Home » Press centre » Archive news » 2018

Disinflation May Have Different Consequences for Small Open and Closed Economies – NBU Open Research Seminar

22 December 2018

Press Release


On 13 December 2018, the National Bank of Ukraine hosted an open research seminar where Oleksandr Faryna, National Bank of Ukraine, and Magnus Jonsson, Sveriges Riksbank, presented their recent research paper “Disinflation in Small Open and Closed Economies,” co-authored with Nadiia Shapovalenko, National Bank of Ukraine.


In the study, the authors estimate differences in short-term output losses in small open and closed economies during a disinflation period and examine the specifics of central bank policies intended to minimize such losses. The authors use a new Keynesian dynamic stochastic general equilibrium model with sticky prices and imperfect central bank credibility.


The results suggest that disinflation in a small open economy is associated with larger short-term output losses than in a closed economy due to real exchange rate appreciation. Interest rate policy therefore should be looser in a small open economy, while the central bank should communicate a stronger commitment to macroeconomic stabilization. Under imperfect credibility, the role of communication increases significantly in both closed and small open economies. Moreover, a new inflation target should be implemented gradually: the reduction must be sharp at first and slow afterwards.


The NBU invites researchers to participate in the NBU’s research seminars to present their findings on issues related to the NBU’s activities and the operation of the financial system. Email your proposals (along with a desired seminar date, presentation materials, an executive summary, and/or draft contributions) to the NBU Research Division of the Monetary Policy and Economic Analysis Department (email: research@bank.gov.ua).


The materials of previous open research seminars are available  here.


The NBU launched open research seminars in July 2015. These seminars provide an opportunity to representatives of the academic and expert community, international financial institutions, other central banks, and the NBU to share their research findings and discuss them with peers.

Last modification   22.12.2018