Inflation Targeting Model in Macroeconomics

Abstract

Empirical targeting by lowering inflation to the marginal level that causes monetary deflation and transition to depression is shown to increase the growth of the real GDP, while increasing inflation from the marginal level reduces the growth of the real GDP. The inflation is determined according to the theory of reproduction of the national economy by the mathematical function of the amount of money in circulation, foreign currency cash, interest rate, the cost of the utilized in production capital, the production input-output coefficient, and the unemployment rate. A model for regulating the economy by inflation targeting is developed, which allows the Central Bank of Ukraine to determine the target indicators for the period under consideration based on the statistical indicators of the previous period and through the nomogram of the inflation function of its arguments. The growth of the Ukrainian economy was modeled with an inflation target of four percent in 2021–2023 after the recession in 2020 caused by the coronavirus pandemic.