MACROECONOMETRIC MODELLING OF THE RELATIONSHIP BETWEEN INFLATION, THE EXCHANGE RATE AND GDP OF UKRAINE

Abstract

The article develops a macroeconometric model of the interaction among inflation, the exchange rate and real GDP of Ukraine based on quarterly data for 2019–2026. The relevance of the study stems from the need to quantify the transmission of exchange-rate and price shocks to output under the extreme volatility of the wartime economy, when the hryvnia depreciated sharply and inflation accelerated into double digits, making the currency channel a central concern for monetary policy. The purpose of the article is to estimate the direction, strength and timing of the links among the three variables. The methodological framework rests on a vector autoregression estimated in levels; the choice of levels rather than a vector error-correction specification is justified by the stationarity of all three series confirmed by the Augmented Dickey–Fuller and KPSS tests, while a Johansen test is reported for completeness. The analytical toolkit comprises impulse-response functions with confidence bands, forecast-error variance decomposition and Granger causality tests, with the exchange rate ordered as the most exogenous variable in the Cholesky identification, and the stability and residual properties of the model verified by the corresponding diagnostic tests. The results establish a statistically significant exchange-rate pass-through: a depreciation shock raises inflation with the effect peaking two to three quarters ahead, whereas both inflationary and exchange-rate shocks depress GDP growth. Variance decomposition attributes up to 45 per cent of inflation variance and about 27 per cent of GDP variance to the exchange-rate factor over an eight-quarter horizon, confirming the leading role of the currency channel in shock transmission. The practical value lies in providing empirical support for exchange-rate stability as a precondition for both price stability and output recovery, which is directly relevant for the calibration of monetary policy during post-war reconstruction of the Ukrainian economy.