Martial Law Stress-shocks in the Currency Market of the National Economy and Ways to Overcome Them
Year: 2025
Type: article
Abstract: The article defines the content of currency market stress shocks, their causes and consequences. It is shown that the mechanisms for overcoming currency stress shocks are: interventions of the central bank by buying or selling currency to stabilize the exchange rate, limiting currency transactions based on the introduction of restrictions on the purchase of currency or capital control; increasing the discount rate; agreements with international organizations regarding the provision of financial support from the IMF or other partners; reduction of panic sentiments through transparent information policy of the government and the central bank. It has been proven that the consequences of currency stress shocks are: devaluation of the national currency due to a sharp decrease in the value of money, which leads to an increase in the price of imports; inflation caused by the increase in prices of goods due to increased import costs; loss of confidence in the financial system due to the fact that people can start withdrawing deposits and transferring money to foreign currency; bankruptcy of business entities that have foreign currency loans due to the inability to service them; capital outflow due to investors withdrawing their own funds from the country, which further increases the pressure on the exchange rate. To protect against currency market stress shocks, the following measures are proposed: diversification of savings by keeping part of the funds in different currencies; investing in protected assets, including in precious metals or government bonds; limiting currency speculation to avoid panic buying of currency under the influence of news; tracking the actions of the central bank to predict possible changes in the market. The purposes of sensitivity stress testing are substantiated, which are: currency risk management, financial decision-making, prevention of financial crises. It is shown that early identification of risks contributes to the development of strategies to avoid defaults or loss of liquidity. It has been proven that sensitivity stress testing is an important tool of financial analysis that allows enterprises to more effectively manage currency risks and maintain stability of financial results. It was determined that the regulation of the foreign exchange market in conditions of stress shocks involves the achievement of the following effects: economic (short-term and long-term goals); socio-political aspects involve increased control, maintenance of trust, political stability.
Author: Stanislav Cherednichenko
Institution: Classic Private University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7152526331