Maryna Brychko

Department of Finance, Banking, and Insurance, 

Sumy State University

Ukraine

m.brychko@uabs.sumdu.edu.ua

Trust cycle of the finance sector and its determinants: The case of Ukraine

Jiří Polách

Institute of Entrepreneurship and Marketing, 

University of Entrepreneurship and Law, Prague, Czech Republic

profpolach@email.cz

ORCID 0000-0002-2224-0414

Olha Kuzmenko

Economic Cybernetics, Sumy State University,

Ukraine 

o.kuzmenko@uabs.sumdu.edu.ua

Tadeusz Olejarz

The Faculty of Management,

Rzeszow University of Technology

Poland

olejarz@prz.edu.pl 

Abstract. The paper presents the results of exploring the characteristics of trust cycle in the financial sector of the economy in general and across its main components (trust in banking and non-bank financial and credit systems) illustrated by the economy in transition - Ukraine - for the period 1st quarter 2009 - 1st quarter 2018. Determinants of nonlinear dynamics of public trust in the financial sector of the economy were also identified. For this purpose, an algorithm has been developed that enables studying the cyclical nature of public trust in the financial sector and testing the hypotheses about the determinants of its nonlinear dynamics. To highlight the cyclical component of the time series, harmonic analysis via Fourier transformations was used. In order to analyze public trust in the financial sector and its main components the following indicators were used: absolute volatility, relative volatility (in relation to financial and business cycles), the persistence of actual values and cyclic components, correlation with financial and business cycles. Our main result is that trust in the banking system has a greater cyclical amplitude than the national economy, the financial sector of the economy, and psychological dimensions of economic agents (a propensity to save and financial savings). High volatility of trust in the banking system indicates that any news or an event could lead to destabilization processes, ignoring of which may lead to a banking crisis.

Received: December, 2018

1st Revision: May, 2019

Accepted: November, 2019

DOI: 10.14254/2071-8330.2019/12-4/20

JEL Classification: E320, E710, G41, O160

Keywords: trust cycle, business cycle, financial cycle, economic agent's behaviour