The financial behavior of households in Ukraine

Abstract

The purpose of this paper is to evaluate the peculiarities of the financial behavior of households as one of the main factors of country competitiveness. The authors undertook to fulfill this aim by dividing household expenditures into fixed and variable elements, and investigating each element separately. The analysis is based on data from the State Statistics Service of Ukraine and encompasses the period of 2001-2017. A chi-square test was used to test the selected data. A high propensity of households to consume stimulates a greater internal market size within a country, a correlation which is also an important indicator of competitiveness in Ukraine, where a high proportion of savings of household income is typical. The situation in Ukraine shows a great positive impact of savings to the development of the local financial market. Ukrainian households tend to accumulate savings with the intent of creating a financial safety net for themselves in anticipation of future economic downturns. As is the case in many Central and Eastern European countries, Ukrainian households hold most of their savings in foreign currency and bank deposits. This allocation has proven itself to be resilient to changes in the expected returns of the assets in question. The marginal propensity of Ukrainian households to purchase non-financial assets is small, but relatively stable. The internal crisis in 2014-2016 triggered substantial changes in the financial behavior of Ukrainian households. The post crisis period of 2017 has not yet significantly changed the financial behavior of Ukrainian households. As in the past, today households keep a great deal of cash outside the banking system, with the largest share of the non-financial assets of households held in foreign currency.