: 12.10.2022). https://doi.org/10.5089/9781451860009.001

Reinhart, C., Sbrancia, M. (2015). The Liquidation of Government Debt. IMF Working Paper, 15/7. (Last accessed: 12.10.2022). https://doi.org/10.5089/9781484369234.001

Sargent, T., Hall, G., Ellison, M., Scott, A., James, H., …, Gaspar, V. (2019). Debt and Entanglements Between the Wars. International Monetary Fund. URL: https://www.elibrary.imf.org/view/book/9781513511795/9781513511795.xml (Last accessed: 12.10.2022).

Sargent, T., Wallace, N. (1981). Some Unpleasant Monetarist Arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, 5(1), Fall, 1-17. (Last accessed: 12.10.2022). https://doi.org/10.21034/qr.531

Aiyagari, S., Gertler, M. (1985). The Backing of Government Debt and Monetarism. Journal of Monetary Economics, 16(1), 19-44. (Last accessed: 12.10.2022). https://doi.org/10.1016/0304-3932(85)90004-2

Leeper, E. (1991). Equilibria Under 'Active' and 'Passive' Monetary and Fiscal Policies. Journal of Monetary Economics, 27 (1), 129-147. (Last accessed: 12.10.2022). https://doi.org/10.1016/0304-3932(91)90007-B

Fleming, J. (1962). Domestic financial policies under fixed and floating exchange rates. IMF Staff Papers, 3, 369-379. URL: https://doi.org/10.5089/9781451968873.024 (Last accessed: 12.10.2022).


Mundell, R. (1963). Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates. Canadian Jour nal of Economics and Political Science, 29(4), 475-485. (Last accessed: 12.10.2022). https://doi.org/10.2307/139707

Khatat, M., Buessing-Loercks, M., Fleuriet, V. (2020). Monetary Policy Under an Exchange Rate Anchor. IMF Working Paper, 20/180. (Last accessed: 12.10.2022). https://doi.org/10.5089/9781513556383.001

Rey, H. (2015). Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence. NBER Working Paper, 21162. (Last accessed: 12.10.2022). https://doi.org/10.3386/w21162

International Monetary Fund (IMF). (2021). World Economic Outlook: Managing Divergent Recoveries, April 2021. URL: https://www.imf.org/-/media/Files/Publications/WEO/2021/April/English/text.ashx (Last accessed: 12.10.2022).

Schmukler, S. (2003). Financial globalization: gain and pain for developing countries. World Bank Working Paper, 30141. URL: http://documents.worldbank.org/curated/en/832961468782172232/ (Last accessed: 12.10.2022).

Court of Justice of the European Union (CJEU). (2015). Judgment of the Court (Grand Chamber) of 16 June 2015 (Case C-62/14). URL: https://curia.europa.eu/juris/liste.jsf?num=C-62/14 (Last accessed: 12.10.2022).

European Central Bank (ECB). (n.d.). Our response to the coronavirus pandemic. URL: https://www.ecb.europa.eu/ home/search/coronavirus/html/index.en.html (Last accessed: 12.10.2022).

Fisher, I. (1922). The Purchasing Power of Money: Its determination and relation to credit, interest and crises. Econlib books. URL: http://www.econlib.org/library/YPDBooks/Fisher/fshPPM.html (Last accessed: 12.10.2022).

Anderson, R., Bordo, M., Duca, J. (2017). Money and Velocity During Financial Crises: From the Great Depression to the Great Recession. Journal of Economic Dynamics and Control, 81, 32-49. (Last accessed: 12.10.2022). https://doi.org/10.1016/j.jedc.2017.03.014

Blanque, P. (2021). Money and its velocity matter: the great comeback of the quantity equation of money in an era of re gime shift (Amundi Institute Discussion Paper). URL: https://research-center.amundi.com/article/money-and-its-velocitymatter-great-comeback-quantity-equation-money-era-regime-shift (Last accessed: 12.10.2022).

Federal Reserve Bank of St. Louis (FRBSL). (n.d.). Velocity of M2 Money Stock. URL: https://fred.stlouisfed.org/series/ M2V (Last accessed: 12.10.2022).

Benigno, P., Canofari, P., Di Bartolomeo, G., Messori, M. (2020). Theory, Evidence, and Risks of the ECB's Asset Purchase Programme (European Parliament, Monetary Dialogue Papers, September 2020). URL: https://www.europarl.europa. eu/cmsdata/211438/2_Luiss%20final.pdf (Last accessed: 12.10.2022).

Chen, H., Cúrdia, V., Ferrero, A. (2012). The macroeconomic effects of large-scale asset purchase programmes. The Econo mic Journal, 122(564), 289-315. (Last accessed: 12.10.2022). https://doi.org/10.1111/j.1468-0297.2012.02549.x

Ohanian, L. (1997). The Macroeconomic Effects of War Finance in the United States: Taxes, Inflation, and Deficit Finance. Routledge. 138 p. (Last accessed: 12.10.2022). https://doi.org/10.4324/9781351108874

Wicksell, K. (1907). The Influence of the Rate of Interest on Prices. The Economic Journal, 17(66), 213-220. (Last accessed: 12.10.2022). https://doi.org/10.2307/2220665

Laubach, T., Williams, J. (2003). Measuring the Natural Rate of Interest. The Review of Economics and Statistics, 85(4), 1063-1070. URL: http://www.jstor.org/stable/3211826 (Last accessed: 12.10.2022). https://doi.org/10.1162/003465303772815934

Danylyshyn, B., Bohdan, I. (2021). Problems of estimating the neutral interest rate: conclusions for Ukraine. Investment Management and Financial Innovations, 18(3), 214-228. (Last accessed: 12.10.2022). https://doi.org/10.21511/imfi.18(3).2021.20

Ferrando, A., Popov, A., Udell, G. (2021). Unconventional monetary policy, funding expectations and firm decisions. ECB Working Paper, 2598. URL: https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2598~ed44fd455c.en.pdf (Last acces sed: 12.10.2022).

International Monetary Fund (IMF). (2013). Unconventional Monetary Policies - Recent Experiences and Prospects - Background Paper (Policy Paper, 29). (Last accessed: 12.10.2022).


Altavilla, C., Giannone, D., Lenza, M. (2016). The Financial and the macroeconomic effects of the OMT announcements. International Journal of Central Banking, 12(3), 29-57. URL: https://ideas.repec.org/a/ijc/ijcjou/y2016q3a1.html (Last accessed: 12.10.2022).

Chakraborty, I., Goldstein, I., Mac Kinlay, A. (2020). Monetary stimulus and bank lending. Journal of Financial Economics, 136(1), 189-218. (Last accessed: 12.10.2022). https://doi.org/10.1016/j.jfineco.2019.09.007

Grosse-Rueschkamp, B., Steffen, S., Streitz, D. (2019). A capital structure channel of monetary policy. Journal of Financial Economics, 133, 357-278. (Last accessed: 12.10.2022). https://doi.org/10.1016/j.jfineco.2019.03.006

Heider, F., Saidi, F., Schepens, G. (2019). Life below Zero: Bank Lending under Negative Policy Rates. Review of Financial Studies, 32(10), 3728-3761. (Last accessed: 12.10.2022). https://doi.org/10.1093/rfs/hhz016

Cukierman, A. (1992). Central Bank Strategy, Credibility, and Independence: Theory and Evidence. Cambridge, MIT Press. 518 p. https://doi.org/10.1515/jeeh-1992-0410

End, N., Marinkov, M., Miryugin, F. (2019). Instruments of Debtstruction: A New Database of Interwar Debt (IMF Working Paper, 19/226). (Last accessed: 12.10.2022). https://doi.org/10.5089/9781513514550.001

Aizenmann, J., Chinn, M., Ito, H. (2010). The Emerging Global Financial Architecture: Tracing and Evaluating the New Patterns of the Trilemma's Configurations. Journal of International Money and Finance, 29(4), 615-641. (Last accessed: 12.10.2022). https://doi.org/10.1016/j.jimonfin.2010.01.005

International Monetary Fund (IMF). (2020). Annual Report on Exchange Arrangements and Exchange Restrictions. URL: https://www.elibrary-areaer.imf.org/Documents/YearlyReport/AREAER_2020.pdf (Last accessed: 12.10.2022).

Nordstrom, A., Roger, S., Stone, M., Shimizu, S, Kisinbay, T., Restrepo, J. (2009). The Role of the Exchange Rate in Inflation Targeting Emerging Economies (IMF Occasional Paper, 267). (Last accessed: 12.10.2022). https://doi.org/10.5089/9781589067967.084

Ostry, J., Ghosh, A., Chamon, M. (2012). Two Targets, Two Instruments: Monetary and Exchange rate Policies in Emerging Market Economies, Journal of International Money and Finance, 60, 172-196. (Last accessed: 12.10.2022). https://doi.org/10.1016/j.jimonfin.2015.03.005

International Monetary Fund (IMF). (2022). Review of The Institutional View on The Liberalization and Management of Capital Flows (Policy Paper, 8). (Last accessed: 12.10.2022). https://doi.org/10.5089/9798400204593.007

Checkley, L., Piris. A. (n.d.). Public Communication During a Financial Crisis. (IMF Special Series on COVID-19). URL: https://www.imf.org/-/media/Files/Publications/covid19-special-notes/en-special-series-on-covid-19-public-commu nication-during-a-financial-crisis.ashx (Last accessed: 12.10.2022).

Woodford, M. (2003). Interest and prices: Foundations of a theory of monetary policy. Oxfordshire: Princeton University Press. 808 p. https://doi.org/10.1515/9781400830169

International Monetary Fund (IMF). (2022). World Economic Outlook: War Sets Back the Global Recovery, April 2022. URL: https://www.imf.org/-/media/Files/Publications/WEO/2022/April/English/text.ashx (Last accessed: 12.10.2022).

National Bank of Ukraine (NBU). (n.d.). Official web-site. URL: https://bank.gov.ua (Last accessed: 12.10.2022).

Ministry of Finance of Ukraine (MFU). (n.d.). Official web-site. URL: https://minfin.gov.ua (Last accessed: 12.10.2022).

Federal Reserve System (FRS). (1945). Federal Reserve Bulletin, December 1945. URL: https://fraser.stlouisfed.org/ title/62#21132 (Last accessed: 12.10.2022).

Department of the Treasury of the United States (DTUS). (1945). Treasury Bulletin, October 1945. URL: https://fraser. stlouisfed.org/title/407#6584 (Last accessed: 12.10.2022).

Bureau of Economic Analysis (BEA). (n.d.). Data by Topic. URL: https://www.bea.gov/data/gdp (Last accessed: 12.10.2022).




How to Cite

Danylyshyn, B. (2023). Ensuring Macroeconomic Stability under the Martial Law. Science and Innovation, 19(1), 3–19. https://doi.org/10.15407/scine19.01.003



General Questions on Modern Scientific, Technical and Innovation Policy