Dollarization of the national economy and labor migration: aspects of relationship (case of Ukraine)

Abstract

The dollarization of the national economy of Ukraine as a natural phenomenon in close connection with the processes of labor migration is studied. Types and directions of dollarization of the domestic economy are analyzed. An assessment of the dynamics of average annual dollarization in Ukraine in 2014-2020, the dynamics of the exchange rate, the dynamics of private remittances to Ukraine are discussed. It is substantiated that the number of Ukrainians who left Ukraine is 2.5-3 times higher than the number of foreign citizens who entered the country. The main causes of migration problems in Ukraine and their impact on the dollarization of the domestic economy are identified. It is substantiated that foreign currency imported into the territory of Ukraine through international migrants is either not exchanged for the national currency, or is converted from the currencies of the leading countries of employers into dollars/euros. This is mainly due to the population's distrust of political and economic reforms within the country, and, accordingly, to the hryvnia. An inverse relationship has been established between the balance of purchase and sale of foreign currency and the level of dollarization of the economy in Ukraine, as well as the balance of purchase and sale of foreign currency and the share of foreign currency deposits. Both the factors that cause the strengthening of dollarization and the factors that constrain it are considered. It is determined that the key problem of dollarization of the economy is that Ukraine loses the most important target - monetary policy and its targets, as the NBU loses the ability to influence the money supply in the economy, and thus ensure stability of the national currency.