DOLARIZATION OF THE FINANCIAL MARKET OF UKRAINE: CAUSES, EVOLUTION, CONSEQUENCES

Abstract

The purpose of the article is to assess the level of domestic financial market dollarization, find out the causes of this
economic phenomenon, trace its evolution and identify current features, substantiate proposals to minimize the negative
consequences for the financial market and the economy in general. The methods of theoretical analysis, synthesis and
generalization, analysis of statistical data and its graphical interpretation are used in the research.
The results of the research showed that the main reasons for dollarization in Ukraine were high inflation and sharp
fluctuations in the exchange rate of the national currency. In general, the dollarization of national financial markets occurs through the following channels: 1) borrowing on the international financial market; 2) the entrance of foreign banks to a
domestic market; 3) investing abroad, when a national financial market is not sufficiently developed to create high-quality
and highly liquid assets, dollarization provides rapid access to foreign financial assets and optimization of the profitability
and risk structure of an investment portfolio; 4) the difference (spread) between interest rates in national and foreign currency.
Based on the study of the domestic financial market, the following conclusions are made: 1) the level of Ukraine`s
financial market dollarization in the aggregate and in terms of its separate segments is high; 2) this level poses a threat to the
stable operation of financial intermediaries and the banking system in case of the national currency devaluation; 3) currency
imbalance of assets and liabilities in the banking system has strongly decreased since 2008, but is still significant; 4) foreign
currency is widely used by economic agents in the shadow sector of the economy. We consider the current dollarization level
dangerous for the development of the country's financial system, and its reduction to a scientifically sound natural level
should become one of the main tasks of the National Bank of Ukraine. Achieving the natural dollarization level and effective
use of the domestic financial market potential will allow to intensify Ukraine's national economy development and promote
integration into the international financial market and the global financial space.