VII. Summarize the following text in about 100 words and give an appropriate title.

 

The situation changed in 1994 when the NBU impeded inflation rates and provided for financial stability.

A number of restrictivemeasures weretaken for this purpose:

- discount rate was raised;

- interest on banks' credit and deposit operations reached positive level rela­tive to inflation rates;

- norms of required reserves were raised;

- credit auctions were introduced in­stead of credit resources centralized distribution. As a result funds distribution among banks has acquired a market character;

- operations with state securities were introduced as the main source of covering the budget deficit.

All these measures had a positive impact on the dynamics of inflationary processes in Ukraine. Inflation rates in 1994 reached 400%, in 1997 they were only 10.1%; production decline rates considerably decreased as well — from 22.9 to 3.2%.

However, even this stage of the NBU's monetary policy can be consid­ered monetarist only conventionally. The above aspects of this policy were di­rected primarily at restricting money supply. General rates of money supply growth M2 decreased from 7 times in 1994 to 1,38 times in 1997. Thus, the NBU's monetary policy can be consid­ered monetarist only to the extent of its anti-inflationary orientation.

Monetarism in its classical under­standing also envisions money demand stability, which is not inherent in the Ukrainian economy since its real sector has not been subject to qualitative changes directed at its structural reformation. Under such circumstances the deficiency of working capital at enter­prises is explained by their non-competitiveness in conditions of the flexible price system, inability to act in the mar­ket situation or work in competitive en­vironment rather than by the strict NBU policy or by monetarism. Without prop­er institutional transformations and changes in the taxation and financial systems (primarily in the sphere of budgetary expenses) it is too early to speak about achievements of macroeconomic stabilization.

Thus, the estimation of the monetary policy in transitional Ukraine from the scientific point of view at a conceptu­al level makes it clear that Ukraine does not answer the main postulates of monetarism. Even despite the fact that the NBU's policy is oriented to­wards stabilization — this is not mon­etarism in the proper meaning of the word. Actually, as it was mentioned above, monetarism was not used in its pure form in developed countries ei­ther. However, corresponding mea­sures of the monetary policy were ac­companied there by necessary structural changes in the real sector of the economy and financial sphere. In addition they did not need to create all the market institutes anew.

So, if the monetary policy as a means of reforming the economy is considered one-sidedly, without taking into account the interrelation of all components of the economic reform, it will continue to be estimated from the extreme points of view: as a panacea for overcoming all crisis phenomena, or as a reason of the reforms failure. Both the first and the second estimates will be as far from the truth as the identification of the cur­rent monetary policy in Ukraine with monetarism.

 

Herald of the National Bank of Ukraine, May 2000

 

 

VIII. Read the memorandum (memo) written by the Kyiv National University teacher, who is responsible for the students practicing at one of the NBU departments (International Banking Department).

Memo 1

To: the students A.Kovalenko and T.Ivanchenko From: Mr.Osadchiy 1. Give the definition of the b/e (bill of exchange). 2. Study thoroughly the letter advising dispatch of a bill. Panton Manufacturing Ltd have completed an order for a Dutch customer. They now advice him that the agreed bill of exchange has been sent off. 3. Answer my questions: - Where has the b/e been sent? - When should the bill be paid? - How can Mrs. Haas get the shipping documents?   Thanks. Your teacher, Mr.Osadchiy

 

Panton Manufacturing Ltd. Panton Works, Hounslow, Middlesex, TW6 2BQ   Tel: [phone] Registered No. England 266135 Telex: 21511 Fax: [phone] Mr. B.Haas, 2nd March 20- B.Haas B.V., Heldingstraat 180-2, Postbus 5411, Amsterdam 1007, NETHERLANDS   Dear Mrs Haas, Order No. 8842 Thank you for your order which has now been completed and is being sent to you today. As agreed we have forwarded our bill, No. 1671 for £860.00 with the documents to your bank, Nederlandsbank, Heldringstraat, Amsterdam. The draft has been made out for payment 30 days after sight, and the documents will be handed to you on acceptance. Yours sincerely, D. Panton Managing Director

 

B/E No. 1671 5th March 20—   30 days after sight pay to the order of Panton Manufacturing Ltd. London Eight hundred and sixty pounds only value received payable at current rate of exchange for Banker's sight drafts on London.   To. B Haas B.V. Heldrmgstraat 180-2 Amsterdam 1007 Signed ________________ Managing Director

 

Memo 2

 

To: the students A.Kovalenko and T.Ivanchenko From: Mr.Osadchiy 1. Here is the bill mentioned in the previous memo. The bill has already been accepted by the drawee, who has named a bank in London, which she wants to use to clear the bill. 2. Study the bill and give your answers to the following questions: - What type of draft is it? - How much is it for? - Who is the payee? - When must the draft be paid? - What is the rate of exchange?   Thanks. Your teacher, Mr.Osadchiy

 

3) Words to remember. Give the translation:

 

a commercial bank a merchant bank to open an account a current/deposit/savings/budget account a specimen signature a balance a transaction Giro system a cheque/Eurocheque/traveller's cheque a cheque card cash card cash dispenser a credit card to honor a cheque to cancel a cheque to stop a cheque a paying-in/withdrawal/transfer slip notice of withdrawal a counterfoil a cashier negotiable securities a guarantor a loan an overdraft to overdraw overdraft facilities to call in an overdraft interest minimum lending rate (MLR) inflation

bank charges a standing order a direct debit overseas customer credit status confirming houses new issue/bullion/Euro-bond market shipping/insurance/foreign exchange market a bill of exchange a drawer a drawee a sight draft/bill days after sight (d/s) documents against payment (D/P) documents against acceptance (D/A) a foreign bill an inland bill a clean bill to discount a bill to endorse a bill a dishonored bill to protest a bill a letter of credit (L/C) a revocable/irrevocable letter of credit an importer an exporter an agent confirmed credit commission confirming bank

 

IX. Read the passage below and explain the meanings of the words and phrases, which have been underlined.

Cash Circulation and Settlements Sphere

 

The cash circulation and settlements sphere contains the fol­lowing key operations

- provision of the requirements of the country's economic development with cash in necessary volumes and optimum de­nominations of banknotes and coins in circulation;

- continuing the policy of rational limitation of settlements in cash between economic entities, and strengthening control of ap­propriate bodies over these entities, cash;

- further expansion of the sphere and increasing the volumes of cashless household settlements for goods and services and the improvement of their forms on the grounds of gradual introduction of elements of the national mass electronic payments system using electronic means of payment;

- book-keeping in compliancewith the international stan­dards as one of the instruments of reliability and authenticity of the banking system's information.

 

X. Make a chart using the following data, given by the NBU (20XX).

 

- Nominal GDP – UAH 124.1 million; fall in real GDP – 1%;

- budget deficit – 1% of GDP or UAH 1,240 million; its coverage from external sources in the amount of UAH 630 million, from external sources – YAH 610 million;

- inflation – to 19%.