State monetary policy is a set of economic measures to regulate monetary circulation aimed at ensuring sustainable economic growth by influencing the level and dynamics of production, employment, inflation, investment activity and other macroeconomic indicators.

Monetary policy is carried out by the Central Bank. The ultimate goal of the monetary policy pursued by the Central Bank and state institutions is to organize the stability of monetary circulation, ensuring the achievement of sustainable growth of national production, characterized by full employment and the absence of inflation.

Monetary policy consists of regulating the money supply: during an economic recession, by increasing the supply of money to encourage spending, and during economic growth accompanied by inflation, by restricting the supply of money to limit spending.

The subject of monetary policy is the Central Bank of the country, which, using certain methods, influences supply and demand in the money market. A central bank changes a country's money supply by adjusting the amount of excess reserves held by commercial banks, which are critical to the banking system's ability to create money. It has at its disposal instruments of direct action (transactions with government bonds on the securities market) and indirect action (changes in the discount rate and the required reserve ratio). All these instruments affect the reserves of commercial banks and thereby the interest rate and money supply.

Open market operations(transactions with government securities) is the purchase and sale of government securities by the Central Bank. Commercial banks and the population act as economic partners. By purchasing or selling government securities (government bonds) on the open market, the Central Bank can either inject reserves into the state's credit system or withdraw them.

The Central Bank issues government short-term securities to cover the state budget deficit (that part of government spending that is not covered by taxes).

By selling government securities (GKOs), the Central Bank reduces the supply of money. And vice versa.

Change in discount rate (refinancing rate).

Discount rate- this is the interest rate at which the Central Bank provides loans to commercial banks. The level of the discount rate is set by the Central Bank. A commercial bank, receiving a loan, issues its debt obligation, guaranteed by additional financial security in the form of government short-term bonds and commercial bills.

Changes in the required reserve ratio. In general, the mechanism of action of this tool is as follows:

• when the Central Bank increases the required reserve ratio, the excess reserves of commercial banks are reduced, which leads to a multiplicative decrease in the money supply
• when the required reserve rate decreases, a multiplicative expansion of money occurs

Monetary policy is associated with the regulation of the money supply in circulation. Implements the monetary policy of the Central Bank. The Central Bank regulates both cash and non-cash money circulation. Monetary policy is an effective tool in the fight against inflation.

Measures that the Central Bank uses to reduce the money supply in circulation: 1. monetary reforms, 2. Increase in interest rates on loans, 3. Increasing the reserves that banks must keep in the Central Bank. Operations to increase the amount of money in circulation: 1. Introduction of new banknotes (for example, a 5000 ruble bill)2. Reduction of interest on loans, 3. Reducing the size of bank reserves that must be kept in the Central Bank. The instruments at its disposal implement the goals of monetary policy, the main types of which are maintaining the money supply at a certain level (tight monetary policy) or interest rates (flexible monetary policy). Tight policy involves maintaining the monetary base in line with the target money supply. Flexible monetary policy corresponds to maintaining a certain target interest rate. In practice, some intermediate option is usually implemented.

The choice of monetary policy options depends largely on the reasons for changes in the demand for money. For example, if the increase in demand for money is associated with inflationary processes, a strict policy of maintaining the money supply would be appropriate. If it is necessary to protect the economy from unexpected changes in the velocity of money, then preference may be given to maintaining the interest rate.

The central bank cannot simultaneously fix the monetary system and the interest rate. To maintain a relatively stable rate when the demand for money increases, the bank will be forced to expand the supply of money and vice versa.

Monetary policy mechanism. There are usually four main parts of the monetary policy mechanism. These are: 1) a change in the value of the money supply; 2) change in interest rate; 3) the reaction of total expenses to the dynamics of the interest rate; 4) a change in output in response to changes in aggregate demand - aggregate expenditures.

Between a change in the money supply and the reaction of aggregate supply, there are two more intermediate links that provide an influence on the final result. The interest rate changes by changing the structure of assets of economic entities. For example, if the Central Bank expands the supply of money, then economic entities will have more money at their disposal. The consequence of this will be the purchase of non-monetary assets and a reduction in loan rates. But the reaction of the money market depends on the nature of demand. If the demand for money is sufficiently sensitive to changes in the interest rate, then the result of an increase in the money supply will be a slight change in the rate and vice versa. If the demand for money reacts weakly to the interest rate*, then an increase in the supply of money will lead to a significant drop in the rate. It is obvious that violations in any link of the mechanism can lead to a decrease in the effectiveness of monetary policy.

It should be borne in mind that monetary policy faces a number of restrictions, among which the following are often noted: 1) excess reserves resulting from the “cheap money” policy may not be used by banks to expand the supply of monetary resources; 2) a change in the money supply caused by monetary policy can be partially compensated by a change in the velocity of money; 3) the impact of monetary policy will weaken if the demand curve for money becomes flat and the demand curve for investment becomes steep; in addition, the demand curve for investment may shift without neutralizing monetary policy.

Trends in monetary policy. The main methods of monetary regulation in accordance with neo-Keynesian recommendations are: changing the official discount rate of the Central Bank; tightening or weakening direct restrictions on the volume of bank loans depending on the size of aggregate demand and employment, exchange rate and inflation levels; the use of transactions with government securities to stabilize their rates and reduce the price of government loans.

The fundamental difference between the technique of monetary control based on the monetarist approach was the introduction of quantitative regulatory guidelines, the change of which also determines a change in the direction of monetary policy. The choice of one or another indicator as a guideline for monetary policy began to determine both the main objects and the technique of monetary control. Such indicators can be both the total money supply and its individual aggregates.

Government bodies of countries with market economies have recently increasingly focused on “policy for the development of competition” in the banking sector, stimulate competition, and take measures against anti-competitive cooperation. In many countries, domestic and international financial markets are being liberalized, controls over interest rates of commercial banks, and restrictions on banks on conducting transactions in the securities markets and on other types of financial activities are being abolished. Wide access of foreign banks to local markets is often seen as essential to improving the efficiency of the banking sector.

More on topic 40. monetary policy:

1. 1.1. Monetary regulation and monetary policy
2. 7.2.Monetary policy.\r\nMethods of monetary regulation
3. The Central Bank, its tasks and functions. Monetary policy of the Central Bank

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State monetary policy (Monetary policy) (Monetary policy) is the ability of the state to influence the monetary system, and therefore the interest rate and, through it, investment and real GDP.

The purpose of monetary policy is to ensure a stable monetary system and national currency. In this case, three main tools are used:

1. Changing the mandatory reserve norm(level of reserve requirements). Required reserves reduce the credit resources of commercial banks, and, consequently, the volume of monetary funds circulating in the country. These reserves in Russia are kept in the form of interest-free deposits in the Bank of Russia. An increase in the reserve ratio reduces the money multiplier, and conversely, a decrease in the reserve ratio will increase the money supply: the original amount of bank deposits is repeatedly used to provide loans, decreasing by the amount of reserve requirements with each turnover. With an average reserve ratio of 0.1, the total amount of credit resources of commercial banks will be 10 times greater than the amount of bank deposits.
2. Change in central bank policy rate- refinancing rates. A decrease in the discount rate reduces the price of a loan and contributes to an increase in lending volumes and vice versa. Raising the discount rate helps curb the demand for foreign exchange. Most often, the central bank will provide a loan to a commercial bank secured by a package of highly liquid securities (government bonds, corporate securities). This rate is called the pawn loan rate. Thus, the discount rate is closely related to the yield of government securities: an increase in the discount rate automatically increases the yield of government securities. During the first half of 2000, the Central Bank of the Russian Federation reduced the discount rate four times, lowering it from 55 to 28%.
3. Open market operations. This monetary policy instrument is most widely used in developed countries. The Central Bank, by purchasing government securities from commercial banks, increases their credit resources and vice versa. Often the central bank carries out such transactions in the form of a repurchase agreement (repurchase agreement), where it sells securities with an obligation to repurchase them at a (usually) higher price after some time.

The market for government securities began to form in the Russian Federation in 1993 and by the fall of 1998 it was represented by government short-term obligations (GKOs), federal loan bonds (OFZ), government savings loan bonds (OGSZ), and domestic currency loan bonds (OVVZ). Interest on them is paid from the federal budget, and in order to repay previously issued bonds (mainly GKOs - OFZs) it was necessary to issue all new issues (tranches). The placement of new trenches encountered increasing difficulties. To solve this problem, the yield of government securities was increased and non-residents were attracted to this market. At the same time, the bulk of GKO-OFZ were in the portfolios of the Central Bank and Sberbank. By August 1998, the yield on these bonds reached 170% per annum. The expansion of the pyramid of government bonds diverted money from the real sector of the economy, since transactions with them gave fabulous, incomparable profits. Doubts about the state’s ability to support this market increased attacks on the ruble, which ultimately led to a reduction in the Bank of Russia’s foreign exchange reserves, a fall in the ruble exchange rate, and an acute budget crisis. On August 17, 1998, the GKO-OFZ pyramid collapsed. A significant portion of these bonds, owned primarily by the Central Bank of the Russian Federation and Sberbank, were reissued as state debt obligations with minimal income and maturing in the second decade of the 21st century. Bonds owned by private individuals were repaid in the amount of 150 billion rubles. in 1999. In February 2000, the government again resorted to issuing GKOs with a three-month maturity with a yield of approximately 20% per annum.

Monetary policy can be tight when the money supply is maintained at a certain level, and flexible when the government seeks to maintain the interest rate at a certain level. But the Central Bank cannot simultaneously fix both the money supply and the interest rate. Thus, with an increase in the demand for money, in an effort to “keep” the money supply at a certain level, he will be forced to agree to increase the interest rate (Fig. 1), and in order to prevent the interest rate from rising, he will be forced to increase the supply of money (Fig. 2).

In practice, the state will more often combine these two goals of monetary policy, since a consistently tight policy will lead to an increase in the interest rate, an increase in the cost of credit, and a reduction in aggregate demand and aggregate supply. In Fig. Figure 3 shows an option for a relatively flexible monetary policy. In all these cases we are talking about the real money supply:

The state's monetary policy is closely related to fiscal and foreign economic policy. It must take into account the relationship between the main macroeconomic variables (money supply, interest rates, aggregate demand, output volume), and the expectations of investors and the population (buyers), and the degree of confidence of residents and non-residents in the actions of the government. The effectiveness of monetary policy depends on the degree of independence of the Central Bank as a branch of government, and on the qualifications and art of its leadership. As a rule, price and exchange rate stability policies are incompatible with soft fiscal policies and with fixed exchange rate policies, where domestic monetary policy will depend on the inflow and outflow of foreign currency into the country.

Basics of economic theory. Lecture course. Edited by Baskin A.S., Botkin O.I., Ishmanova M.S. Izhevsk: Udmurt University Publishing House, 2000.

Under state monetary policy is understood as a set of regulation of money circulation and credit aimed at ensuring sustainable economic growth by influencing the level and dynamics of inflation, investment activity and other important macroeconomic processes.

Monetary policy is closely linked to domestic political and economic relations, especially the rate of inflation and economic growth. Moreover, it is used not as a separate element of economic regulation, but in conjunction with such instruments as financial policy, income policy and others.

The Central Bank or organizations performing the functions of the Central Bank (US Federal Reserve System) carries out monetary policy.

Monetary policy is based on the principles of monetarism. Its main advantage over fiscal policy is efficiency and flexibility. Because it is administered by the Central Bank rather than the country's parliament, it is much less subject to political influence.

A negative point compared to fiscal policy is the indirect nature of the impact of monetary policy on the economy, mediated by certain “transmission mechanisms”. The Central Bank is able to exert predominantly indirect influence on commercial banks in order to reduce or increase their loans, which in turn contributes to financial stabilization, strengthening monetary circulation, expanding investment and, ultimately, economic growth in the country.

The main goals of the state's monetary policy are:

* mitigation of cyclical fluctuations in the economy;

* curbing inflation;

* stimulation of investments;

* ensuring full employment;

* regulation of economic growth rates;

* ensuring the stability of the balance of payments.

The Central Bank achieves its goals by influencing the intermediate links of the monetary regulation mechanism: the money supply, the interest rate, and the currency exchange rate.

There are passive and active monetary policies.

Under passive Policy understands changes in monetary parameters that arise as a result of the state’s implementation of fiscal (budgetary and tax) policy.

Conducting active politics, the state, with the help of specific instruments of monetary policy, influences the money market to achieve its goals.

There are two types of monetary policy: stimulating and restrictive.

Stimulating monetary policy (credit expansion) is carried out in order to increase economic activity in the country by increasing the money supply and reducing the price of money (interest rates).

For example, in the face of falling production and rising unemployment, central banks are trying to revive the market situation by expanding credit and reducing interest rates. On the contrary, economic growth is often accompanied by “stock market fever,” speculation, rising prices, and growing imbalances in the economy. In such conditions, central banks seek to prevent the “overheating” of the market by limiting credit, increasing interest rates, curbing the issue of means of payment, etc.

Restrictive monetary policy (credit restriction) is aimed at curbing inflationary economic growth and involves a reduction in the volume of money supply and an increase in the price of money.

We can also distinguish between long-term and short-term monetary policy. They differ in their results. In the short term, monetary policy has a greater influence on national output and a lesser influence on prices. In the long run, on the contrary, it has a predominant effect on the price level, only slightly affecting the real volume of output.

The choice of monetary policy options depends largely on the reasons for changes in the demand for money. For example, if the increase in the demand for money is associated with inflationary processes, a strict policy of maintaining the money supply would be appropriate, which corresponds to a vertical or steep money supply curve. If it is necessary to isolate the dynamics of real variables from unexpected changes in the velocity of money, then a policy of maintaining an interest rate related directly to investment activity (a horizontal or flat money supply curve L s depending on the slope of the curve L s change in the demand for money) will probably be preferable will have a greater impact either on the money supply M (Figure 1.1, b) or on the interest rate r.

Obviously, the central bank is not able to simultaneously fix the monetary system and the interest rate. For example, in order to maintain a relatively stable rate when the demand for money increases, the bank will be forced to expand the supply of money in order to reduce the upward pressure on the interest rate from the increased demand for money (this will be reflected by a shift to the right of the demand curve for money L D and a movement of the equilibrium point to the right along the curve L S from point A to point B).

Monetary policy has a rather complex transmission mechanism. The effectiveness of the policy as a whole depends on the quality of work of all its links.

We can distinguish four links in the transmission mechanism of monetary policy:

* change in the value of the real money supply (M/p) S as a result of the central bank revising the relevant policy;

* change in interest rate on the money market;

* reaction of total expenses (especially investment ones) to the dynamics of the interest rate;

* change in output in response to changes in aggregate demand (aggregate expenditures).

Between a change in the supply of money and the reaction of aggregate supply, there are two more intermediate stages, the passage through which significantly affects the final result.

A change in the market interest rate occurs by changing the structure of the asset portfolio of economic agents after, as a result of, say, the expansionary monetary policy of the central bank, they have more money on hand than they need. The consequence, as we know, will be the purchase of other types of assets, cheaper loans, i.e. resulting in a reduction in interest rates.

However, the reaction of the money market depends on the nature of the demand for money. If the demand for money is sufficiently sensitive to changes in the interest rate, then the result of an increase in the money supply will be a slight change in the rate. Conversely, if the demand for money reacts poorly to the interest rate, then an increase in the supply of money will lead to a significant drop in the rate.

It is obvious that violations in any link of the transmission mechanism can lead to a decrease or even the absence of any results of monetary policy. For example, minor changes in the interest rate in the money market or the lack of response of the components of aggregate demand to the dynamics of the rate break the connection between fluctuations in the money supply and the volume of output. These disturbances in the operation of the transmission mechanism of monetary policy are especially pronounced in countries with transition economies, when, for example, the investment activity of economic agents is associated not so much with the interest rate on the money market, but with the general economic situation and investor expectations.

Monetary policy has a significant external problem (the time from decision making to its result), since its impact on the size of GDP is largely associated through interest rate fluctuations with a decrease in investment activity in the economy, which is a rather long process. This also complicates its implementation, since a delay in the result can even worsen the situation. For example, a countercyclical expansion of the money supply (and a reduction in the interest rate) to prevent a recession can produce results when the economy is already on the rise and cause unwanted inflationary processes.

In general, monetary policy faces a number of limitations and problems:

* excess reserves resulting from the “cheap money” policy may not be used by banks to expand the supply of monetary resources;

* a change in money supply caused by monetary policy can be partially compensated by a change in the velocity of money;

* the impact of monetary policy will weaken if the demand curve for money becomes flat and the demand curve for investment becomes steep; in addition, the demand curve for investment may shift, neutralizing monetary policy.

(DCP) of a country is a set of measures in the field of credit and money circulation aimed at achieving the economic well-being of the country. The choice of PrEP is determined primarily by the goals to be achieved. Experts include the following among the possible goals of PrEP:

• Strengthening the national currency.
• Increasing the level of employment of the population.
• Increasing economic growth rates.
• Stabilization of the national economy.

Principles of economic regulation

In general, DCT can be restrictive or expansive. The first type involves the introduction of restrictions on banking operations, the second, on the contrary, their stimulation.

It can be seen that the Central Bank can use a variety of tools to implement monetary policy. Among them:

• Regulation of reservation norms. Everyone must keep part of their assets in an account with the Central Bank. The share of such assets is called the reserve ratio. Banks can only provide lending services when they have enough money in excess of the reserved amount. By increasing the reserve ratio, the Central Bank pushes commercial banks to raise interest rates, thereby reducing the attractiveness of banks' offers for consumers. At the moment, the reserve rate is 3.5% for accounts of legal entities, individuals, as well as for accounts in foreign currency. Violation of the standard threatens an unscrupulous bank with a fine, the amount of which cannot exceed two refinancing rates (the rate at which a bank loan is provided).

• Actions via . The Central Bank can also regulate monetary policy through purchases and sales of securities of commercial banks on the open market. The scheme is as follows: the purchase of bank securities leads to an increase in its reserves, and, consequently, to an increase in the money supply. Selling has the opposite effect.

• . The Central Bank regularly issues loans to commercial banks. By changing the interest rate, the Central Bank can influence bank reserves.

• . It is carried out by the Central Bank in the form of interventions - the Central Bank enters the foreign exchange market and purchases or sells foreign currency, thereby influencing the exchange rate.

Classification of PrEP methods

The most common classification of PrEP methods suggests dividing them into straight(administrative) and indirect(economic). Each type of method has its own advantages and disadvantages.

Direct methods affect the economic system as a whole. A clear example of the direct monetary policy method is a change in the reservation norm. The attractiveness of these methods is that the consequences of their implementation are much easier to predict, and development does not require a lot of time and money. However, direct methods are considered crude, as they can lead banks to irrational allocation of resources and push the banking market towards a monopoly. used direct methods until 1995, after which he abandoned them, however, he was forced to return to them in 1998, during a time of crisis.

Indirect methods, on the contrary, make it possible to avoid deformations and pathologies of market development, however, the consequences of their implementation are quite difficult to predict. However, the transition from administrative to economic methods is now officially enshrined in regulatory documents.

Types of PrEP

There are two main types of DCT: rigid and flexible.

As can be seen from the diagram, tough policies are aimed at maintaining the money supply at the same level ( Δ M is an increase in the money supply). money Sm vertical, since the interest rate is subject to change Δ r.

With a flexible monetary policy, the curve Sm horizontal, since, on the contrary, the Central Bank influences the money supply, preferring to maintain the interest rate at the level. The Central Bank resorts to a flexible monetary policy when the task is to neutralize the impact of the speed of money turnover on the national economy.

The type of monetary policy affects the demand for investment, which in turn affects the degree to which production and employment depend on the supply of money. Below is a graph of the dependence of investment demand on monetary policy:

The graph shows that the rigid one allows you to significantly influence the size of the investment I (due to the amplitude change in the interest rate), while the flexible one allows only a slight impact.

Current problem: the impact of electronic money on monetary policy

The problem is the following: the uncontrolled issuance of electronic money can lead to a significant increase in the money supply, and therefore to a rapid increase in inflation. can grow even if there is no growth in the money supply - this is facilitated by an increase in the speed of money turnover.

The following measures can be taken as preventive measures by the Central Bank:

• Introduction of a mandatory reserve requirement for electronic money issuers.

• Limiting the number of electronic money issuers in order to simplify the procedure for monitoring them.

• Introduction of an interest rate on amounts raised from the issue of electronic funds.

In addition to the fact that the issue of electronic money increases inflation, it also “takes away” from the Central Bank part of the issue income, which is also called seigniorage. Despite the fact that the drop in share premium to the level where it cannot cover the share premium will take a long time, the Central Bank should think about minimizing losses in advance. Experts do not exclude the possibility of monopolization of the issue of electronic money.

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