The aim of the article is to provide an impartial analysis of the monetary and economic developments that have taken place since Ukraine gained independence in 1991 and to answer the question: which monetary regime is optimal now from the point of view of ensuring sustainable economic growth and preventing possible financial crises.

The first part of the paper describes main events that took place during the last fifteen years. There was a hyperinflation period and stagnation of the economy in the early 1990s, economic and currency reforms in 1994-97, the financial crisis of 1998 and a period of real economic growth and moderate inflation in 2000-05.

The second part of the paper discusses possible exit strategies to a more flexible exchange rate regime from the current de facto peg to the US dollar. It is argued that the inflation targeting approach is best suited to the needs of the Ukrainian economy and will provide a new "nominal anchor" for the economy. It allows increase in the credibility and transparency of monetary policy and maintenance of low rate of inflation in the long run to support sustainable economic growth.

Keywords: Ukraine, monetary development, exchange rate, inflation targeting.

  Oleksandr Petryk, History of Monetary Development in Ukraine - plik pdf; (603 KB)