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Due to this, the money supply increases. Money supply problems. Money supply indicators

In the modern economy, the money supply is formed with the participation of: the central bank, commercial banks and economic agents (organizations and the population) who are depositors and borrowers of commercial banks.

The Central Bank creates the main component of the money supply - the monetary base.

Monetary base = Cash in circulation + Reserves and deposits of commercial banks with the Central Bank

The central bank provides the economy with cash. This institution has a monopoly right to issue cash. The central bank is a bank of banks.

If we try to pay for the purchased pies at the buffet with a receipt with our signature, we will not succeed. But the central bank has this right. It issues cash if its experts believe that the economy needs additional money. The central bank of any state can increase the non-cash money supply in the economy by providing a loan to a commercial bank. In this case, the asset of the central bank’s balance sheet will reflect the operation of issuing a loan, for example, for 200 million rubles. In the liability balance sheet of the central bank, this amount will be reflected as the balance in the correspondent account of the commercial bank that received the loan.

The question arises: where did the central bank get the money to provide the loan? He created them! Unlike all other economic agents, the central bank is given by law the right to create money by making digital entries on its balance sheet. Therefore, it is not much of an exaggeration to say that the central bank will create money out of thin air. But it is important to remember that the central bank, firstly, forms only part of the money supply - the monetary base; secondly, it creates money in accordance with the needs of the economy. To understand this process, one must examine the central bank's balance sheet.

An increase in central bank assets simultaneously means an increase in liabilities and, accordingly, an increase in the monetary base. For example, the central bank’s purchase of foreign currency on the foreign exchange market from exporting organizations means an increase in cash balances in correspondent accounts of commercial banks with the central bank. This is due to the fact that exporting organizations have accounts in commercial banks, and the latter make payments among themselves through correspondent accounts opened at the central bank.

The money supply is formed in the modern economy on the basis of the monetary base and is quantitatively measured by monetary aggregates (Table 3.1). Commercial banks and their borrowers participate in the formation of another and the main part of the money supply. Non-cash money is created as a result of credit transactions.

Depositors of commercial banks contribute cash to current accounts and deposits and thereby increase non-cash money. It is non-cash money that is used in credit operations, and these operations lead to the creation of additional non-cash money.

Money supply is the amount of cash and non-cash money circulating in the economy. The non-cash component of the money supply is

money in current accounts and in bank deposits (deposits) on demand, money from which the depositor can receive in hand on any day, and in time bank deposits (deposits), i.e. open for a certain period.

Depending on the bank deposits taken into account, quantitative elements of the money supply - monetary aggregates - are distinguished. IN different countries A different set of such units is calculated, but usually there are four of them: * MO = cash in circulation; Ml = MO plus bank deposits in demand accounts; M2 = Ml plus bank deposits in time accounts; * M3 = M2 plus quasi-singles (short-term treasury securities).

The Bank of Russia currently publishes data on two monetary aggregates - MO and M2. According to the Bank of Russia definition, the monetary aggregate M2 is the sum of cash in circulation and non-cash funds. This indicator includes all funds of non-financial and financial (except credit) organizations and individuals in cash and non-cash form in rubles. Cash in circulation (MO monetary aggregate) is the most liquid part of the money supply, available for immediate use as a means of payment. This unit includes banknotes and coins in circulation. Non-cash funds include balances of non-financial and financial (except credit) organizations and individuals on settlement, current, deposit and other demand accounts (including accounts for payments using bank cards) and time accounts opened with credit institutions in rubles.

Liquidity of money is the relative ease of its use when purchasing goods, services, financial assets ( valuable papers). Of course, money in current accounts and demand deposits can be used by the owner immediately, unlike money in time deposits. This means that monetary aggregates have different liquidities. The Ml aggregate is more liquid than the M2 aggregate.

The ratio of the monetary aggregate M2 to GDP is called the monetization coefficient. This coefficient shows the degree of saturation of the economy with money. Currently, the monetization of the Russian economy is significantly lower than that of other developed countries. But the monetization coefficient of the Russian economy has a steady upward trend.

The process of formation of the money supply is directly affected by: - ​​the volume of the monetary base created by the central bank; - the intensity of money multiplication by commercial banks.

Monetary base. The primary and main element of the formation of the money supply is the monetary base (money on the balance sheet of the central bank).

The monetary base is the stable component of the money supply. We can talk about the stability of this component in the sense that it is entirely determined by the actions of the central bank, i.e. is completely controlled by him. The monetary base consists of coins and banknotes issued by the central bank, as well as mandatory reserve requirements - funds that commercial banks, by force of law, hold in special non-interest-bearing accounts at the central bank.

Another component of the money supply - bank accounts and deposits - can be characterized, firstly, as unstable, and secondly, as self-regulating.

Central banks have several methods at their disposal to create the monetary base:

  • purchasing foreign currency on the foreign exchange market in order to replenish reserves;
  • purchase of government securities;
  • accounting of bills of commercial banks;
  • loans to commercial banks.

In the USA and European countries, the main method of creating a monetary base is the purchase of government securities on the open market, and in Russia - the purchase of foreign currency on the foreign exchange market.

The monetary base is the monetary obligations of the central bank to economic agents - organizations and the population. Statistically, this indicator is determined on the basis of the balance sheet of the central bank. In the balance sheet of the central bank, items of sources of the monetary base are balanced by items reflecting its use. Sources of the monetary base include:

  • foreign currency reserves;
  • loans to commercial banks;
  • government securities;
  • rediscounted commercial bills;
  • gold reserve.

The items of use of the monetary base in the balance sheet of the central bank are: * cash in circulation; * required reserves of commercial banks with the central bank; * balances on correspondent accounts of commercial banks with the central bank; * deposits of commercial banks with the central bank.

Note that the sum of the items of sources of the monetary base coincides with the sum of the items of its use.

If the central bank buys foreign currency or government securities, it pays with newly created money. Initially, this money ends up in correspondent accounts of commercial banks at the central bank and is subsequently distributed throughout the economic system.

The size of the monetary base reflected in the balance sheet of the central bank corresponds to the amount of: - cash in the non-banking sector of the economy; - required reserves of commercial banks in the central bank; - cash in the reserves of commercial banks.

The part of the monetary base that is created in the United States and European countries as a result of the purchase of government securities is more manageable compared to the part that is created as a result of central bank loans. The first is called the unborrowed monetary base.

The monetary base is often characterized by the term “primary liquidity”. To the secondary, i.e. derivative liquidity refers to the total money supply created by the multiplier effect of the expansion of deposits as a result of lending operations by commercial banks. Historically, primary liquidity was created by commercial banks and treasuries (mints). To date, the function of creating primary liquidity has been assigned to central banks.

It is important to compare the effectiveness of methods for creating primary liquidity (sources of the monetary base) and, accordingly, the choice of criteria for comparing them. Two such criteria can be distinguished:

  1. effectiveness in achieving monetary policy objectives;
  2. efficiency.

As world practice has shown, the purchase and sale of securities, i.e. Carrying out operations on the open market allows you not only to control the amount of money in circulation, but also to change it quite accurately within the required limits. The purchase by the central bank of government securities to create an appropriate amount of new money means monetization (transformation into money) government debt. Government obligations are most suitable for monetization, since they are secured by the economic power of the state - its property, as well as the tax base determined by it.

The volume of government bond issues in the United States and European countries is determined by the budget's borrowing needs. Bonds are distributed in the banking and non-banking sectors, as well as among the population. The Central Bank is interested in purchasing only part of the volume of bonds issued by the government for the purpose of monetization. If the central bank were to purchase the entire government bond issue equal to the budget's borrowing needs, it would create a monetary base that would lead to a surplus money supply.

But if the state, represented by the government, issued only such a volume of bonds that the central bank needs to monetize public debt (i.e., to organize money circulation), then open market operations to regulate the money supply in circulation would become impossible. Their essence is as a method of regulating the quantity of money - in the exchange of bonds for money or money for bonds (depending on the current goal of the central bank's monetary policy). The interest income paid by the government on the bonds is distributed between the central bank and economic agents. At first glance, it turns out that the state is transferring money from pocket to pocket - the Ministry of Finance pays a percentage to the central bank, and the latter then transfers part of its net profit back to the budget. In turn, economic agents receive income on their investments. But in practice it turns out to be more a difficult situation. The use of government bonds as assets of the central bank determines a specific policy regarding their exchange rate. When conducting open market operations, the central bank must determine the bond rate at which economic agents would be interested in either buying them or, conversely, selling them, depending on the goals of monetary policy.

Significant funds in in this case are spent on servicing the bond market. In fact, there is a loss of large volumes of share premiums (seigniorage). Methods of expanding the monetary base, such as discounting commercial bank bills and loans to commercial banks, allow the central bank to fully accumulate share premium. However, they do not make it possible to quickly manage the money supply and ensure its change within strictly specified limits.

The Bank of Russia calculates the monetary base in narrow and broad definitions.

The monetary base in a narrow definition includes cash issued by the Central Bank of the Russian Federation (taking into account cash balances credit institutions, i.e. commercial banks) and balances in required reserve accounts for funds attracted by credit institutions in national currency deposited with the Bank of Russia.

The monetary base in a broad definition includes: cash in circulation, taking into account balances in the cash registers of credit institutions; correspondent accounts of credit institutions with the Bank of Russia; required reserves; deposits of credit institutions in the Bank of Russia; Bank of Russia bonds from credit institutions.

Before the global economic crisis of 2008, the Central Bank of the Russian Federation created the monetary base mainly through the purchase of foreign currency on the Russian foreign exchange market. This foreign currency comes to Russia as export earnings from the sale of goods and services on the world market. Russian exporters sell proceeds in foreign currency because they need rubles to pay taxes, wages, acquisition of equipment. The Bank of Russia is buying foreign currency both to replenish its reserves and to prevent the strengthening of the ruble. Excessive strengthening of the ruble has a negative impact on Russian exports of industrial products, and also leads to an increase in imports and, accordingly, a weakening of the competitiveness of domestic producers in the national market. With the onset of the 2008 crisis and the reduction in export revenues from energy exports, the Bank of Russia began to use such a tool as increasing the monetary base as lending to commercial banks.

Money creation by the banking system. Let's imagine the following situation: the volume of money supply in the economy is N; In addition, you have a bank deposit (deposit) in the amount of 1000 rubles. A commercial bank issues a loan to its client in the amount of 800 rubles using this deposit. This money is transferred to another bank as payment for purchased goods. Consequently, before the loan was granted, the money supply in the economy was N + 1000, and after the credit operation it was N + 1000 + 800. Thus, the banking system creates the money supply as a result of credit operations. This phenomenon is called the money multiplier.

Not only economists, but also politicians participated in the recognition of the fact that commercial banks increase their liabilities by issuing credits (loans). In 1859, during hearings on the problem of banking policy in the House of Commons, English parliamentarians drew attention to the growth of loans provided by banks, which occurred against the backdrop of a stable amount of money in circulation. One of the parliamentarians asked a question in this regard, the meaning of which boiled down to the following: it turns out that banks create their own liabilities by issuing loans? This is what actually happens.

The concept of expanding bank deposits was put forward by K. Pixel in 1907. Around the same time, practicing economists began to develop ideas about the special importance of bank reserves for expanding the money supply. But the very concept of a money multiplier appeared much later, in the 1960s.

The money multiplier effect is the process of creating non-cash money in bank (deposit) accounts as a result of lending operations by commercial banks. In economic literature, along with the concept of “money multiplier,” the concepts of banking, credit, deposit, and reserve multipliers are used. All these concepts characterize a single mechanism and in this sense are synonymous. They emphasize specific aspects of money multiplication.

When using the term “bank multiplier”, attention is focused on the subjects of the process - commercial banks. When using the term “credit multiplier”, the emphasis shifts to the driving force of the process - credit operations. When using the term “deposit multiplier”, the result of the process is noted - an increase in money in deposit accounts in commercial banks.

When using the term “reserve multiplier”, emphasis is placed on the main condition for the multiplication of money - the presence of free reserves in commercial banks. Money multiplier = money supply: money base or Money supply = money multiplier x monetary base

From the above formula it follows that the formation of the money supply occurs on the basis of the monetary base created by the central bank. Thus, the amount of deposits exceeds the volume of the monetary base by the value of the money multiplier.

The monetary base is completely controlled by the central bank. The value of the money multiplier is influenced by the central bank, commercial banks, their depositors and borrowers.

The central bank influences the money multiplier if it sets reserve requirements for commercial banks. When determining such requirements, each commercial bank is obliged to transfer to a special account at the central bank a certain part of its demand accounts and time deposits of clients. This portion of deposits deposited by commercial banks with the central bank is called the reserve requirement. For example, with a mandatory reserve requirement of 6%, a commercial bank will have to transfer 6 kopecks to the central bank. from every ruble of deposits opened with him. Mandatory reserve requirements are applied in the banking systems of Russia, the USA, and the EU. They are not available in the UK, Canada, Switzerland.

Such requirements have a double meaning. Firstly, the withdrawal of part of the deposits placed in them from commercial banks means a decrease in their ability to provide credits (loans) and thereby create additional non-cash money. Consequently, an increase in the required reserve ratio leads to a decrease in the money multiplier, and a decrease, on the contrary, leads to an increase. Therefore, mandatory reserve requirements play the role of a tool for regulating the money supply.

Secondly, required reserves are credited to the balance sheet of the central bank and can be used to pay off the debts of a commercial bank in the event of its bankruptcy. Commercial banks make decisions about granting loans and can refuse such transactions if they consider them to be unnecessarily risky, for example, in case of poor market conditions. In this case, commercial banks will prefer to hold excess reserves. The larger the amount of excess reserves, the fewer loans will be issued and the smaller the volume of newly created non-cash money will be. Consequently, the ratio of excess reserves to the sum of accounts and deposits affects the value of the money multiplier.

Borrowers are able to influence the value of the money multiplier if, under certain conditions, for example, when interest rates on loans are high, they find it impossible to resort to widespread use of bank lending.

Savers influence the value of the money multiplier by their decisions to change the amount of money they hold in cash and, therefore, to deposit money into a commercial bank account. If the depositor decides to put money on deposit, the commercial bank will receive additional funds and can use them to provide loans. As a result of the credit operation, the amount of non-cash money in circulation will increase.

Thus, we have identified four indicators that affect the value of the money multiplier: the required reserve ratio of the central bank; the amount of reserves of commercial banks not used for lending; interest rate on loans issued commercial bank to their borrowers; the ratio between the cash of economic agents and their money in deposit accounts and debit cards.

It is important to consider that increasing the monetary base by issuing cash does not lead to a multiplication of money if it remains in the hands of the population. This is due to the fact that the money multiplier effect is associated only with non-cash money.

The scheme for the manifestation of the money multiplier effect is as follows: the excess reserve of a commercial bank turns into a loan; loan - to a new deposit; the latter again turns into a loan, minus the amount subject to mandatory reservation. The chain is repeated every time until the amount of accumulated required reserves is equal to the amount of the initial reserve of the banking system. It turns out that the total amount of expansion of deposits is equal to the increase in reserves of the banking system divided by the required reserve ratio. So, if the increase in reserves is equal to 100 rubles, and the mandatory reserve requirement is 10%, then total deposits will increase by 1000 rubles. The growth of banking system reserves occurs when the central bank increases the monetary base.

The transition from commodity money (precious metals) to credit money meant that the banking system acquired the ability to create a money supply. By attracting deposits, i.e. By expanding their liabilities (liabilities), commercial banks simultaneously create the opportunity for themselves to form new assets by providing loans. The newly issued loan is transferred to the account of the recipient - the bank's client. If he leaves a given bank, he still remains in the banking system except for the amount that takes the form of cash. The chain “loans - deposits - loans” turns into the process of creating new money.

A prerequisite for predicting the effect of the money multiplier is the correct calculation of the monetary base. As noted, the sources of the monetary base are reflected in the assets of the balance sheet of the central bank, and the directions of its use are reflected in the liabilities. However, its different components play different roles in money multiplication. In particular, the required reserves of commercial banks represent a “frozen” part of the monetary base. The multiplier effect is directly affected by changes in the volume of these reserves, since the withdrawal of funds into mandatory reserve funds reduces the resource base of commercial banks. But required reserves held in accounts at the central bank do not participate in the creation of money and, therefore, should not be included in the monetary base when calculating the value of the multiplier. It should be taken into account that the expansion of the multiplier effect through the impact on commercial bank reserves is completely under the control of the central bank.

In the liabilities of the balance sheets of the central banks of many countries, a significant amount consists of deposits of the public sector - treasury funds (i.e., budgetary resources). Therefore, the monetary base includes “central bank money” (the monetary base minus treasury funds). Budgetary resources accumulated in central banks are formed at the expense of taxpayers. This reduces the volume of deposits and, accordingly, the scale of multiplication of monetary aggregates. Conversely, spending budget resources increases funds on deposits and leads to an increase in the money multiplier. In this case, decisions on the use of resources are made by the treasury and are outside the control of the central bank.

The money multiplier can be calculated using both the Ml and M2 aggregates. But in reality, only the funds used for lending are multiplied, or more precisely, the balances on demand accounts. For example, company “A” has a demand deposit in the bank in the amount of 1000 rubles. (taken into account as part of the Ml aggregate) and places it in a fixed-term deposit (M2). As a result, Ml is reduced, and the value (M2 - Ml) increases. At the same time, company “B” receives a loan from the same bank in the amount of 1000 rubles, credited to the account on demand. As a result, (M2 - Ml) remains unchanged, and Ml increases by 1000 rubles. Consequently, M2 increases due to the multiplicative expansion of Ml.

When the economy is in crisis, the money multiplier decreases. In conditions of low business activity, an increase in the monetary base has little effect on the Ml aggregate. This situation was typical during the Great Depression in the United States. It was also observed during the economic crisis of the early 1990s. in Russia.

A net withdrawal of money from circulation occurs only during hoarding, when part of the money supply remains in the hands of the population and does not enter the banking system in the form of demand or term deposits. But if money is in accounts with credit institutions and is not used by its owner, it automatically turns into credit resources. Narrow aggregate Ml “workers” converting money; they provide economic turnover. The value (M2 - Ml) can be interpreted as money capital. The Ml unit is closely related to the dynamics of the transaction amount; the value (M2 - Ml) depends on the volume of GDP, since it reflects the increase in income. According to Ml, it is also related to GDP to the extent that the latter indicator is determined by the volume of transactions.

Monetary multiplication mechanism. Theoretical understanding of the process of creating deposits by the banking system took almost the entire 19th century. First, the attention of economists was attracted by the activities of clearing houses. By studying their operations, researchers took note of the increased capabilities of commercial banks in creating credit instruments of circulation. An important step In the development of monetary theory, there was an awareness of the difference between the credit expansion carried out by each bank individually and the credit expansion of the banking system as a whole. In addition, theorists gradually developed an understanding of the role of bank reserves in the formation of the money supply.

The transition from commodity money (gold) to credit money predetermined the special role of the banking system in the creation of means of payment. First, banks began to issue banknotes in a certain proportion to their gold reserves. Secondly, through the “loans - deposits - loans” mechanism, the banking system was able to create additional money supply.

A change in the form of part of banking assets leads to an increase in liabilities. The fact is that when the bank's funds are converted into a loan, this loan goes to the borrower's current account and thereby increases the bank's liabilities.

Changes in the monetary base can play a more significant role in the dynamics of the money supply than the dynamics of the multiplier. In the long term, the decline in the multiplier may be offset by an increase in the monetary base. In the short term (month, quarter), the value of the money multiplier can fluctuate significantly and have a significant impact on the money supply.

Among the determinants of the money multiplier, the ratio of time deposits to demand deposits, as well as the volume of required reserves of commercial banks, is of particular importance. But the action of these determinants can be multidirectional. They are able to mutually balance each other. A factor reducing the multiplier effect is the increase in cash in the hands of the population.

To increase the money supply, it is necessary that the effect of increasing the monetary base and reducing reserve requirements exceeds the counter-effect produced by an increase in the ratios “cash - deposits” and “term money - demand deposits”.

Money multiplier in modern economics. The deposit expansion process begins:

  1. from the appearance of excess reserves at a commercial bank after the sale by it or its client of foreign currency or government bonds to the central bank;
  2. a commercial bank obtaining a loan from the central bank;
  3. opening by an economic agent of a deposit in a commercial bank by depositing cash.

In other words, the impetus for the expansion of deposits is an increase in excess reserves of the banking system. For the subsequent expansion of deposits, it is fundamentally important that the first deposit is not immediately converted into cash or transferred to another bank. IN otherwise the process of creating secondary liquidity will not be able to begin. Therefore, the multiplier effect is based on the fact that banks are able to decide to use excess reserves arising from the appearance of a deposit faster than the owner of the deposit decides to use it.

The money multiplier effect is created by balances in deposit accounts. The larger they are, the greater this effect. Banks consider a certain proportion of these balances to be a relatively stable value and use them to issue loans. In other words, any slowdown in turnover on customer accounts is used by banks to increase loans issued. If the interest rate is at a level at which the real sector can profitably use bank loans, the greatest multiplier effect of expanding the money supply is observed.

If the interest rate exceeds the level beyond which the profitable use of bank loans in the real world becomes impossible, the money multiplier decreases. A similar situation is possible when there is a lack of liquidity (money) in the economy.

The intensity of money multiplication is determined by the lending activity of commercial banks. In turn, this activity is determined by the interest of potential borrowers in attracting additional credit resources.

The interest of the real sector of the economy in credit resources depends on the ratio of four indicators:

  1. profitability of production in a specific area;
  2. interest rates on attracted loans (loan rates);
  3. interest rates paid by banks on deposits (deposit rates);
  4. net profitability entrepreneurial activity(hereinafter in this chapter - NHPD) - the difference between the profitability of production and the interest rate on attracted loans.

The main role in the multiplication of money is played by the intensity of the lending process, determined by the ratio of the loan rate, deposit rate and profitability in the real sector of the economy. In the mechanism of their interaction, the NPV is of particular importance. If business activity is carried out without attracting bank loans, NPV coincides with profitability. However, if loans are attracted to develop production, the NPV will be less than the profitability by the amount of the interest rate. The NPV indicator determines the “supply of entrepreneurial activity.” An increase in the difference between profitability and interest rates increases the use of credit and leads to an increase in the money multiplier. A decrease in NPV, on the contrary, predetermines the curtailment of business activity.

The profitability of the real sector and the interest rate on loans are determined by a different set of variables. The first is ultimately determined by the technological level of the economy, its ability to produce competitive products. The second depends on the volume of money supply, as well as on the institutional framework economic system, in particular its ability to ensure repayment of borrowed funds.

An entrepreneur will want to use credit resources to expand production if his expected NPV turns out to be high enough. This is possible either with an increase in profitability in conditions of improving market conditions, or with a decrease in loan rates.

The deposit rate can be considered as a lower bound on the supply of business activity. Once this is achieved, it becomes more profitable to place money in bank deposits. The demand for loans from entrepreneurs will be stable when the NPV significantly exceeds the deposit rate. Conversely, the demand for loans will fall when the NPV is below this value.

The convergence of profitability in the real sector with the deposit rate means stagnation of production and the flow of monetary resources from the manufacturing sector to the banking sector, where they are used to finance speculative transactions with financial instruments or trade and purchasing activities. Therefore, the ratio of NPV and deposit rates connects the real and monetary sectors of the economy.

The required reserve ratio is an administrative limiter on the multiplier effect. But the very fact of the presence of excess reserves, in particular in the form of balances on correspondent accounts of commercial banks with the central bank, indicates that the manifested effect of money multiplication is less than potential. Thus, in the modern economy, monetary aggregates are formed by commercial banks on the basis of the monetary base created the central bank. Consequently, the issue of non-cash money is carried out as state institute and private credit institutions. It is important to note that the basis of the emission system is the monetary base - central bank money.

Multiplying reserve currencies in the global money market. Rapid development in the late 1950s the global money market attracted the attention of researchers to the study of the multiplication of reserve currencies when they circulate on the world market. Three main factors led to the emergence of US dollars on the world money market:

  1. the transfer of dollar deposits of Soviet banks from the United States to Europe, dictated by political reasons;
  2. the introduction in 1957 by Great Britain of a ban on the use of pounds sterling for lending to transactions with non-residents;
  3. legal limitation in the United States on interest rates on deposits.

Therefore, European banks, primarily London ones, began opening deposit accounts in American currency. These funds were widely used for interbank lending. A significant expansion of the world dollar market was led by central banks placing part of their reserves on it. The sharp increase in oil prices in the early 1970s played a significant role in the further development of the market. and the emergence of petrodollars for high export earnings of oil-producing countries.

The next stage of expansion of the global dollar market is associated with the creation of offshore banking business centers, as well as the opening of international banking zones (International financial facilities) in the United States. The latter allowed American banks to conduct operations that are not subject to national legislation.

Early explorers of the global dollar market recognized its ability to operate on the same principle as the national banking system: the provision of loans led to the emergence of new deposits.

At the same time, the processes of credit creation in the world dollar market and in the national banking system differ significantly.

Firstly, the world dollar market, especially during its formation, was dominated by time interbank deposits. Their placement did not lead to the multiplication of money. Balances in the current accounts of bank clients began to increase only later, with the development of offshore business and the growth of settlements between account holders. Secondly, mandatory reserve requirements were never established for banks participating in the world dollar market.

Thirdly, the world dollar market is closely connected with the American money market. Deposits transferred outside the United States play the same role in the process of multiplying dollars on the world market as the monetary base does in domestic economy. A rise in US interest rates leads to an outflow of funds from the world dollar market, and a fall in them leads to an inflow. The world dollar market receives not only deposits created by the American banking system, but also funds that were previously multiplied in the world banking system, entered the US monetary system and returned back. The multiplier effect in the global dollar market is closely intertwined with the creation of money in the domestic US economy. This also applies to other world currencies: euro, pound sterling, yen, Swiss franc. If the non-cash ruble circulates in the CIS countries and Eastern Europe, there will be a multiplying effect of the Russian currency outside the borders of Russia.

An important factor in the development of the world dollar market is the policy of national central banks. When they purchase world currencies for their reserves, the possibility of the continuation of the multiplier effect depends on how these resources are used. If the central bank purchases US Treasuries with them, the process of multiplying dollars will be interrupted. This process will continue if the central bank places its reserves on the world dollar market. There is no doubt that this market has a huge impact on the money supply in the world economy, interest rates, and the ratio of reserve currency rates.

Calculating the value of the money multiplier on the world reserve currency market is associated with difficulties that have not been resolved to date. The fact is that the amount of liabilities of participating banks minus interbank deposits can be used as an indicator of market volume. However, it is unknown how the funds raised by banks are placed. They can be withdrawn from the world market, i.e. transferred to US bank accounts, or deposited in the same market. In addition, the amount of reserves created by offshore banks is unknown. A number of researchers note that the predominance of time deposits in dollars means that this market mainly performs redistributive functions, accumulating and placing resources. However, this interpretation does not explain the rapid growth of transactions in this market. To assess the multiplication of dollars on the world market, data on the volume of demand deposits is required. However, such statistics are missing, primarily due to the closed nature of the offshore banking business.

Ssnyorazh. Seigniorage (seigniorage) refers to the income of the issuer of money, appropriated to them by right of ownership.

Seignorage is defined as an increase in the monetary base, i.e. money of high efficiency (line 14 “Reserve money” in the IMF statistical collections). IN developed countries seigniorage ranges from 0.75% to 1% of GDP; in developing countries with moderate inflation - up to 5% of GDP. The faster the rate of economic growth, the greater the demand for money and, accordingly, seigniorage.

When governments issued paper money, this revenue was the difference between the denomination of the bill and the cost of making it, including paper, ink, and printing. When the central bank issues money, the nature of seigniorage changes. The Central Bank issues cash in exchange for previously issued non-cash money in circulation. In developed countries, this money appears in circulation when central banks purchase government securities and foreign currency. Central banks usually return to treasuries, i.e. to governments, the interest income they receive on government securities.

Significant features of the formation of seigniorage are observed in countries with high export potential, including oil-producing countries. In particular, currently the basis of the Bank of Russia's assets is foreign currency. The source of its acquisition is the issue of non-cash rubles. The convertibility of the ruble involves one hundred exchanges into foreign currency. Consequently, the central bank's reserves must ensure the exchange rate of the ruble. But characteristic feature The modern monetary system is freedom of exchange rate setting. The choice of exchange rate regime is within the competence of central banks. They determine the rate at which national currency is converted into foreign currency. Central banks are not required to spend all their reserves to support exchange rates. This means that the amount of foreign currency purchased through the issuance of national money represents a type of seigniorage for the central bank. Assets in foreign currency may be lost by the central bank during operations to support the exchange rate of the national currency, especially if the level of such support is chosen incorrectly.

Central banks' foreign currency reserves are placed on the global financial market, including in US securities, and generate interest income, which, in its economic content, also refers to seigniorage.

Velocity of money circulation. Velocity of money circulation (VMV) is one of the most important indicators of money circulation. The Swiss mathematician and astronomer S. Newcombe in 1885 stated the equality between the money supply and SOD, on the one hand, and the realized commodity supply, on the other. Thus, the importance of SOD for understanding the functioning of money circulation was revealed.

The stability of SOD in the short and medium term is determined by the relative stability of the economic structure and the organization of money circulation. In the long term, SOD depends on the action of two main factors: 1) an increase in the number of economic agents; 2) strengthening the division of labor and increasing the number of intermediate links through which goods pass from the manufacturer to the final consumer. In other words, the long-term dynamics of SOD is determined by an increase in the volume of transactions in the economy. The dynamics of SOD reflects the cyclical fluctuations of the economy. A slowdown in cash flow occurs when cash balances in bank accounts increase. The increase in this indicator is associated with a general improvement in the economic situation. A significant increase in SOD is observed during a monetary disorder and is explained by “flight” from a depreciating monetary unit.

SOD is traditionally calculated as the ratio of GDP to the value of monetary aggregates (Ml or M2). Therefore, its change is the result of a discrepancy in the growth rates of GDP and money supply. An increase in SOD means that GDP is growing faster than M2 (or Ml). Conversely, a decrease in SOD is a consequence of a faster rate of change in M2 (or Ml) compared to the rate of GDP.

The monetary aggregate Ml serves the turnover of not only GDP, but also the total social product (ASP), which is the sum of intermediate and final products. The dynamics of SOP affects money demand. Therefore, SOD is influenced by the relationship between GDP and SOP.

Note that this relationship cannot be stable over time. In particular, it depends on the deepening of the process of specialization of production. At certain stages of this process, an increase in the efficiency of social production can lead to GDP growth rates exceeding the SOP rates. In this case, the demand for money and, accordingly, the aggregate Ml will grow slower than GDP, and the SOD calculated using the aggregate Ml will increase.

IN last years The growth rate of transactions with financial assets and real estate in developed countries is significantly faster than the growth rate of GDP and Ml. This means that the dynamics of these transactions can compensate for the impact that changes in the ratio between GDP and SOP have on SOD.

Interest rate. One of the most important indicators of money circulation is the interest rate. It reflects the balance of money demand and money supply. The interest rate is the “price” of money.

In addition to the relationship between money supply and demand, the interest rate is affected by profitability in the economy. High profitability of activities in any industry or sector of the economy allows you to pay for attracting additional financial resources. This may lead to an increase in the interest rate. There is a distinction between the interest rate on deposits and the interest rate on loans.

The interest rate on deposits is paid to the owners of money when they are placed on deposit with a commercial bank. Consequently, this rate is the “price” at which the owner of money (primary credit resources) sells it to a commercial bank. The interest rate on the loan is paid by the borrower to the commercial bank. Therefore, this rate is the “price” at which the borrower buys money (secondary credit resources) from the bank.

Depending on the duration of the period of use of money for deposit and credit operations, short-term (for a period of up to one year), medium-term (for a period of one to three years) and long-term (for a period of more than three years) interest rates differ.

The interest rate represents the price (i.e. cost) of capital and therefore affects the volume of investment, and through it - the indicators of aggregate demand and aggregate supply in the national economy, which determine the price level. There are differences between nominal and real interest rates:

where rn is the nominal interest rate; rr - real interest rate; p - inflation rate

As can be seen from the above formula, the nominal rate takes into account the rate of inflation (depreciation of money).

When the owner of money receives income in the form of a percentage of their placement, the money turns into money capital.

In the modern monetary system, the interest rate set by the central bank plays a special role. In Russia and the EU it is called the refinancing rate, in the USA - the discount rate. This rate is a benchmark for commercial banks. Central banks may use this rate when providing loans to commercial banks. But they carry out such operations only in cases where they consider it appropriate to increase the monetary base or increase the liquidity of the banking system, for example, in a financial crisis.

Regulation of money circulation. It refers to a system of measures carried out by central banks and aimed at balancing monetary demand and supply and ensuring the stability of the national monetary unit. Regulation of monetary circulation is carried out in each country by its central bank. The object of regulation is the monetary base and monetary aggregates.

By regulating money circulation, the central bank determines effective demand in the economy. This ensures state regulation of the economy. However, a number of economists suggest that the economic and, in particular, monetary systems are capable of functioning on the basis of market self-regulation. That's why Nobel laureate in economics, F. von Hayek expressed the idea of ​​​​a transition from monetary circulation based on fiat, state money to the circulation of exclusively private money. This proposal was supported by M. Friedman. The transition to private money would mean allowing the issuance of their own money by all economic agents without exception and the subsequent victory in the competition of money from specific issuers.

But every system, including the economy, is based on certain restrictions. Thus, viruses should not enter the computer system. In human civilization, marriages between close relatives are impossible, since such marriages lead to hemophilia in the offspring. The most important limitation of the economic system is the inability of economic agents to repay their obligations by issuing their own obligations. Imagine the situation: you live in conditions where private money operates and you paid for a pie at a buffet by writing “one hundred rubles” on a piece of paper and putting your signature. The next day, the dissatisfied barmaid informs you that she was unable to convert the money you issued into any other money and asks you to repay the obligation. If in the economic system it was possible for economic agents to repay their obligations by issuing their own obligations, then you would take a new piece of paper, write “two hundred rubles” and hand it to the barmaid. But thanks, among other things, to her prudence, we are not in danger of switching to issuing private money.

In recent years, the creation of local currency systems, i.e., has been actively discussed in the world economic literature. money used in small communities of people. One of the varieties of such money is used for settlements for mutual services between residents of populated areas; the second - mediates the exchange of goods between groups of enterprises. In the first case, the creation of local money is the work of enthusiasts and will forever remain so; in the second, we are talking about streamlining the barter exchange of non-competitive products. Neither one nor the other can significantly influence the main trends in the development of monetary circulation.

It is important to take into account that the property of modern money is that it is accepted by the state to pay off tax obligations.

). The increase in money supply (emission) in the modern economy has three sources: the credit channel, the fiscal channel (transactions with sovereign funds and government debt), and the foreign exchange channel (purchase and sale of foreign currency to the real sector). The main source of money emission in Russia in the 2010s is the credit channel associated with the provision of borrowed funds by banks to the real sector of the economy (the word “credit” is used in a broad sense: the provision of funds can be carried out through the issuance of loans, the issuance of bonds, bills and other financial instruments ). When the bank provides funds to an individual or an enterprise, he creates an account into which he credits the loan amount (that is, an increase occurs), as a result of which the money supply and the banks’ demands on the economy simultaneously increase. If a bank provides a loan in cash, part of the funds from the bank’s cash register goes into cash circulation (an increase against a decrease), that is, the money supply still increases.

Another source of money supply growth is the fiscal channel associated with financing the budget deficit. This financing can be carried out from funds accumulated in government accounts with the central bank. If tax revenues are insufficient to meet budget expenditures, government agencies instruct the Bank of Russia to transfer funds that they previously accumulated in budget accounts with the central bank to budget recipients. The Bank of Russia reduces the balance on budget accounts and increases the balance on the correspondent account of the bank in which the budget recipient's account is opened. The bank, in turn, having received funds from the Bank of Russia, increases the balance in the budget recipient's account.

The flow of money into the economy through the fiscal channel is most typical during periods of unfavorable economic conditions, when tax revenues are reduced, forcing government agencies to spend funds from sovereign funds. During periods of favorable economic conditions, the opposite process is observed: budget revenues exceed expenses, which allows funds to accumulate in budget accounts or reduce public debt. As a result, it grows or contracts and at the same time decreases, that is, budget operations restrain the growth of the money supply.

An alternative option for the functioning of the fiscal channel is to finance budget expenditures by increasing public debt (banks purchase government bonds, these funds finance budget expenditures received in the accounts of budget recipients, that is, they simultaneously increase). If funds are invested in government bonds not by banks, but by enterprises or the population, then there is no increase in the money supply (when purchasing bonds, the balances in investors’ accounts are reduced, and then the accounts of budget recipients increase by the same amount; in other words, the distribution of funds in the accounts of the real sector in banks, but in general the money supply remains unchanged).

In the 2000s, another source played a significant role in the formation of money supply - the flow of funds through the foreign exchange channel associated with the operations of the banking system in the foreign exchange market. If the Bank of Russia purchases foreign currency on the foreign exchange market from a bank that is a representative of exporters or Russian companies, attracting foreign investment, foreign assets of the Bank of Russia increase, and foreign assets of the real sector decrease. At the same time, the Bank of Russia transfers rubles to the bank in which the account of the company that sells the currency is opened, and the bank increases the balance in the account of this company. As a result of these operations, and increase. An alternative form of the foreign exchange channel is the purchase of foreign currency by banks from the population and companies in the real sector (reduction and increase). In this case, banks credit ruble funds to the accounts of sellers (increase) or give them cash rubles (decrease and increase). The result is an increase in the money supply. The sale of foreign currency to the real sector by the central bank or credit institutions leads to exactly the opposite results.

The three main emission channels are closely related to each other. Since the ability of banks to increase lending is quite wide and is determined primarily by the demand for money, it is credit operations that balance changes in other emission channels. If a significant amount of funds enters the economy through the budget or foreign exchange channel, these funds partially satisfy the need for money and the demand for loans decreases. If budget operations or foreign exchange interventions reduce the money supply, then it is through loans that the increased demand for money is satisfied.

The key influence on the relationship between the currency and budget channels of issue was the Bank of Russia’s refusal to actively intervene in the dynamics of the ruble exchange rate and the transition to a floating exchange rate of the national currency. Under these conditions, the Bank of Russia's operations in the foreign exchange market are primarily related to servicing the needs of the state budget. The reserve fund, managed by the Bank of Russia, is invested primarily in foreign assets. Therefore, if budget revenues consistently exceed budget expenditures and government bodies increase the Reserve Fund (money outflow through the fiscal channel), the Bank of Russia purchases currency to replenish the Reserve Fund in the interests of the Russian Ministry of Finance (money inflow through the foreign exchange channel). Negative budget emissions and positive currency emissions associated with the replenishment of the Reserve Fund compensate each other to a certain extent. As the Russian Ministry of Finance creates its own infrastructure for carrying out these operations, the Bank of Russia will cease to participate in them. As a result, the impact of transactions related to the replenishment or expenditure of sovereign funds on the money supply will become completely neutral.

militarization of the economy and increased military spending. At the same time, the economy is focused on significant expenditures on weapons and for this reason the state has a growing budget deficit, which is covered by issuing money that is essentially not backed by commodity resources.

Budget deficit and growing public debt. Covering the state budget deficit is carried out either by government loans - a non-inflationary way to cover the budget deficit, or by issuing banknotes, which gives the state additional funds, and therefore additional demand for goods.

Credit expansion of banks. The expansion of credit operations of banks and other credit institutions leads to an increase in credit instruments of circulation, which also create additional requirements for goods and services.

The influx of foreign currency into the country. Currency, through exchange for a national monetary unit, causes a general increase in the volume of money supply, and therefore excess demand.

So, demand-side inflation occurs when the price level rises under the influence of a general increase in aggregate demand.

Production cost inflation. The reason for this inflation is:

Declining labor productivity growth. This leads to an increase in costs per unit of production, and therefore to a decrease in profits. Ultimately, this will affect a decrease in production volume, a reduction in the supply of goods and services;

The expansion of the service sector, the emergence of new types with a large share of wages, hence the overall increase in prices for services;

High indirect taxes. They increase the price of goods and the overall level of costs increases.

normal inflation- the pace is growing slowly, approximately 3 - 3.5% per year; the scale of inflation is controllable;

moderate inflation (creeping)- price growth rates reach up to 10% per year; such inflation is recognized as relatively harmless and fully consistent with normal economic development as a whole; its scale does not lead to unforeseen disturbances, especially in the distribution of national income between different social groups;

galloping inflation- characterized by price increases from 20 to 200% per year; under these conditions it is impossible to control not only the rise in prices, but the process economic development;

hyperinflation- begins when prices increase by more than 50% per month over a long period of time - six months or more; over the course of a year, prices rise no less than 130 times, while money is forced out of circulation, giving way to commodity barter.

Inflation has bad influence on society as a whole. The expenditure of wages and rising prices are becoming catastrophic, which affects the well-being of the population, even the wealthiest strata. The socio-economic costs require measures to curb inflation itself.

Getting worse economic situation: production volume decreases, capital flows from production to trade and intermediation, speculation expands as a result of sharp price changes, credit operations are limited because no one believes in debt, depreciation financial resources states, there is a flow of funds to other countries.

Social tension arises due to the fact that inflation redistributes national income to the detriment of the least affluent sections of society; inflation depreciates the savings of citizens. Inflation is especially severe for people with fixed incomes: pensions, benefits, and civil servants' salaries. In this regard, in order to delay the sharp decline in living standards, the state carries out income indexation, indexation tax benefits.

An increase in inflation rates leads to the fact that the state begins to take measures to overcome inflation and stabilize money circulation.

Money supply is the state's supply of money.

The money supply serves the movement called money circulation.

The totality of all the money in a given country held by the government, firms, banks, citizens, in accounts, on the move, in wallets, in “stockings”, etc. forms national money supply. Money circulation as a totality is divided into cash and non-cash. Non-cash circulation is much higher than cash (Fig. 1):

Rice. 1. The ratio of cash and non-cash money supply in

In countries with an unreliable banking system, the ratio of cash and non-cash money supply looks different (Fig. 2):

Rice. 2. The ratio of cash and non-cash money supply in

The concept of liquidity is used not only in relation to, but also to, the international monetary system, etc. Liquidity in relation to money is its ability to be used by its owner for the immediate acquisition of necessary goods. Depending on the specific form in which money exists (cash and non-cash), the liquidity of money increases or, conversely, decreases. Thus, cash is much more liquid than non-cash money, and in the non-cash money supply, money in current accounts, which can be used through checks, transfers, credit cards, is much more liquid than money in time deposits, since the latter have a time limit during which the account owner does not can use the entire amount of the deposit, but only the interest on it.

Liquidity of various forms of money according to the degree of increasing liquidity:
  • Money in time and savings bank deposits;
  • Money on demand deposits (current) checks, bills, payment orders, credit cards, electronic money, traveler's checks;
  • Cash, banknotes, banknotes, treasury notes, loose change, securities;

System of money supply aggregates

Since 1992, the Russian Federation has switched to calculating monetary aggregates.

The money supply is divided by monetary aggregates(from to ), which includes different kinds money.

Monetary aggregates are a grouping of bank accounts according to the rate at which funds in these accounts are converted into cash. How faster means in accounts can be converted into cash, the more liquid the unit is considered.

The system of money supply aggregates is "matryoshka", in which each previous unit is “inserted” into each subsequent one.

Money supply M0

To the unit M 0 includes all types of money with a high degree of liquidity.

Different types of money and different types make it possible to introduce a certain classification of money depending on the degree of its liquidity and scope of application. This was expressed in the creation of a system of monetary aggregates used in the analysis of the national monetary circulation systems of various countries. The original unit includes cash and checks:

M 0 = C + checks,

Where WITH— initial money supply (cach).

Cash, in turn, consists of paper money, banknotes and small change.

1st sign. Cash is issued into circulation in the Russian Federation, and then the Central Bank of the Russian Federation takes measures to preserve its purchasing power. Thus, cash is a debt obligation of the Central Bank of the Russian Federation, that is, the Central Bank of the Russian Federation guarantees its purchasing power.

2nd sign. Non-cash money listed on current accounts and other demand accounts and urgent accounts. These are debt obligations to their clients. At the same time, the Central Bank of the Russian Federation controls and regulates the activities of commercial banks, ensuring the liquidity of commercial banks, that is, the ability to pay debts.

3rd sign. Banknotes, coins, and non-cash money in circulation in the form of entries in accounts are legal means of payment. Therefore, they are accepted as payment for dogs according to their functions.

4th sign. Modern money (in the narrow sense of the word) is convenient and acceptable for people to use.

5th sign. M 1 has absolute liquidity, therefore M 1 banknotes that perform the functions of money.

Money supply M2

In addition to money, that is, the aggregate, the money supply includes purchasing and means of payment that do not have absolute liquidity. These include bills, bonds, and certificates of deposit. In non-cash form: time deposits in bank accounts.

Unit M 2 complements to M 1 time deposits:

M 2 = M 1 + time deposits.

With a fixed-term deposit, the account owner transfers his cash at the disposal of the bank. If necessary, money can be withdrawn from the time deposit before the maturity date, but in this case the client may experience losses (interest on the deposit is not paid). This shows that the fixed deposit is almost money. In the conditions of the Russian Federation, the level of liquidity of the unit is close to absolute, so usually a fixed-term deposit is issued to the client upon request.

Funds on time deposits further reduce the liquidity of the unit M 2 compared with M 1 And M 0 and involve servicing savings, savings, and investments.

Money supply M3

Unit M 3 assumes an increase in the unit M 2 due to:

M 3 = M 2 + government securities.

These papers (mainly government bonds) are no longer fully-fledged money, but they can still be transformed into other types of money (sold on the open market) and for this reason they are included in the money supply (Fig. 3).

Money supply structure

The structure of the money supply is constantly changing.

In the modern monetary system, the growth rate of the money supply has noticeably decreased and money began to work better. In the Russian Federation, one of the disadvantages of the monetary system is the large share of cash (42-65%), while in developed countries this figure barely reaches 7-10%.

Rice. 3 The structure of the money supply, represented by a system of aggregates (from to)

The ratio between aggregates changes depending on economic growth.

Changes in the volume of money supply are the result of the influence of two factors:

  • change in the amount of money in circulation;
  • change in the speed of their turnover.

Change in turnover rate

The velocity of money circulation is determined using indirect methods:

Speed ​​of circulation of money in the circulation of income= GDP / Money supply (M1 and M2). This indicator reveals the relationship between economic growth and money circulation.

Cash turnover rate= Income according to the forecast of the balance of cash turnover / the average annual value of the money supply in circulation.

Turnover of money in payment circulation(shows the speed of non-cash payments) = Amount of funds in settlement, current and forecast accounts (bank accounts) / average annual money supply in circulation.

The change in the speed of money turnover depends on:
  • general economic factors showing how production is going, how the cyclical nature of economic development is changing, rising prices, growth rates of the most important sectors of the economy;
  • monetary factors: what is the structure of payment turnover (how much cash and non-cash money is involved), the development of credit operations, the development of mutual settlements, the level interest rate on loan;
  • frequency of payments of money and income, level of savings and savings, uniformity of spending money.

The effect of inflation on the growth of the velocity of money circulation is explained by the fact that buyers increase purchases in order to protect themselves from economic losses due to a decrease in the purchasing power of money.

Rules for regulating the structure of the money supply

Dividing the money supply by , , , is necessary if it is necessary to ensure state regulation of the volume of money supply and prevent unexpected events (price rises).

When circulating money, it is not only the amount of absolutely liquid money that is important M1, but also that amount of money M2, which can quickly turn into M1. Also M3 may, under certain conditions, become a means of payment M1.

By distributing the money supply into aggregates, the Central Bank of the Russian Federation influences the money supply M1, increasing it or decreasing it (or restraining its growth).

Example. In case of high inflation, the Central Bank pursues a policy to reduce the money supply M1. To do this, the Central Bank sells, on behalf of the government, large denomination government securities of other firms and banks, i.e. M1 - M3 (the money supply M1 decreases).

For the population, the Central Bank of the Russian Federation sells securities of lower denominations and M1 - M2, the money supply M1 decreases.

Rule: if money goes into the banking system for a time deposit or into the budget, the money supply M1 decreases, money leaves the sphere of circulation M1.

If the Central Bank of the Russian Federation increased the interest rate at which banks are credited, commercial banks, in turn, raise the interest rate on time deposits.

It has become profitable for people (depositors) to make time deposits - M2 increases, and M1 decreases - inflation is contained.

For the duration of the deposit, the money went to the disposal of the banking system (- M2).

Monetization rate

An important indicator of the state of the money supply is monetization ratio, equal

The monetization coefficient allows us to answer the question: is there enough money in circulation? It shows how gross product provided with money (or how much money is per ruble of GDP).

The monetization coefficient reaches 0.6, and sometimes is close to one. In Russia this figure barely reaches 0.1.

Money supply (MS) is a tool for the central bank to manage economic processes, including the total number of legally established means of payment.

How does the money supply move in the economy?

The priority function of the Central Bank is to maintain the solvency of the national currency. The growing/falling money supply in the economy is a clear indicator of the quality of the Russian Federation’s monetary policy.

When calculating the indicator indicators, it is important to take into account the total amount of cash and electronic money supply that forms the national turnover.

To calculate the overall unit Md, take into account the formulas of its parts:

  • MO = funds outside banks (“cash”);
  • M1 = MO + financial assets of current accounts, credit accounts (individuals/enterprises) + demand capital in Sberbank accounts;
  • M2 = M1 + urgent;
  • M3 = M2 + certificates, government bonds;
  • M4 = M3 + deposits in credit institutions.

Country's money supply: calculation features for the Russian Federation

A certain number of units with an individual structure are applicable to each country.

Thus, M2 may include “peno” operations for the sale and repurchase of securities. M3 sometimes includes treasury bills and forward currency repurchase agreements between central banks.

It is important to consider that the more primary the indicator, the higher its liquidity. The most liquid aggregate is MO, the least liquid is M4, reflecting the private investment sector.

If you are interested in the country's money supply, keep in mind that the calculation includes exchange transactions on export transactions and the results of conversion turnover.

Are we facing monetary inflation?

Money supply inflation is the “inflation” of money and deprivation of its security and solvency.

The solid, consistent financial policy of the Russian government protects small businesses and the population from a sharp decline and external control of the money supply.

Making a justification for the strategy for exchange trading, planning tactics for spot transactions, Special attention focus on forward transactions, futures, factoring operations.

What characterizes the circulation of the money supply?

The circulation of the money supply, naturally, must be justified:

  1. The needs of the economy.
  2. Control of the issue of credit funds.

It is important to understand that vector cash flow can always be adjusted by certain actions of the Central Bank of another country or private trading agencies.

When keeping statistics on domestic money turnover, it is important to realize the role banknotes play in it, although modern trend The global economy tends to increase the share of credit funds not only by replacing one type of money with others, but also by replacing the manufacturing sector with a growing services market.

What influences the money supply?

Factors determining the volume of money supply and the speed of its circulation:

  1. The cyclical nature of the state economy.
  2. Direction of price movement.
  3. Structure of the country's general balance sheet.
  4. Lending development level.
  5. The amount of interest rates.
  6. Share of savings.
  7. Equal spending of money.
  8. Shadow market level.

The higher the sovereignty of a state, the more elastic and balanced its monetary system. The proportional size of the speed of the money supply to its quantity means very high growth rates of the money supply, provoking the activation of inflationary processes and expectations.

What does the structure of the money supply look like?

The structure of the money supply implies taking into account the “monetary base”.

Keep in mind that the monetary base includes the following amount:

  • cash circulation, including money from the non-financial sector, bank cash desks;
  • required reserves;
  • funds of credit institutions in the Central Bank.

The monetary base serves as a liability of the Central Bank and is characterized by increased activity. However, this indicator is not an indicator of the actual position, since it is the most subjective of all other units.

What does an increase in the money supply mean?

The increase in the money supply occurs due to factors:

  • militarization of the economy;
  • credit expansion;
  • inflow of foreign currency.

Draw your own conclusions. The number of specified means of payment put into circulation must be regulated:

  • a certain volume of output from manufacturing industries;
  • natural price changes, elimination of unofficial monopoly.

It is absolutely unacceptable to cover the budget deficit by issuing funds that inherently remain unsecured, contributing to a decrease in the commodity functions of money.

What does a decrease in the money supply lead to?

Reducing the money supply and increasing liabilities is the main tool for curbing inflation.

  1. Tax increases.
  2. Increase in the Central Bank interest rate.
  3. Reducing municipal spending.
  4. Increase in savings.
  5. Tightening of lending conditions and methods.

To build an effective policy, it is important to determine:

  • the golden mean between the policy of monetization of money and government withdrawal of part of the money supply;
  • acceptable level of electronic circulation, taxation.

For correct formation financial policy, it is important to remember that the deterioration of the economy necessarily occurs as a result of the uncontrolled flow of capital into foreign economies, the intermediary sphere of circulation.