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Mykhaylo Makarenko ORCID logo, Daria Gordieieva


This paper develops an indicator for estimating international reserves adequacy in Ukraine taking into account its unique characteristics. The proposed indicator was constructed based on the modification of IMF adequacy metric by changing weighting coefficients of potential balance of payments vulnerabilities based on historical data for Ukraine and by the inclusion of import as an additional component. In comparison to the IMF metric our indicator implies greater international reserves. This is due to the fact that balance of payments of Ukraine is very sensitive to current account shocks such as worsening terms of trade so our indicator except import component has increased weighting coefficient of export earnings. Also, compared to the IMF metrics our indicator provides more weighting coefficients of the other portfolio liabilities and the money supply that represents the sensitivity to financial account shocks. Reduced weighting coefficient of the short-term debt could be explained by the partial refinancing of external debt. This new indicator suggests that the accumulated levels of reserves of Ukraine have been inadequate at 1 April 2015.

Keywords: International Reserves, Reserve Adequacy, Balance of Payments

How to cite this paper: Makarenko, M., Gordieieva, D. (2015). Development of composite indicator of Ukraine’s international reserves adequacy. Risk governance & control: Financial markets & institutions, 5(4-1), 168-176.