National monetary policy. Abstract: Monetary policy of the state. See what “Monetary policy of the state” is in other dictionaries
State monetary policy (Monetary policy) (Monetary policy) is the ability of the state to influence the monetary system, and therefore the interest rate and, through it, investment and real GDP.
The purpose of monetary policy is to ensure a stable monetary system and national currency. In this case, three main tools are used:
- Changing the mandatory reserve norm(level of reserve requirements). Required reserves reduce the credit resources of commercial banks, and, consequently, the volume of monetary funds circulating in the country. These reserves in Russia are kept in the form of interest-free deposits in the Bank of Russia. An increase in the reserve ratio reduces the money multiplier, and conversely, a decrease in the reserve ratio will increase the money supply: the original amount of bank deposits is repeatedly used to provide loans, decreasing by the amount of reserve requirements with each turnover. With an average reserve ratio of 0.1, the total amount of credit resources of commercial banks will be 10 times greater than the amount of bank deposits.
- Change in central bank policy rate- refinancing rates. A decrease in the discount rate reduces the price of a loan and contributes to an increase in lending volumes and vice versa. Raising the discount rate helps curb the demand for foreign exchange. Most often, the central bank will provide a loan to a commercial bank secured by a package of highly liquid securities (government bonds, corporate securities). This rate is called the pawn loan rate. Thus, the discount rate is closely related to the yield of government securities: an increase in the discount rate automatically increases the yield of government securities. During the first half of 2000, the Central Bank of the Russian Federation reduced the discount rate four times, lowering it from 55 to 28%.
- Open market operations. This monetary policy instrument is most widely used in developed countries. The Central Bank, by purchasing government securities from commercial banks, increases their credit resources and vice versa. Often the central bank carries out such transactions in the form of a repurchase agreement (repurchase agreement), where it sells securities with an obligation to repurchase them at a (usually) higher price after some time.
The market for government securities began to form in the Russian Federation in 1993 and by the fall of 1998 it was represented by government short-term obligations (GKOs), federal loan bonds (OFZ), government savings loan bonds (OGSZ), and domestic currency loan bonds (OVVZ). Interest on them is paid from the federal budget, and in order to repay previously issued bonds (mainly GKOs - OFZs) it was necessary to issue all new issues (tranches). The placement of new trenches encountered increasing difficulties. To solve this problem, the yield of government securities was increased and non-residents were attracted to this market. At the same time, the bulk of GKO-OFZ were in the portfolios of the Central Bank and Sberbank. By August 1998, the yield on these bonds reached 170% per annum. The expansion of the pyramid of government bonds diverted money from the real sector of the economy, since transactions with them gave fabulous, incomparable profits. Doubts about the state’s ability to support this market increased attacks on the ruble, which ultimately led to a reduction in the Bank of Russia’s foreign exchange reserves, a fall in the ruble exchange rate, and an acute budget crisis. On August 17, 1998, the GKO-OFZ pyramid collapsed. A significant portion of these bonds, owned primarily by the Central Bank of the Russian Federation and Sberbank, were reissued as government debt with minimal income and maturing in the second decade of the 21st century. Bonds owned by private individuals were repaid in the amount of 150 billion rubles. in 1999. In February 2000, the government again resorted to issuing GKOs with a three-month maturity with a yield of approximately 20% per annum.
Monetary policy can be tight when the money supply is maintained at a certain level, and flexible when the government seeks to maintain the interest rate at a certain level. But the Central Bank cannot simultaneously fix both the money supply and the interest rate. Thus, with an increase in the demand for money, in an effort to “keep” the money supply at a certain level, he will be forced to agree to increase the interest rate (Fig. 1), and in order to prevent the interest rate from rising, he will be forced to increase the supply of money (Fig. 2).
In practice, the state will more often combine these two goals of monetary policy, since a consistently tight policy will lead to an increase in the interest rate, an increase in the cost of credit, and a reduction in aggregate demand and aggregate supply. In Fig. Figure 3 shows an option for a relatively flexible monetary policy. In all these cases we are talking about the real money supply:
The state's monetary policy is closely related to fiscal and foreign economic policy. It must take into account the relationship between the main macroeconomic variables (money supply, interest rates, aggregate demand, output volume), and the expectations of investors and the population (buyers), and the degree of confidence of residents and non-residents in the actions of the government. The effectiveness of monetary policy depends on the degree of independence of the Central Bank as a branch of government, and on the qualifications and art of its leadership. As a rule, price and exchange rate stability policies are incompatible with soft fiscal policies and with fixed exchange rate policies, where domestic monetary policy will depend on the inflow and outflow of foreign currency into the country.
Fundamentals of economic theory. Course of lectures. Edited by Baskin A.S., Botkin O.I., Ishmanova M.S. Izhevsk: Udmurt University Publishing House, 2000.
Plan
1.General information about the state’s monetary policy
2. Types of monetary policies
3. Monetary policy methods
State monetary policy
Monetary (or monetary) policy is the policy of the state that influences the amount of money in circulation in order to ensure price stability, full employment and growth in real output. The Central Bank implements monetary policy.
The impact on macroeconomic processes (inflation, economic growth, unemployment) is carried out through monetary regulation.
Typically, the Central Bank's monetary policy is aimed at achieving and maintaining financial stabilization, primarily strengthening the exchange rate of the national currency and ensuring the stability of the country's balance of payments.
Monetary regulation is a set of specific measures of the central bank aimed at changing the money supply in circulation, the volume of loans, the level of interest rates and other indicators of money circulation and the loan capital market.
Monetary policy is an integral part of the unified state economic policy. State economic policy should include measures to solve problems in each block. The Central Bank performs its part - monetary policy, it is responsible for its implementation.
Types of monetary policies
Tough - aimed at maintaining a certain amount of money supply.
Flexible - aimed at regulating interest rates.
There are different types of monetary policy:
Stimulating - carried out during a recession and is aimed at “cheering up” the economy, stimulating the growth of business activity in order to combat unemployment.
Containing - carried out during a boom period and is aimed at reducing business activity in order to combat inflation.
Expansionary monetary policy involves the central bank taking measures to increase the supply of money. Its tools are:
reduction in reserve requirements
reduction in discount rate
purchase of government securities by the central bank.
Contractionary (restrictive) monetary policy consists of the use of measures by the central bank to reduce the supply of money. These include:
increase in reserve requirements
increase in interest rate
sale by the central bank of government securities.
Monetary Policy Methods
Methods of monetary policy are a set of techniques and operations through which subjects of monetary policy influence objects to achieve their goals.
Direct methods are administrative measures in the form of various directives of the Central Bank regarding the volume of money supply and prices in the financial market. Limits on lending growth or deposit attraction are examples of quantitative controls. The implementation of these methods gives the fastest economic effect from the point of view of the central bank for the maximum volume or price of deposits and loans, for quantitative and qualitative variables of monetary policy. When using direct methods, time lags are reduced. Time lags are a certain period of time between the moment the need arises to apply a particular measure in the field of monetary policy and the awareness of such a need, as well as between the awareness of the need, the development of an opinion and the beginning of implementation.
Indirect methods of regulating monetary policy affect the motivation of behavior of business entities using market mechanisms, have a large time lag, and the consequences of their use are less predictable than when using direct methods. However, their use does not lead to market distortions. Accordingly, the use of indirect methods is directly related to the degree of development of the money market. The transition to indirect methods is characteristic of the global process of liberalization and increasing the degree of independence of central banks.
There are also general and selective methods:
General methods are predominantly indirect, affecting the money market as a whole.
Selective methods regulate specific types of credit and are mainly prescriptive in nature. Thanks to these methods, private problems are solved, such as limiting the issuance of loans to certain banks and refinancing on preferential terms.
Open market operations.
The sale (purchase) by the Central Bank of government securities on open markets by commercial banks reduces (increases) bank reserves, and therefore reduces (increases) the lending capabilities of banks, increasing (decreasing) the interest rate. This method of monetary policy is applied in the short term and has great flexibility.
Change in the minimum reserve ratio.
Increasing the reserve ratio by the central bank reduces excess reserves (which can be loaned out), thereby reducing the bank's ability to expand the money supply through lending. This means of regulating the money supply is usually used in the long term.
Change in discount rate.
The rate charged by the central bank for loans made to commercial banks is called the discount rate. With a decrease in the discount rate, the demand of commercial banks for Central Bank loans increases. At the same time, the reserves of commercial banks and their ability to provide loans to entrepreneurs and the population increase. Bank interest rates for loans are also reduced. The money supply in the country increases. On the contrary, when it is necessary to reduce business activity by reducing the money supply in the country, the central bank increases the discount rate. Increasing the discount rate is also a technique to combat inflation. Depending on the economic situation, the central bank resorts to a policy of “cheap” and “expensive” money.
Cheap money policy
It is carried out during a period of low market conditions. The central bank increases the supply of money by purchasing government securities on the open market, lowering the reserve ratio, and lowering the discount rate. This lowers the interest rate, increases investment and increases business activity.
Dear money policy
It is carried out by the Central Bank, first of all, as an anti-inflationary policy. In order to reduce the money supply, money emission is limited, government securities are sold on the open market, the minimum reserve ratio is increased, and the discount rate is increased.
Along with the listed methods of state regulation, which have an internal economic focus, there are special measures of external economic regulation. These include measures to stimulate the export of goods, services, capital, know-how, and management services. These are export credits, guarantees of export loans and investments abroad, the introduction and abolition of quotas, and changes in the value of duties in foreign trade.
Implementation of the principles of monetary policy allows you to maintain financial balance and build effective trade relations.
Main objectives of monetary policy
The goals of financial regulators within the framework of monetary policy can be divided into three main categories: intermediate, strategic and tactical. The intermediate method includes the method of adjusting the interest rate and the actual volume of money supply in circulation. Such techniques make it possible to artificially balance the current demand for essential goods and regulate the supply of money. The final result is to ensure an impact on increasing employment and production volumes, attracting third-party investments into the economy, and maintaining the dynamics of the pricing policy.The strategic goals of monetary policy are aimed at achieving the following key objectives:
- stabilization of prices while containing possible economic imbalances and inflationary processes;
- growth in employment in the economy;
- formation of the state balance of payments;
- increasing current production volumes, developing new markets.
Monetary policy: types and features
Each state has its own type of implemented monetary policy. Appropriate changes can be made under the influence of the current state of the economy and the implementation of basic growth indicators, external stress factors, the dynamics of expansion of production capacity, and employment. In total, monetary policy is divided into four main types, each of which has its own characteristics.- The policy of dear money (tight monetary policy). The main objective is to control the growth of the money supply to protect against high inflation. The main signs of a tight monetary policy are an increase in the limit of available bank reserves to regulate the actual money supply, an increase in the interest rate to create barriers to lending to commercial structures and the population.
- Soft monetary policy. The purpose of this mechanism is to stimulate various areas of the economy by increasing the money supply and adjusting the interest rate. In such a situation, the Central Bank actively purchases government securities in an open market. The level of bank reserves is reduced in order to expand opportunities for lending to the economy. The key interest rate is being gradually reduced, thereby ensuring access to profitable loans for commercial financial institutions.
- Expansionary monetary policy. This method is based on: a reduction in the current discount rate, active purchase of government assets on the open market and a reduction in the normalized value of reserve requirements. The effectiveness of such actions has been confirmed in practice in the context of the need to slow down the growth rate of unemployment and stimulate employment in the economy.
- Contractionary monetary policy. It assumes a decrease in the level of actual money supply in the domestic market. The discount rate is being increased, the normalized amount of reserve requirements is being increased, and a set of measures is being taken to sell state assets. The approach is relevant in the context of the need to maintain the level of inflation and reduce business activity.
Monetary policy- This is a set of activities in the field of money circulation and credit aimed at solving the following problems:
Regulation of economic growth;
Containing inflation;
Providing employment for the country's population;
Balance of payments equalization.
Monetary policy aimed at increasing the money supply in the economy is called expansionary; monetary policy aimed at reducing the money supply is called restrictive.
In accordance with the chosen strategy, the Bank of Russia carries out the following types of policies:
Monetary;
Accounting;
Deposit;
Foreign exchange.
Each direction of the Central Bank's policy from time to time (depending on the situation in the economy) is a priority.
Monetary policy- release (issue) of money and regulation of monetary circulation in the country.
Accounting policy Central banking is based on rediscounting or purchasing bills of exchange previously discounted by commercial banks. The central bank withholds a discount, or discount interest, from the currency of the bill, the change of which affects the volume of lending in the country. When it increases, a strict policy of “expensive money” is pursued; when it decreases, a policy of “cheap money” is pursued.
The accounting policy is supplemented by a pawn or collateral policy based on the provision by the Central Bank of credit institutions of loans secured by bills, securities and government debt obligations.
The meaning of the discount and collateral policy is to influence the situation in the money market and capital market by changing the conditions for refinancing credit institutions.
The accounting and pawnshop policy of the Central Bank is a mechanism for its direct impact on the liquidity of credit institutions and indirect impact on the economy as a whole.
Deposit policy regulates movement of cash flows between commercial banks and the Central Bank, thereby influencing the state of reserves of credit institutions.
When pursuing an expansive deposit policy, funds from the public sector of the economy deposited with the Central Bank decrease. Accordingly, the reserves of commercial banks increase by this amount. However, as reserves increase, the lending potential of commercial banks increases, which leads to lower interest rates and inflation. When carrying out a contractive deposit policy, the opposite result is achieved - a decrease in bank reserves, a reduction in credit potential, an increase in interest rates, and a decrease in inflation rates.
Monetary policy - set of activities carried out in the field of international economic relations. The direction and forms of monetary policy pursued by the Central Bank depend on the internal economic situation of a given country.
In different periods, different forms and methods of foreign exchange policy are used: foreign exchange restrictions, changes in parities (devaluation and revaluation), regulation of the degree of currency convertibility, exchange rate regime, discount and exchange rate policies. One of the means of implementing foreign exchange policy is foreign exchange regulation, aimed at regulating international payments and the procedure for carrying out transactions with foreign currency values.
The Central Bank also conducts motto policy. This method impact on the exchange rate of the national currency through the sale of foreign currency:
In order to increase the exchange rate of the national currency, the Central Bank sells foreign currency;
And to reduce it, he buys foreign currency in exchange for national currency.
The motto policy is carried out mainly way in the form of currency intervention, i.e. e. intervention of the Central Bank in operations on the foreign exchange market in order to influence the exchange rate of the national currency. A feature of currency interventions is the relatively large scale and short period of time.
The main methods of monetary policy of the Central Bank of the Russian Federation are:
1. administrative methods - These include direct restrictions and limits, such as:
Quotas for certain types of active and passive operations;
Introduction of limits on the issuance of loans of different categories;
Restrictions on the opening of various branches and offices;
Limitation of interest rates, tariffs, etc.;
2. economic methods - To These include the use of measures that do not involve the establishment of direct prohibitions, for example such as:
tax measures;
Regulatory measures (contributions to the fund for regulating credit resources, liquidity ratios and bank capital adequacy, as well as other types of deductions).
The main instruments of the monetary policy of the Bank of Russia are:
Interest rates on Bank of Russia operations;
Standards for required reserves deposited with the Bank of Russia (reserve requirements);
Open market operations;
Refinancing of credit institutions;
Currency interventions;
Establishing benchmarks for money supply growth;
Direct quantitative restrictions;
Issue of bonds in one's own name.
Interest rates on transactions. The Bank of Russia may set one or more interest rates for various types of transactions or pursue an interest rate policy without fixing the interest rate.
Interest rates of the Bank of Russia represent the minimum rates at which the Bank of Russia carries out its operations.
The Bank of Russia uses interest rate policy to influence market interest rates in order to strengthen the ruble.
Required reserve standards. The essence of this policy lies in the establishment by the Central Bank of mandatory minimum reserves for credit institutions in the form of a certain percentage of the amount of their deposits, which are stored in an interest-free account with the Central Bank. As an instrument of monetary policy, minimum reserves perform a dual role: they serve the current regulation of liquidity in the money market and at the same time act as a brake on the issue of credit money to commercial banks.
Required reserve ratios cannot exceed 20% of a credit institution's liabilities and can be differentiated for different credit institutions. Required reserve ratios cannot be made at one time
changed by more than 5 points.
The reserve requirement mechanism is used as a credit policy tool in almost all developed countries. In case of violation of required reserve standards, the Bank of Russia has the right to indisputably write off from the correspondent account of a credit organization opened with the Bank of Russia the amount of funds not deposited, and also to collect from the credit organization in court a fine in the amount established by the Bank of Russia.
Open market operations- purchase and sale by the Bank of Russia of treasury bills, government bonds, other government securities, bonds of the Bank of Russia, as well as short-term transactions with these securities with the completion of a reverse transaction later. The influence of the Central Bank on the money market and the capital market is that, by changing interest rates on the open market, the Bank creates favorable conditions for credit institutions to buy or sell government securities to increase their liquidity. Open market operations are the most flexible method of regulating the liquidity and lending capabilities of banks through the placement of public debt.
Refinancing of credit institutions-
lending by the Bank of Russia to credit organizations. In modern conditions, refinancing is used as a tool for providing financial assistance to commercial banks, which allows them
reduce the stock of liquid funds to a minimum.
Currency interventions
-
purchase and sale by the Bank of Russia of foreign currency on the foreign exchange market to influence the ruble exchange rate and the total demand and supply of money.
Direct quantitative restrictions
-
setting limits on the refinancing of credit institutions and the conduct of certain banking operations by credit institutions.
The Bank of Russia has the right to apply quantitative restrictions that apply equally to all credit institutions in exceptional cases in order to implement a unified state monetary policy only after consultations with the Government of the Russian Federation.
Setting benchmarks for money supply growth- The Bank of Russia can set growth targets for one or several indicators of the money supply, based on the main directions of the unified state monetary policy.
Issue of bonds on your own behalf- The Bank of Russia has the right to issue. The maximum amount of the total nominal value of Bank of Russia bonds of all issues that are not redeemed on the date of the Board of Directors’ decision on the next bond issue is established as the difference between the maximum possible amount of required reserves of credit institutions and the amount of required reserves of credit institutions, determined on the basis of the current required reserve ratio.
Central Bank of the Russian Federation
The Central Bank (Bank of Russia) is the main conductor of monetary policy aimed at stabilizing money circulation.
The role of the Central Bank of the Russian Federation in the economy is: in protecting and ensuring the stability of the ruble; regulation of the total money supply in the economy; development and strengthening of the banking system; impact on the activity of commercial banks; establishing uniform rules for banking activities and clarifying certain issues of banking practice; facilitating the smooth functioning of the settlement system.
As the economy develops, the role of the Central Bank strengthens and increases, since it is through the monetary mechanism that the basis for the development of the country’s monetary system is provided,
The Bank of Russia is the main link in the modern banking system of Russia. Its distinctive features:
- the authorized capital and other property of the Bank of Russia is federal property;
- The Bank of Russia carries out its expenses at the expense of its own income;
- The bank is not registered with the tax authorities;
- The Bank of Russia is a legal entity;
- the state is not liable for the obligations of the Bank of Russia, and the Bank of Russia for the obligations of the state, if they have not assumed such obligations;
- powers to own, use and dispose of the property of the Bank of Russia without its consent are not permitted.
The Central Bank of the Russian Federation is characterized by principle of independence- a key element of the status of the Bank of Russia - is manifested primarily in the fact that it is not part of the structure of federal government bodies and acts as a special institution with the exclusive right:
Money issue;
Organizations of money circulation.
The Bank of Russia is accountable to the State Duma of the Federal Assembly of the Russian Federation, which appoints and dismisses:
Chairman of the Bank of Russia;
Members of the Board of Directors of the Bank of Russia;
Auditor of the Bank of Russia.
The State Duma also approves the annual report of the Central Bank of the Russian Federation and the audit report.
The Central Bank performs the following main functions:
1. function of the emission center - is that the Central Bank has monopoly on the issue of banknotes. The volume of cash emission is regulated by the Bank with the calculation of the total costs of its monetary policy. The issuance of cash itself is carried out by selling banknotes and coins to commercial banks in exchange for their reserve at the Central Bank.
The importance of the function of the emission center is somewhat reduced since banknotes make up a small part of the money supply of industrialized countries. However, banknote issue is still required for retail payments. The higher the share of circulation in the country, the higher the value of bank emissions;
2. "bank of banks" function. The special role of the Central Bank in the credit system is also that his main clients are not commercial and industrial enterprises and the population, but credit institutions, mainly commercial banks. Commercial banks act as intermediaries between the economy and the Central Bank.
The service of commercial banks on passive operations is that to ensure their liquidity, banks store part of their money in the form of cash reserves with the Central Bank. In most countries, commercial banks are required to keep a portion of their cash reserves with the Central Bank. Such reserves are called required bank reserves. The Central Bank is the lender of last resort for commercial banks. It provides lending to commercial banks in the form of rediscounting bills, as well as re-pledge of their securities;
3. function of the government's bank. Regardless of the ownership of capital, the Central Bank is closely connected with the state. The Central Bank acts as the main banker of the state and advisor to the government on financial and monetary issues.
The Treasury keeps its available funds in current accounts with the Central Bank, which it uses for its expenses. At the same time, the Treasury pays its suppliers by checks to the Central Bank. At the same time, the Central Bank, using the interest-free free funds of the treasury, carries out budget execution operations free of charge for it. Thus, on behalf of the Treasury, the Central Bank accepts tax payments, which are credited to its current account. In conditions of state budget deficit, the function of state lending and public debt management is strengthened. Public debt management is carried out through the operations of the Central Bank to place and repay loans, and organize the payment of income on them.
The Central Bank uses the following methods for managing public debt:
- buys or sells government bonds in order to influence their rates and profitability;
- changes the terms of sale of government obligations;
- in various ways increases the attractiveness of government obligations for private investors.
4. function of a currency center. Historically; that to ensure banknote emission, central banks concentrated gold and foreign exchange reserves. They are saved as guarantee and insurance funds for international payments and to support the exchange rates of national currencies. On behalf of the government, the Central Bank regulates foreign currency and gold reserves and is the traditional custodian of gold and foreign exchange reserves. It carries out currency regulation through accounting policies and balance sheets, and participates in the operations of the global loan capital market. As a rule, the Central Bank represents its country in international and regional monetary and financial institutions.
5. function of monetary regulation, which at the present stage is the most important function of the Central Bank. The Central Bank is the main conductor of monetary regulation of the economy, which is an integral part of the government's economic policy. The main goals of monetary policy are: achieving stable economic growth, reducing unemployment and inflation, equalizing the balance of payments.
6. function of issuing government securities. The Central Bank determines the conditions for their issue and place of placement.
Transactions with government securities allow you to:
Ensure market financing of the budget deficit;
Promote more effective monetary policy;
Provide the foundation on which all other elements of the capital market will develop.
To implement its functions in the course of its activities, the Central Bank of Russia performs the following tasks:
Pursues a unified state monetary policy.
Monopoly issues cash and organizes cash circulation;
Is the lender of last resort for credit institutions, organizes a system for their refinancing;
Establishes the right-handedness of settlements in the Russian Federation;
establishes uniform rules for conducting banking transactions throughout the country ;
Provides servicing of budget accounts at all levels
budget system of the Russian Federation, unless otherwise established by federal laws, through settlements on behalf of authorized executive authorities and state extra-budgetary funds, which are entrusted with organizing the execution and execution of budgets; .
Carries out effective management of gold and foreign exchange reserves of the Bank of Russia;
Makes a decision on state registration of credit
organizations, issues licenses to credit institutions to carry out banking operations, suspends their validity and revokes them;
Supervises the activities of credit organizations and banking groups;
Registers the issue of securities by credit institutions in accordance with federal laws;
Carries out independently or on behalf of the Government of the Russian Federation all types of banking operations and other transactions necessary to perform the functions of the Bank of Russia;
Organizes and carries out currency regulation and currency control in accordance with the legislation of the Russian Federation;
- determines the procedure for making settlements with international organizations, foreign states, as well as with legal entities and individuals;
Establishes accounting and reporting rules for banking
RF systems;
- establishes and publishes official exchange rates of foreign currencies in relation to the ruble;
Participates in the development of the balance of payments forecast
RF and organizes the compilation of the balance of payments of the RF;
Performs other tasks.
Central Bank operations
1. Passive operations of the Bank Russia is distinguished by the fact that source of their resources serve primarily not own capital and attracted deposits, a. issue of banknotes.
The main passive operations of the Central Bank include:
Issue of banknotes;
Acceptance of deposits from commercial banks and the treasury.
The main source of resources for central banks in most countries is issue of banknotes (from 54 to 85% of all liabilities). At the present stage, the issue of banknotes is not backed by gold. The official gold content of monetary units has been abolished everywhere.
The modern mechanism for issuing banknotes is based on:
On lending to commercial banks and the state;
Increasing gold and foreign exchange reserves.
The issue of banknotes when lending by a bank is secured by bills of exchange and other bank obligations; when lending to the state - with state long-term obligations, and when purchasing gold and foreign currencies - in gold and foreign currency. It follows that the banknote issue is supported by the assets of the Central Bank. The size of the banknote issue depends on the active operations of the Central Bank.
However, not all loans to the Central Bank of Credit, or to the state, are associated with the new issue of banknotes. Loans can be credited to commercial bank and treasury accounts opened with the Central Bank. In this case, it is not the banknote issue, but the deposit issue of the Central Bank. The source of resources for central banks is also deposits of the treasury and commercial banks. Commercial banks are required to keep part of the funds in the form of cash reserves. A correspondent account of a commercial bank in Central is equivalent in its liquidity to cash. As a rule, commercial banks have a certain balance in their correspondent account with the Central Bank, which becomes the concentration of the cash reserves of commercial banks. The Central Bank does not pay interest on deposits, but carries out settlement transactions free of charge.
Along with bank deposits, state deposits occupy a large place in the liabilities of issuing banks. The share of equity capital usually accounts for no more than 4% of the Central Bank's liabilities.
2. Active operations are called operations for the placement of banking resources. The main active operations of the bank include:
1. accounting and loan operations
Accounting and lending operations are represented by two types of operations:
Accounting operations;
Short-term loans to the state and banks.
The main borrowers of the central bank are the commercial banks and the state. Commercial banks resort to loans from central banks for targeted lending to their clients, as well as during periods of tension in the money market. Such loans take the following forms:
Rediscounting and re-pledge of bills;
Re-pledge of securities;
Targeted loans from the Central Bank for investment purposes.
Rediscounting and re-pledge of bills is that the Central Bank rediscounts bills issued by commercial banks. Purchasing bills from commercial banks is called re-discounting, since this involves secondary accounting of bills that commercial banks bought from their clients. The discounting of treasury bills serves in most industrial countries as the main instrument for short-term government lending. Re-pledge of bills - This short-term loans against bills of exchange, presented to commercial banks.
Re-pledge of securities- issuing bank loans against government securities, but some countries also allow issuing loans against other types of securities. The method of covering cash reserves can be direct bank loans to government for a period of no more than one year. Short-term loans to commercial banks are provided against provision of simple and transferable bills, securities and other assets.
2. investments in government securities are made by the bank for various purposes. Central banks' purchases of government bonds serve as the main and even the only form of government lending to cover budget deficits. Direct lending to the state is practically absent or limited by law,
the above measures.
3.operations with gold and foreign currency are practiced, as a rule, in conditions of extreme necessity for the state and are used less frequently than the above measures.
Monetary policy is a set of activities and government in the field of money circulation and credit.
Central bank monetary policy (monetary policy)- this is a set of government measures that regulate the activities of the monetary system, the loan capital market, order in order to achieve a number of general economic goals: stabilization of prices, rates, strengthening of the monetary unit.
Monetary policy is the most important element.
All impacts are reflected in the value of the total social product and.
The main goals of the state's monetary policy:- Containment
- Security
- Tempo control
- Mitigation of cyclical fluctuations in the economy
- Ensuring the stability of the balance of payments
Principles of monetary and credit regulation of the economy
Monetary regulation of the economy is carried out on the basis of the principle compensation regulation, which assumes the following:
- monetary policy restrictions, which involves limiting credit transactions by increasing the norms for reserving funds for participants in ; level up ; restrictions on the growth rate in circulation compared to the commodity mass;
- monetary policy expansion, which involves stimulating credit operations; reduction of reserve standards for subjects of the credit system; falling lending rates; acceleration of currency turnover.
Monetary Policy Instruments
The development and implementation of monetary policy is the most important function. It has the ability to influence the volume of money supply in the country, which in turn allows it to regulate the level of production and employment.
The main instruments of the central bank in implementing monetary policy:- Regulation of official reserve requirements
It is a powerful means of influencing the money supply. The amount of reserves (part of the banking assets that any commercial bank is required to keep in the accounts of the central bank) largely determines its lending capabilities. Lending is possible if the bank has enough funds in excess of the reserve. Thus, increasing or decreasing reserve requirements can regulate the lending activity of banks and accordingly affect the money supply.
- Open Market Operations
The main instrument for regulating the supply of money is the purchase and sale of government securities by the Central Bank. When selling and purchasing securities, the Central Bank tries to influence the volume of liquid funds of commercial banks by offering favorable interest rates. By purchasing securities on the open market, he increases the reserves of commercial banks, thereby contributing to an increase in lending and, accordingly, an increase in the money supply. The sale of securities by the Central Bank leads to the opposite consequences. - Regulation of the discount interest rate (discount policy)
Traditionally, the Central Bank provides loans to commercial banks. The interest rate at which these loans are issued is called the discount rate. By changing the discount interest rate, the central bank affects the reserves of banks, expanding or reducing their ability to lend to the population and enterprises.
Factors that influence demand, supply and interest rates can be collectively called “monetary policy instruments.” These include:
Interest rate policy of the Bank of Russia
The Central Bank sets minimum interest rates for transactions it carries out. The refinancing rate is the rate at which loans are provided by commercial banks, or it is the rate at which bills of exchange are rediscounted from them.
The Bank of Russia may establish one or more for various types of transactions or pursue an interest rate policy without fixing the interest rate. Bank of Russia uses interest rate policy to influence market interest rates in order to strengthen the ruble.
Bank of Russia regulates the total volume of loans issued to them in accordance with the accepted guidelines of the unified state monetary policy, using the discount rate as an instrument. Bank of Russia interest rates represent the minimum rates at which the Bank of Russia carries out its operations.
Interest rate policy of credit institutions, being part of the national monetary policy, has a significant impact on the development and its stability. are usually free to choose specific rates on loans and deposits and use certain indicators reflecting the state of the short-term money market as guidelines when implementing interest rate policy. On the other hand, the central bank, in the targeting process, sets intermediate monetary policy goals that it can influence, as well as specific tools for achieving them. This may be the refinancing rate or interest rates on central bank operations, on the basis of which the short-term interbank lending rate is formed, etc.
The problems of identifying factors influencing the interest rate policy of commercial banks have worried specialists since the formation of economic theory. However, answers to many questions have not yet been found. Modern research aimed at identifying optimal rules for implementing national monetary policy is largely based on.
Methods of direct and indirect regulation of national monetary policy are considered in theory and practice. From the point of view of interest rate policy in the narrow sense (rates on credit and deposit operations, the spread between them), the instrument of its direct regulation is establishment by the central bank of interest rates on loans and deposits of commercial banks, indirect instruments - establishing the refinancing rate and the rate for central bank operations in the money and open markets.
Interest rates on loans and deposits as instruments of direct regulation are not often used in world practice. For example, the People's Bank of China sets rates that are considered indicative for the banking system. At the same time, the bank's policy is aimed at reducing the spread, which in the first half of 2006 was 3.65%, and by the end of 2009 - 3.06%, which indicates sufficient liquidity of the Chinese banking system.
In many countries, including Russia, the refinancing rate has become more of an indicative indicator, giving the economy only an approximate benchmark for the value of the national currency in the medium term, because it remains unchanged for a long time, while real rates in the money market change every day.
Required reserve standards
According to existing legislation, commercial banks are required to transfer part of the raised funds to special accounts in.
Since January 2004 established by the Central Bank following amounts of contributions to the mandatory reserve fund Bank of Russia: for ruble accounts of legal entities and foreign currency of citizens and legal entities, as well as for ruble accounts of citizens - 3.5%.
The maximum amount of deductions, i.e., required reserve standards, is 20% and cannot change by more than 5% at a time.
This standard allows the Bank of Russia to regulate the liquidity of the banking sector.
Reserves serve as a current regulation of liquidity in the money market, on the one hand, and as a limiter on the emission of credit money, on the other.
In case of violation of required reserve standards, the Bank of Russia has the right to indisputably collect from the credit institution the amount of funds not deposited, as well as a fine in the established amount, but not more than double.
Open market operations
Open market operations, which mean the purchase and sale by the Bank of Russia of corporate securities, short-term transactions with securities with the completion of a reverse transaction later. The limit on open market operations is approved by the board of directors.
In accordance with the law of July 10, 2002 No. 86-FZ (as amended on October 27, 2008) “On the Central Bank of the Russian Federation (Bank of Russia),” the Bank of Russia has the right to buy and sell goods of commercial origin with a maturity date of not more than 6 months, buy and sell bonds, certificates of deposit and other securities with a maturity of no more than 1 year.
Refinancing
Refinancing means lending by the Bank of Russia to banks, including accounting and rediscounting of bills. The forms, procedure and conditions of refinancing are established by the Bank of Russia.
Refinancing of banks is carried out by providing intraday loans, overnight loans and holding pawnshop credit auctions for a period of up to 7 calendar days.
Currency regulation
It should be looked at from both sides. On the one hand, the Central Bank must monitor the legality of foreign exchange transactions, and on the other hand, monitor changes in the national monetary unit in relation to other currencies, avoiding significant fluctuations.
One of the methods of influencing the exchange rate is through central banks carrying out foreign exchange interventions or monetary policy.
Currency intervention- this is the sale or purchase by the Central Bank of foreign currency for the purpose of influencing the exchange rate and the total demand and supply of money. These obviously include transactions for the purchase and sale of precious metals on the domestic market of the Russian Federation, the procedure for which is regulated by letter of the Central Bank of the Russian Federation dated December 30, 1996 No. 390.
The main objectives of exchange rate policy in Russia are strengthening confidence in the national currency and replenishing gold and foreign exchange reserves. Currently, the monetary base is fully backed by gold and foreign exchange reserves.
Direct quantitative restrictions
Direct quantitative restrictions of the Bank of Russia include the establishment of limits on the refinancing of banks and the conduct of certain banking operations by credit institutions. The Bank of Russia has the right to apply direct quantitative restrictions in exceptional cases in order to implement a unified state monetary policy only after consultations with the government of the Russian Federation.
Benchmarks for growth of money supply indicators
The Bank of Russia can set growth targets for one or more indicators based on the main directions of the unified state monetary policy. In Russia, the main aggregate is the monetary aggregate.
Today, the monetary policy of central banks is guided by monetarist principles, where the Central Bank is tasked with strictly controlling the money supply, ensuring a stable, constant and long-term growth rate of the amount of money in the economy, equal to the growth rate of GDP.
Other factors influencing demand, supply and interest rates include:
- the situation in the real sector of the economy;
- return on investment in production;
- the situation in other sectors of the financial market;
- economic expectations of business entities;
- the need of banks and other business entities for funds to maintain their liquidity.
The politics of cheap and expensive money
Depending on the economic situation in the country, the central bank pursues a policy of cheap or expensive money.
Cheap money policy
Characteristic of a situation of economic recession and high level. Its goal is to make credit money cheaper, thereby increasing aggregate spending, investment, production and employment.
To implement a cheap money policy, the central bank can reduce the interest rate on loans to commercial banks or make purchases on the open market or reduce the reserve requirement ratio, which would increase the money supply multiplier.
Dear money policy
It is carried out with the aim of reducing the pace by reducing total expenditures and limiting the money supply.
Includes the following activities:- Increasing the interest rate. Commercial banks begin to take less loans from the Central Bank, therefore the supply of money is reduced.
- Sale by the central bank of government securities.
- Increase in reserve requirements. This will reduce excess reserves of commercial banks and reduce the money supply multiplier.
All of the above monetary policy instruments related to indirect (economic) methods of influence. In addition to these general methods of monetary regulation, the central bank also uses direct (administrative) methods designed to regulate specific types of credit. For example, a direct limitation on the size of bank loans for consumer needs.
Monetary policy has pros and cons. Strengths include speed and flexibility, less dependence on political pressure than fiscal policy. Problems in the implementation of monetary policy are created by cyclical asymmetry. The effectiveness of monetary policy may also decrease as a result of counter-directional changes in the velocity of money.