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The author describes the model of short-time aggregate supply. He shows, that the optimal inflation level equals to the value such that the first derivative of point elasticity of aggregate supply reduces to zero. In qualitative terms, the level and dynamics of optimal inflation depend on the degree of correspondence of the market institutes to the principles of perfect competition: the lesser is that degree, the greater is the eventual value of optimal inflation. And, on the contrary, removal of market distortions promotes the decrease in its level

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It is concluded that Ukraine's economy is dominated by the commodity model, within which it specializes in the production of low value added goods. Because of this Ukraine's economy is highly dependent on the fluctuations of the world prices for this country's export commodities.
The author proves that, over the last 20 years, all the three economic, financial and FX crises observed in Ukraine (1998-1999, 2008-2009, and 2014-2015) took place against the background of the decline of the world prices for Ukrainian export items. And, vice versa, the revivals of the global conjuncture for raw materials were associated in Ukraine with economic growth, balanced budget and strong foreign exchange market position.
In this article, the world commodity market conjuncture is analyzed through the prices for steel, wheat, sunflower oil and nitrogen fertilizers exported by Ukraine.
It is stated that the causes of economic, financial and FX crises can vary significantly depending on the type of economy: commodity or industrial one, small or big one, and having or not a free access to international financial markets. It is concluded that, in small commodity based economies, financial, monetary and FX misbalances are not always the initial point of a crisis. In a number of cases they only play a secondary role in the crisis origination.
It is stressed that the phases of economic cycle in Ukraine as well as the stance of its finance, budget and exchange rate of the Hryvnia are to a great extent determined by the commodity nature of national production. Meanwhile the high volatility of the latter could be explained by a long-term technological decline.
Ukraine is featuring a lagging growth model according to which national GDP rates are lower than those in the most countries with emerging markets. As a result, Ukraine has been helplessly slipping down towards the commodity based periphery of the global economy although, in formal terms, its GDP dynamics may remain positive.
It is underscored that a systematic eradication of the above mentioned drawbacks would involve a technological revival, and the development of the manufacturing sector with its shifting to the production of high value added goods.

Keywords: Ukraine, commodity based economy, cycle, world conjuncture, commodity prices, GDP, exchange rate, general government budget

It is concluded that Ukraine's economy is dominated by the commodity model, within which it specializes in the production of low value added goods. Because of this Ukraine's economy is highly dependent on the fluctuations of the world prices for this country's export commodities.
The author proves that, over the last 20 years, all the three economic, financial and FX crises observed in Ukraine (1998-1999, 2008-2009, and 2014-2015) took place against the background of the decline of the world prices for Ukrainian export items. And, vice versa, the revivals of the global conjuncture for raw materials were associated in Ukraine with economic growth, balanced budget and strong foreign exchange market position.
In this article, the world commodity market conjuncture is analyzed through the prices for steel, wheat, sunflower oil and nitrogen fertilizers exported by Ukraine.
It is stated that the causes of economic, financial and FX crises can vary significantly depending on the type of economy: commodity or industrial one, small or big one, and having or not a free access to international financial markets. It is concluded that, in small commodity based economies, financial, monetary and FX misbalances are not always the initial point of a crisis. In a number of cases they only play a secondary role in the crisis origination.
It is stressed that the phases of economic cycle in Ukraine as well as the stance of its finance, budget and exchange rate of the Hryvnia are to a great extent determined by the commodity nature of national production. Meanwhile the high volatility of the latter could be explained by a long-term technological decline.
Ukraine is featuring a lagging growth model according to which national GDP rates are lower than those in the most countries with emerging markets. As a result, Ukraine has been helplessly slipping down towards the commodity based periphery of the global economy although, in formal terms, its GDP dynamics may remain positive.
It is underscored that a systematic eradication of the above mentioned drawbacks would involve a technological revival, and the development of the manufacturing sector with its shifting to the production of high value added goods.

Keywords: Ukraine, commodity based economy, cycle, world conjuncture, commodity prices, GDP, exchange rate, general government budget

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The Ukrainian economy has been suffering from financial instability for years, which manifests itself in the chronic devaluation of the hryvnia, regular financial, budgetary, debt and banking crises, cyclical inflation surges, "excommunication" of the public and private sectors from international financial markets, national dependence on external official loans, creditors and conditions for receiving their credits. Each further financial aggravation in Ukraine is accompanied by a deep economic crisis, an increase in unemployment, social tension and the spread of public disbelief. After all, such a picture has been observed in the country for 20 years in a row.
According to a common glance that seems particularly obvious during each new explosion of financial /budget deficits, the root cause of all these problems is excessive state consumption, which provokes unproductive costs in all sectors of the economy, increasing its internal instability and vulnerability. In such circumstances, strict budgetary constraints are considered as the best safeguard for financial and economic stability.
The article offers a different view on the causes of financial instability in Ukraine. In particular, as its key factor, structural and manufacturing imperfection is considered, which causes the country's financial dependence on fluctuations of the world conjunction on the raw materials it produces and exports. This approach is consistent not only with the logic of "intoxication" of the domestic economy during the last global financial crisis, but also with the results of relevant studies conducted after it has been overcome.
Underlying circumstances of the financial dynamics of Ukraine is the global liquidity supply, the volume of which directly depends on the nature of the monetary policy applied by the world's leading central banks. In particular, its easing is accompanied by an increase in demand in world markets, including those of raw materials, which stimulates economic growth of Ukraine with simultaneous increase of its financial capabilities. Conversely, the introduction of a tighter monetary policy oppresses global demand, commodity prices and, consequently, the productive and financial prospects of the national economy.
The analysis of empirical data confirms this hypothesis. In particular, the study concludes that the impact on the real GDP of Ukraine of world commodity prices and the exchange rate of the US dollar against the euro is, in certain circumstances, more significant than inflation in Ukraine (PPI) and the exchange rate of the hryvnia against the dollar. This allows to interpret the external monetary conditions as a significant factor for the economic and financial stability of Ukraine. It is so significant that, under certain conditions, its effectiveness succeeds that of the monetary and exchange rate policy of the NBU itself.

Keywords: financial instability, economic dynamics, economic structure, global monetary policy, US dollar to euro exchange rate, VAR model

The article considers financial aspects of the implementation of the People's Republic of China's international initiative of "One Belt, One Way". China's impressive economic success over the last 30 years has shown how it grew into a major global exporter and investor, gaining the second-country status in terms of national GDP and imports. These changes took place against the backdrop of rapid economic growth and deep structural reforms, which were accompanied by increased output and exports of high value-added products. Under these conditions, the country naturally prefers to reorient the global economic system in such a way that it is more conducive to China's economic, financial and political interests. A key practical tool for implementing such a plan is the One Belt, One Way initiative, which is to ensure simultaneous access to (a) Western technologies, (b) global raw materials markets, (c) infrastructure capacities that should maximize the deliveries of Chinese produce to all corners of the world economy. However, such an ambitious plan requires an extraordinary amount of financial resources. Despite China's considerable international reserves (over $3 trillion), its volume is still insufficient to cope with such a task. Moreover, the country itself needs further assimilation of foreign investment and technology due to the relatively low level of capital intensity of its workforce. China will be able to solve this dilemma if it manages to create a system of "counter investment", that is, attraction and absorption of foreign investments from more technologically developed countries, which are denominated in the main reserve currencies, and simultaneously realize their own foreign investments in Yuan, offering their users deliveries of own products of slightly lower technological complexity than those received from foreign investors.
This publication was prepared based on the presentation of "The Belt and Road Initiative - A New Shape of Globalization?" presented at the Institute of World Economics and Policy (IWEP) of the Chinese Academy of Social Sciences (CASS) in May 2019 as part of the International Economic and Economic Conference on "Economic and Trade Cooperation under the Belt and Road Initiative: Retrospect and Prospect".

Keywords: China, One Belt, One Way initiative, net international investment position