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Monetary policy refers to a set of measures taken by the government to regulate the amount of money in the economy. To implement monetary policy, the state uses a set of monetary instruments (money supply parameters, reserve norms, interest levels, loan terms, refinancing rates, etc.) and monetary regulation institutions (Central Bank of the Russian Federation, Treasury, Ministry of Finance etc.).

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The objects of monetary policy are supply and demand in the money market. The subjects of monetary policy are banks, primarily the central bank in accordance with its inherent functions as the conductor of the state’s monetary policy, and commercial banks.

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The main strategic goals of monetary policy are expressed in increasing the well-being of the population and ensuring maximum employment. The final goals of the Bank of Russia's monetary policy are formulated in accordance with the macroeconomic policy goals adopted for the current year. The main task of the Bank of Russia in the medium term is to smoothly reduce inflation.

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The main direction of the monetary policy of the Central Bank of the Russian Federation is to reduce the rate of inflation. In modern conditions, states with market economic models use one of two concepts of monetary policy: 1. the policy of credit expansion, or “cheap” money (Credit expansion of the Central Bank increases the resources of commercial banks, which, as a result of issued loans, increase the total amount of money in circulation) 2.policy of credit restriction, or “expensive” money. (Credit restriction entails limiting the ability of commercial banks to issue loans and thereby saturate the economy with money)

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Monetary policy methods are a set of techniques and operations through which the subjects of monetary policy - the Central Bank as a state body of monetary regulation and commercial banks as “conductors” of monetary policy - influence objects (demand for money and supply money) to achieve your goals. The methods for conducting day-to-day monetary policy are also called tactical objectives of monetary policy.

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Classification of monetary policy methods: 1. Direct and indirect regulation of the monetary sphere Direct methods have the nature of administrative measures in the form of various directives of the Central Bank regarding the volume of money supply and prices in the financial market. Indirect methods of regulating the monetary sphere affect the motivation of behavior of business entities with the help of market mechanisms.

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2. General and selective methods of monetary regulation General methods are predominantly indirect, influencing the money market as a whole. Selective methods regulate specific types of credit and are mainly prescriptive in nature.

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The influence of the subjects of monetary policy on its objects is carried out using a set of specific instruments. Monetary policy instruments are understood as a means, a way of influencing the Central Bank as a monetary regulatory authority on the objects of monetary policy.

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Even love has not driven as many people crazy as philosophizing about the essence of money. Gladson - Prime Minister of Great Britain Money will not feed you, clothe you, shelter you or entertain you until you spend it or invest it. People will do almost anything for money, and money will do almost anything for people. Money is a fascinating, repetitive, mask-changing mystery. Inscription on the Federal Reserve Bank of Philadelphia (1957)

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Money, banks and monetary policy Money and the money market Demand for money and equilibrium in the money market. Banking system and money supply. Monetary policy. Monetary policy instruments. What is money? The history of the origin of money - consider for yourself.

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Money is a special commodity that serves as the only universal equivalent that expresses the value of all goods and is an intermediary in their exchange. Consider in detail on your own the Functions of money: Measure of value Means of circulation Means of accumulation Means of payment World money

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Law of money circulation Fisher's theorem MV=PQ, hence M= PQ/ V, where M – mass of money P – sum of commodity prices Q – quantity of goods V – velocity of circulation CD=Ʃ TC – KR + P – VP/ CO, where Ʃ TC – sum of commodity prices KR – credit P – payments by terms VP – mutual payments CO – circulation speed

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Monetary aggregate is an indicator of the amount of money or financial assets classified as money supply; their liquidity is close to unit). They are distinguished: 1. M0 - cash 2. M1 - M0 plus funds in settlement, current and special accounts of enterprises and organizations 3. M2-M1 plus time deposits of the population in Sberbank 4. M3-M2 plus certificates and government bonds They differ from each other in terms of the composition of the money supply and liquidity. Liquidity decreases from M0 M1 M2 M3.

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The money market is a market in which the demand for money and its supply determine the level of interest rates, the “price” of money: it is a network of institutions that ensure the interaction of demand and supply of money. In the money market, money is “not sold” and “not bought” - this is the specificity of the money market. They are exchanged for other liquid assets at opportunity cost, measured in units of the nominal interest rate.

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Money market Since the supply of money is not determined by its price, but is regulated by the state, it is completely inelastic. In reality, the supply of money depends on the goals of monetary policy: Fixed interest rate (MS2). Constant level of number of prices (MS1). Change points 1 and 2 (MS3). s D surplus % supply shortage supply Q MS1 MS3 MS2

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Details Banking system Central Bank - (state) Bank of Issue - has a monopoly right to issue money Commercial banks - collect money from depositors at interest and issue loans to clients at interest. The difference between % is bank profit Non-banking sector - bank-like organizations _ pension fund, insurance companies BANKING SYSTEM Bank - specialized financial institution Level 1 Level 2

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One of the main functions of a bank is to provide credit. A loan is a transaction between economic agents to lend money or goods at interest. Basic principles of lending: 1 – repayment (it is necessary to return what you took, but with %); 2 - urgency (return of money within a specified period); 3 – security (the loan is issued against material security); 4 – payment (payment of % for using the loan).

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FORMS OF CREDIT: Commercial Banking Consumer Mortgage State International Lombard

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Topic 5. Monetary system and monetary policy of the state 1. Concept and types of monetary systems. 2. Money market: demand, supply, equilibrium. 3. The role of credit in a modern market economy. 4. Structure of the credit system. 5. Commercial banks. Their main operations and role in the economy. 6. Central Bank and its functions. Monetary policy and its types.

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The monetary system is a form of organization of monetary circulation that has historically developed in each country and is legally established by the state. Money circulation is the movement of money that mediates the circulation of goods and services. The most important elements of the monetary system: - national monetary unit (dollar, ruble, mark), in which prices of goods and services are expressed; -a system of credit and paper money, small change coins, which are legal tender in cash circulation; - a system of issuing money, i.e. a legally established procedure for issuing money into circulation; -institutions of the monetary system, i.e. state and non-state institutions regulating money circulation.

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The money supply is the totality of cash and non-cash funds that ensure the circulation of goods and services in the national economy. Basic monetary aggregates Rule: an aggregate with a higher degree of liquidity is part of a complex with a lower level of liquidity. Liquidity: the ability to use cash (financial assets) as a means of payment

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Basic monetary aggregates Aggregate M0 - cash, including balances in the cash registers of enterprises and organizations. Defined only in Russia The M1 unit is “money for transactions.” It includes the most mobile funds in the form of cash and money held in bank accounts on demand, other checkable deposits and traveler's checks. The M2 aggregate is money in the broad sense of the word, which includes all the components of M1 plus non-checking savings and time deposits of relatively small size (in the USA these are deposits up to $100 thousand). Aggregate M3 is formed from M2 by adding large time savings deposits to it. Aggregate L (M4) is the most extensive monetary aggregate. In addition to funds included in M3, it includes various securities (savings bonds, treasury bills), funds in foreign currency owned by the population, enterprises and organizations and banks

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Monetary base (money of increased power MB) - cash outside the banking system (C) and reserves of commercial banks stored in the central bank (R): The money market is a market in which the demand for money and its supply determine the level of the interest rate, the “price » money.

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Fisher equation: where M is the amount of money in circulation; V - velocity of money circulation; P - price level; Y – output volume in real terms). Hence: Replacing M with the parameter DM (amount of demand for money), we get the formula:

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“Cambridge equation”: where k is the share of nominal cash balances in income, i.e., the part of income that economic agents want to store in cash.

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Demand for money (Keynesian approach): 1.Transaction demand (MD1); 2. Speculative demand (MD2).

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Total demand (liquidity preference curve)

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Money supply Equilibrium in the money market

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Credit is a system of economic relations arising from the mobilization of temporarily free funds and lending them on repayment terms. Principles of credit: - urgency: - repayment; - payment; - security (guarantee); - purpose.

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Forms of credit: 1) commercial credit is a loan provided by some operating entrepreneurs to others in the form of the sale of goods with deferred payment. It is formalized by a bill of exchange; 2) bank loan is a loan provided by financial institutions in the form of cash loans; 3) consumer credit - provided to individuals in the form of a commercial loan (when purchasing goods with deferred payment) and a bank loan (loans for consumer purposes); 4) mortgage loan - long-term loans secured by real estate (land, buildings); 5) state credit - a system of credit relations in which the state and local authorities act as a borrower or lender in relation to citizens and legal entities; 6) interbank loan - short-term lending by banks to each other; 7) international credit - the movement of loan capital in the field of international economic relations.

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Two-tier (two-tier) system: 1. Central Bank. 2. Commercial banks and specialized non-banking financial institutions. Functions of commercial banks: - storage of money; -providing loans; -performing calculations. Operations of commercial banks: - passive; - active; - commission-intermediary and trust.

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Leasing is the issuance of loans in the form of rental or rental of equipment. Using this form provides businesses with a number of benefits. Factoring is the transfer by a company of management of its receivables to a bank. Bank profit is the difference in interest received from active operations and paid on passive ones. In addition, this includes income from the bank's equity capital. All this forms gross profit. Net profit is the difference between gross profit and the costs of banking operations. The rate of banking profit is the ratio of net profit to the bank's equity capital. The bank profit margin is the ratio of net profit to the bank's equity capital.

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Functions of the Central Bank: 1) issuing center of the country; 2) servicing government operations (government banker); 3) storage of reserves of commercial banks; 4) regulation and supervision of the activities of commercial banks; 5) regulation of the exchange rate of the national monetary unit; 6) regulation of the economy by monetary methods.

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Monetary policy instruments: 1) regulation of official reserve requirements; 2) open market operations; 3) manipulation of the discount interest rate.

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Required reserves are part of bank assets held either in the form of cash or in the form of deposits in the accounts of the Central Bank. Required reserve ratio (reserve ratio): Credit emission is the process of issuing means of payment within the system of commercial banks.

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The money supply multiplier is a numerical coefficient showing how many times the money supply will increase or decrease as a result of an increase or decrease in deposits in the monetary system by one unit where M is the multiplier; rr is the norm of required reserves. The increase in the money supply is calculated: where D1 is the initial deposit.

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where M is the multiplier; rr is the norm of required reserves. The increase in the money supply is calculated: where D1 is the initial deposit.

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Open market operations are the purchase and sale by the Central Bank of government securities. Changing the discount rate (discount policy) The discount rate is the interest on loans provided by the Central Bank to commercial banks.

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Monetary policy Cheap money policy: - reduction of the discount rate; - purchase of government securities on the open market; - reduction of the norm of reserve requirements. Cheap money policy: - increasing the discount rate; - increasing the reserve norm; - sale of government securities on the open market.

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Monetary policy is a set of government measures in the field of money circulation and credit, aimed at regulating economic growth, curbing inflation, ensuring the stability of Ukraine’s monetary unit and employment, and equalizing the balance of payments (Law of Ukraine “On the NBU”).

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Ultimate goals: 1) economic growth; 2) price stabilization; 3) stable balance of payments.

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The main instruments of penny-credit regulation and monetary policy are: 1. Change in the norm of obligatory bank reserves. 2. Change in the interest rate or the official interest rate of the Central Bank (oblikova or discount floor ITICS) 3. Operations on the open market.

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Required reserves are the portion of deposits that commercial banks must hold as non-interest bearing deposits with the Central Bank. The percentage set by the Central Bank for commercial banks is called the discount rate. Open market operations are a way to control the money supply (in advanced economies). The securities market is associated with the sale of securities and short-term government bonds.

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In monetary policy, two opposing courses are distinguished: 1) the policy of cheap money - increasing the money supply in order to expand aggregate demand and exit the recession; 2) the policy of dear money - reducing the money supply in conditions of demand inflation in order to curb it.

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Money is a type of financial asset that can be used for transactions; the most characteristic feature of money is its high liquidity, i.e. their ability to quickly and at minimal cost be exchanged for any other type of asset.

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To measure the money supply, monetary aggregates are used: Mo - cash; M1 = Mo + household deposits in commercial banks (on demand), funds in bank accounts of enterprises and citizens; M2 = M1 + time deposits in savings banks; M3 = M2 + certificates of deposit, government bonds, other bank and government securities, term loans in Eurodollars, etc.

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The demand for money is the desire of economic entities to have at their disposal a certain amount of means of payment, which firms and the population intend to hold at the moment. They distinguish: Nominal demand for money - changes following an increase in prices (Md). Real demand for money - calculated taking into account the purchasing power of money (cash) Md/ P, where P is the average price level.