The concept of monetary policy credit policy is a set of interrelated measures taken by the Central Bank in order to regulate business activity through the planned interaction on the state of credit and money circulation. PrEP is the most important direction of the economic policy of the state and is part of the national policy, which should be "inscribed" in the overall development goal national economy and help achieve macroeconomic equilibrium
Goals of PrEP Goal state regulation economy - achieving macroeconomic equilibrium with optimal types for a given country economic growth Also, the goal of state regulation is the simultaneous achievement of goals in the "magic quadrangle"
"Magic Quadrangle" stable level prices Equilibrium of foreign trade exchange High level Employment rate Economic growth INDICATORS SELECTED OBJECTIVES INDICATORS SELECTED OBJECTIVES Price index Unemployment rate Natural unemployment Unemployment rate Foreign trade balance Positive foreign trade balance Real GDP growth Optimum rates of economic growth
Money supply for various purposes of monetary policy 0 % M MS 1 MS 3 MS 2 M is the amount of money in circulation MS 1 is the money supply with a monetary policy aimed at maintaining a constant supply of money in circulation MS 2 is the money supply with flexible monetary policy MS 3 is the money supply supply with a change in the mass of money and the interest rate
The mechanism of change in required reserves An increase in the required reserve ratio leads to a reduction in the excess reserves of commercial banks, which they can use for lending operations. When the required reserve ratio decreases, a multiplier expansion of the volume of money supply occurs.
Interest rate policy of the Central Bank Regulation of loans of commercial banks from the Central Bank direction of the interest rate policy of the Central Bank Politics discount rate Accounting policy is to regulate the interest rate at which commercial banks borrow money from the Central Bank.
Operations on open market The operations of the Central Bank on the open market have a direct impact on the volume of free resources of commercial banks, which stimulates the reduction or expansion of the volume of credit investments in the economy, while simultaneously affecting the liquidity of banks.
Policy of "cheap money" With this policy, the Central Bank: Buys government securities, transferring money to pay for them in the accounts of the population and in the reserves of banks. This provides an expansion of lending opportunities for commercial banks and increases the money supply. Reduces interest rates, which commercial banks borrowing and lending, and subsequently also increases the money supply. Reduces the mandatory bank reservation, which leads to an increase in the money multiplier and expansion of opportunities for lending to the economy.
The "dear money" policy sells government securities, which causes banks to shrink their reserves. This leads to a reduction in lending opportunities by commercial banks and reduces the money supply. raises the discount rate, which leads to a cessation of borrowing from the Central Bank and an increase in interest on loans from commercial banks Raises the bank reserve requirement, which reduces the money multiplier and limits growth money supply.
Monetary policy (monetary policy, monetary policy) - public policy regulation of the national monetary system. Along with fiscal policy(fiscal policy, fiscal policy) it is one of the two pillars of macroeconomic policy.
Rationale for the need for PrEP in economic theory macroeconomic instability market economy, the problem of increasing the efficiency and competitiveness of the national economy, the problem of asymmetric information, the problem of competition and monopoly.
Stimulating monetary policy (continued) 1. The Central Bank buys state. securities, reduces the required reserve ratio, reduces the discount rate 2. monetary base (H) expands 3. excess reserves of commercial banks increase 4. money supply increases 5. interest rate decreases 6. investment costs increase 7. aggregate demand increases 8. GDP increases 9. unemployment decreases
Restraining monetary policy 1. The Central Bank sells the state. securities, reduces the required reserve ratio, lowers the discount rate 2. the monetary base (H) decreases 3. excess reserves of commercial banks are reduced 4. the money supply decreases 5. the interest rate increases 6. investment spending decreases 7. aggregate demand falls 8. rates GDP growth decrease 9. inflation decreases
Monetary Mechanism (cont.) – The Central Bank increases (or reduces) the monetary base with the help of monetary policy instruments. -Money supply increases (decreases). – The interest rate decreases (increases). –Investment and aggregate demand increase (decrease). -GDP, national income, employment are growing (decreasing).
Benefits of PrEP Less significant administrative lag than BFP, more subtle, complex but flexible implementation mechanism, less reliance on policies and pressure groups, net export positive effect, more effective in terms of macroeconomic stabilization in developed countries market economy.
3. Deregulation of financial institutions legal restrictions in the activities of commercial banks and other financial institutions in order to increase competition in financial market and improve the efficiency of the monetary system.
National Bank The Republic of Kazakhstan, based on the analysis of external and internal factors, as well as in accordance with the tasks assigned to it, performs the main functions: 1. conducting the state monetary policy in the Republic of Kazakhstan 2. issuing banknotes and coins on the territory of the Republic of Kazakhstan 3. performing the function of a bank of banks 4 . implementation of the functions of a bank, financial adviser, agent of the Government of the Republic of Kazakhstan 5. organization of the functioning of payment systems 4. implementation currency regulation And currency control in Kazakhstan 5. management of gold and foreign exchange assets Nat. Bank of Kazakhstan 6. control and supervision over the activities of the fin. organizations.
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Topic 5. Monetary system and monetary policy of the state 1. The concept and types of monetary systems. 2. Money market: demand, supply, balance. 3. The role of credit in the modern market economy. 4. The structure of the credit system. 5. Commercial banks. Their main operations and role in the economy. 6. Central Bank and its functions. Monetary policy and its types.
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The monetary system is a form of organization of monetary circulation that has historically developed in each country and is legally established by the state. Money turnover is the movement of money that mediates the circulation of goods and services. Essential Elements monetary system: - national currency unit(dollar, ruble, mark), in which the prices of goods and services are expressed; - a system of credit and paper money, change coins, which are legal tender in cash circulation; - the system of issuing money, i.e., the legally fixed procedure for issuing money into circulation; -institutions of the monetary system, i.e. state and non-state institutions that regulate money circulation.
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The money supply is the totality of cash and non-cash Money ensuring the circulation of goods and services in the national economy. Basic monetary aggregates Rule: an aggregate with a higher degree of liquidity is an integral part of a complex with more low level liquidity. Liquidity: the ability to use cash ( financial assets) as a means of payment
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The main monetary aggregates Aggregate M0 - cash, including balances in the cash desks of enterprises and organizations. It is defined only in Russia The M1 unit is “money for transactions”. It includes the most mobile money in the form of cash and money held in bank accounts on demand, other checkable deposits and traveller's checks. The M2 aggregate is money in the broadest sense of the word, which includes all the components of M1 plus non-checkable savings and time deposits relatively small size(in the USA these are deposits up to 100 thousand dollars). The M3 aggregate is formed from M2 by attaching large fixed-term savings deposits to it. Unit L (M4) is the most extensive monetary aggregate. In addition to funds included in M3, it includes various securities (savings bonds, treasury bills), funds in foreign currency belonging to the population, enterprises and organizations and banks
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Monetary base (money of increased power MB) - cash outside banking system(C) and the reserves of commercial banks held by the central bank (R): The money market is the market in which the demand for and supply of money determine the level of the interest rate, the "price" of money.
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Fisher's equation: where M is the amount of money in circulation; V is the velocity of money circulation; P is the price level; Y is the volume of output in real terms). Hence: Replacing M with the parameter DM (value of demand for money), we get the formula:
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"Cambridge equation": where k is the share of nominal cash balances in income, i.e., the part of income that economic agents wish to keep in cash.
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Demand for money (Keynesian approach): 1. Transactional demand (MD1); 2. Speculative demand (MD2).
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Total demand (liquidity preference curve)
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Money supply Equilibrium in the money market
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Credit is a system economic relations arising from the mobilization of temporarily free funds and their provision on a loan on a repayment basis. Credit principles: - urgency: - repayment; - payment; - security (guarantee); - special purpose.
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Forms of credit: 1) a commercial loan is a loan provided by some functioning entrepreneurs to others in the form of the sale of goods with a deferred payment. It is drawn up by a bill; 2) a bank loan is a loan provided by financial institutions in the form of cash loans; 3) consumer credit- provided to individuals in the form of a commercial loan (when purchasing goods with a deferred payment) and bank loan(loans for consumer purposes); 4) mortgage- long-term loans secured by real estate (land, buildings); 5) state credit - a system of credit relations in which the state and local authorities act as a borrower or creditor in relation to citizens and legal entities; 6) interbank credit - short-term lending by banks to each other; 7) international credit - the movement of loan capital in the sphere of international economic relations.
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Two-link (two-level) system: 1. Central Bank. 2. Commercial banks and specialized non-bank credit and financial institutions. Functions of commercial banks: - storage of money; - granting loans; - making calculations. Operations of commercial banks: - passive; - active; - commission-intermediary and trust.
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Leasing is the issuance of loans in the form of rental or rental of equipment. The use of this form provides businesses with a number of advantages. Factoring is the transfer by a company of management of its accounts receivable bank. Bank profit - the difference in percentage received from active operations and paid on passive. In addition, this includes income from the bank's own capital. All this forms the gross profit. Net profit - the difference between gross profit and implementation costs banking operations The bank profit margin is the ratio net profit To equity jar. Bank profit margin is the ratio of net profit to the bank's equity capital.
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Functions of the Central Bank: 1) emission center of the country; 2) maintenance of government operations (government banker); 3) storage of reserves of commercial banks; 4) regulation and supervision of the activities of commercial banks; 5) regulation exchange rate national currency; 6) regulation of the economy by monetary methods.
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Monetary policy instruments: 1) regulation of official reserve requirements; 2) open market operations; 3) manipulation of the discount rate of interest.
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Required reserves are part of banking assets, stored either in the form of cash or in the form of deposits in the accounts of the Central Bank. Required reserve ratio (reserve rate): Credit issue - the process of issuing means of payment within the system of commercial banks.
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The money supply multiplier is a numerical coefficient showing how many times the money supply will increase or decrease as a result of an increase or decrease in deposits in the monetary credit system per unit where M is a multiplier; rr is the required reserve ratio. The increase in the money supply is calculated: where D1 is the initial contribution.
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where M is a multiplier; rr is the required reserve ratio. The increase in the money supply is calculated: where D1 is the initial contribution.
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Open market operations are the buying and selling of government securities. valuable papers. Changing the discount rate (discount policy) The discount rate is the interest on loans provided by the Central Bank to commercial banks.
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Monetary policy Policy of cheap money: - lowering the discount rate; - purchase of government securities on the open market; - reduction of reserve requirements. Cheap money policy: - increase in the discount rate; - increase in the reserve norm; - sale of government securities on the open market.
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Monetary policy refers to a set of measures taken by the state to regulate the amount of money in the economy. To implement monetary policy, the state uses a set of monetary instruments (money supply parameters, reserve rates, interest rate, loan terms, refinancing rates, etc.) and institutions monetary regulation(Central Bank of the Russian Federation, Treasury, Ministry of Finance, etc.).
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The objects of monetary policy are supply and demand in the money market. The subjects of monetary policy are banks, primarily the central bank in accordance with its inherent functions of the conductor of the monetary policy of the state and commercial banks.
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The main strategic goals of monetary policy are expressed in improving the welfare of the population and ensuring maximum employment. The ultimate goals of the monetary policy of the Bank of Russia are formulated in accordance with the this year macroeconomic policy goals. The main task of the Bank of Russia in medium term is a gradual decline in inflation.
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The main direction of the monetary policy of the Central Bank of the Russian Federation is to reduce the rate of inflation. IN modern conditions states with market models economies use one of two concepts of monetary policy: 1. credit expansion policy, or "cheap" money (Credit expansion of the Central Bank increases the resources of commercial banks, which, as a result of loans issued, increase the total supply of money in circulation) 2. credit restriction policy, or "expensive" money. (Credit restriction entails limiting the ability of commercial banks to issue loans and thereby saturate the economy with money)
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Monetary policy methods are a set of methods and operations through which the subjects of monetary policy - the Central Bank as government agency monetary regulation and commercial banks as "conductors" of monetary policy - affect the objects (demand for money and supply of money) to achieve their goals. The methods of conducting daily monetary policy are also called tactical objectives of monetary policy.
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Classification of monetary policy methods: 1. Direct and indirect regulation of the monetary sphere Direct methods have the character of administrative measures in the form of various directives of the Central Bank regarding the volume of money supply and prices in the financial market. Indirect Methods regulation of the monetary sphere affect the motivation of the behavior of economic entities with the help of market mechanisms.
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2. General and selective methods of monetary regulation General methods are predominantly indirect, affecting money market generally. Selective methods regulate specific types of credit and are mainly prescriptive.
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The impact of the subjects of monetary policy on its objects is carried out with the help of a set of specific tools. The instruments of monetary policy are understood as a means, a way of influencing the Central Bank as a body of monetary regulation on the objects of monetary policy.
State policy for stabilization economic development. Instruments of state economic policy The state budget Central Bank Directions of state policy Budgetary and financial Credit and monetary Goals of the state economic policy Stabilization of economic development rates Prevention of cyclical recessions Prevention of runaway inflation and hyperinflation Achievement full time
Monetary policy mechanism Increasing the money supply during a downturn to increase spending Restricting the money supply during inflation to reduce spending Mechanism Changing the money supply Monetary policy objectives Achieving full employment No inflation
Monetary Policy Mechanism Lending limits, direct regulation interest rates(direct regulation) Indirect regulation – Change in the reserve requirement – Change in the discount rate of the Central Bank – Open market operations
Change in the required reserve ratio Bank reserve - the funds of commercial banks, which they are obliged to keep in the Central Bank as security for their operations Reserve ratio - established central bank ratio of reserves to deposits
Change in the required reserve ratio Change in the reserve ratio Increase in the reserve ratio Decrease in the money supply in commercial banks Decrease in the credit capacity of banks Decrease in the money supply Decrease in the reserve ratio Increase in the money supply in commercial banks Increase in the lending capacity of banks Increase in the money supply
Change in the discount rate of the Central Bank Discount rate (refinancing rate) - the rate at which the Central Bank issues loans to commercial banks Change in the discount rate - important information for business about the direction of the Central Bank policy
Change in the discount rate Increase in the discount rate Decrease in the amount of loans from the Central Bank Increase in interest on loans from commercial banks Decrease in the money supply Decrease in the discount rate Increase in loans from the Central Bank Decrease in interest on loans from commercial banks Increase in the money supply
Open market operations Open market - a market where any entity can trade and whose prices are determined only by supply and demand stock market
Operations on the open market Purchase of securities - from the public - from commercial banks Additional funds in the accounts of commercial banks Increase in active operations Increase in the money supply Sale of securities - to the public - to commercial banks Decrease in funds in the accounts of commercial banks Decrease in active operations Decrease in the money supply
