Money supply and its main aggregates. What are the consequences of increasing the money supply? What causes the money supply to increase?

Money supply is a set of purchasing, payment and accumulated funds that serves economic relations and belongs to individuals and legal entities, as well as the state. This is an important quantitative indicator of money flow.

To analyze changes in the movement of money on a certain date and for a certain period, financial statistics began to use, first in economically developed countries, and then in our country, monetary aggregates M0, M1, M2, M3, M4.

Aggregate M0 includes cash in circulation: banknotes, metal coins, treasury notes (in some countries). Metal coins, which make up a small share of cash (2-3% in developed countries), enable individuals to make small transactions. These coins are usually minted from cheap metals. The real value of the coin is significantly lower than the nominal value, in order to prevent them from being melted down for the purpose of profitable sale in the form of bullion.

Treasury notes are paper money issued by the Treasury. Paper money now operates in underdeveloped countries. For example, in the Republic of Djibouti, treasury notes (in denominations of 500, 5000, 1000 francs) and coins are in circulation, the issues of which are carried out by the treasury; Treasury notes and coins are also used in the Kingdom of Tonga. The predominant role belongs to banknotes.

Aggregate M1 consists of aggregate M0 and funds in current bank accounts. Funds in the accounts can be used for non-cash payments, through transformation into cash and without transfer to other accounts. To make payments using funds in these accounts, their owners issue payment orders (the predominant form of payment in the Russian economy) or checks and letters of credit. It is the M1 unit that services operations for the sale of gross domestic product (GDP), distribution and redistribution of national income, accumulation and consumption.

Aggregate M2 contains aggregate M1, time and savings deposits in commercial banks, as well as short-term government securities. The latter do not function as a medium of exchange, but can be converted into cash or checking accounts. Savings deposits in commercial banks are withdrawn at any time and converted into cash. Time deposits are available to the depositor only after a certain period of time and, therefore, have less liquidity than savings deposits.

Aggregate M3 contains aggregate M2, savings deposits in specialized credit institutions, as well as securities traded on the money market, including commercial bills issued by enterprises. This part of the funds invested in securities is not created by the banking system, but is under its control, since the transformation of a bill into a means of payment requires, as a rule, the bank’s acceptance, i.e. guarantees of payment by the bank in the event of insolvency of the issuer.

Aggregate M4 is equal to aggregate M3 plus various forms of deposits in credit institutions.

There must be balance between the aggregates, otherwise there will be a violation of monetary circulation. Practice suggests that equilibrium occurs when M2 > M1; it strengthens at M2 + M3 > M1.

In this case, money capital moves from cash circulation to non-cash circulation. If this relationship between aggregates in monetary circulation is violated, complications begin: a shortage of banknotes, rising prices, etc.

To determine the money supply, countries use different numbers of aggregates (for example, the USA - four, France - two). In Russia, the aggregates M0, M1, M2 M3 are used to calculate the total money supply. Monetary aggregates include: M0 - cash in circulation; M1 - M0 plus settlement, current, special accounts in banks, household deposits in savings banks on demand, funds from insurance companies; M2 equals M1 plus time deposits in savings banks; M3 consists of M2 and certificates of deposit, government bonds.

The changes in the M2 money supply and its structure are illustrated by the data in Table 1.

Table 1. Money supply and its structure (trillion rubles)

The M2 money supply increased in 1994-1998. more than 10 times, the share of cash in M2 decreased from 40% in 1994 to 33.9% in 1998. It is noteworthy that outside the sphere of monetary circulation, its key monetary aggregates are GKOs (government short-term bonds ) and OFZ (federal loan bonds). Meanwhile, their volumes in 1994-1998. rapidly increased from 20.5 trillion. rub. in 1994 to 605.5 trillion. rub., i.e. increased almost 30 times, or 3 times faster than the increase in the M2 money supply. Government securities, being a liquid financial asset, are closely related to the movement of cash and non-cash money, which have higher liquidity, i.e. their value may fall in crisis situations, and therefore they either seek to exchange them for cash or open deposit accounts in banks. This is exactly what happened during the August (1998) crisis, when there was a feverish dumping of GKOs, OFZs and other debt obligations. The characteristics of monetary aggregates will be incomplete without an explanation of the concept of “monetary base”. The monetary base is the sum of cash on hand (MC) and commercial bank funds deposited with the Central Bank as required reserves. This money not only has greater liquidity, but also shows the capacity of the Central Bank and its ability to fulfill its obligations. Some economists call it strong money or "high efficiency" money because this category of money can be directly controlled by the Central Bank, which is not the case with other elements of the aggregate money supply. For example, the number and amount of bank deposits depends not only on the effectiveness of the Central Bank's policy, but also on how investors perceive this policy, whether they trust banks or not.

To justify the limits of growth of the money supply (M2), a money multiplier is used, which characterizes a possible increase in the money supply without negative consequences for price growth and inflation. Its value is defined as the ratio of M2 to the monetary base. Considering that the monetary base and M2 include cash, the multiplier reflects an increase in household deposits and legal entity balances. If the share of these elements in M2 increases, this means that the bulk of the money supply can increase in accordance with the value of the multiplier. An essential specificity of monetary circulation in Russia is the widespread use of foreign currency both to pay for foreign economic contracts and for the purpose of preserving the savings of the population and reducing losses of income from inflation. In this regard, to analyze and forecast the demand for money, changes in the ruble exchange rate, the stability of the financial and banking system, the processes of dollarization and capital flight, the broad money indicator is used, which includes the M2 aggregate and household deposits in foreign currency in the national banking system. To determine the amount of broad money, the average annual exchange rate is used. For example, in 1996, deposits in foreign currency amounted to 12.8 billion dollars, and in ruble terms (taking into account the ruble exchange rate of 5.5 thousand rubles per 1 dollar) - 72 trillion. rub.; M2 aggregate - 220.8 trillion, broad money - 292.8 trillion. rub. As you know, a significant part of the population's savings is kept at home in foreign currency. In 1996, the “home” currency amounted to 21.0 billion dollars, or in ruble equivalent - 116.8 trillion. rub. The entire amount of foreign currency money was quite an impressive amount - 188.8 trillion. rub. The mass of foreign currency money is more than 2 times greater than cash outside the banking system (MB) and amounts to 85.5% of M2. If money circulation were based only on domestic currency, then M2 should be 85.5% larger. The scale of replacing the ruble with the dollar in the overall cash flow is so significant that we can consider that in Russia, according to international terminology, a parallel system of monetary circulation has developed, when, along with the national monetary unit, the monetary unit of a foreign state actively circulates, which leads to a reduction in the emission income of the Russian state.

Let's try to analyze the money supply in 2000 based on the data below.

Table 2. Russia's money supply in 2000 (billion rubles).

	Money supply (M2) at the end of the period			Money supply growth rate, %
	Total	including:		to the previous month	by the beginning of the year
		cash (M0)	Non-cash funds
1.01	704,7	266,6	438,1	9,0	-
1.02	695,0	232,9	462,1	-1,4	-1,4
1.03	726,6	242,0	484,6	4,6	3,1
1.04	751,4	251,5	499,9	3,4	6,6
1.05	787,9	279,1	508,8	4,9	11,8
1.06	831,6	289,3	542,3	5,6	18,0
1.07	892,2	321,8	570,4	7,3	26,6
1.08	931,2	334,0	597,2	4,4	32,2
1.09	960,1	341,6	618,5	3,1	36,2
1.10	992,4	351,0	641,4	3,4	40,8
1.11	1001,2	349,7	651,5	0,9	42,1
1.12	1036,4	358,4	678,1	3,5	47,1

Over the year, the money supply in Russia increased 1.5 times or 47.1%, and the growth rate in the first half of the year was higher and amounted to 26.6% versus 16.2% in the second. During the year, the monthly growth rate of the money supply is not the same, and in February 2000 this indicator was negative. The growth rate as of July 1, 2000 was marked by the highest value - 7.3%. The ratio of cash and non-cash money in the total money supply has not changed significantly. The share of cash by the end of the year decreased by 3.2%, and accordingly non-cash increased, which characterizes the growth of non-cash payments in the country’s economy and the trend towards stabilization of its economy. All fluctuations in the money supply are explained by the economic as well as political development of the country, its dependence on industrial growth, the development of real sectors of the Russian economy, various favorable

and unfavorable external and internal factors (the situation with world prices for the main goods of Russian export - oil, gas, ferrous and non-ferrous metals).

From the point of view of leading experts - economists, the year 2000 was marked for the Russian economy as a year of positive growth rates, a positive impulse in production, which in turn strengthened the financial system.

More on topic 2. 1. Money supply. Russia's money supply:

1. Chapter 9. The monetary system of Russia: history and modernity
2. The money supply necessary to carry out the functions of money. Monetary aggregates. Monetary base
3. 1.2. Monetary system and organization of money circulation Money supply and monetary base.
4. 15. Money supply and its structure in Russia and in industrial countries. Monetary base.
5. 3. Money circulation. Content and structure of the money supply. Speed ​​of circulation of money.
6. 29 Monetary system and its elements. Monetary system of Russia
7. Money supply: concept, structure. Monetary aggregates used in the Russian Federation.
8. Monetary system and its elements. Monetary system of Russia
9. Law of money circulation. Money supply, its structure (monetary aggregates)

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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; in these conditions it is impossible to control not only the rise in prices, but the process of 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 a negative impact 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.

The economic situation is deteriorating: the volume of production is decreasing, there is a flow of capital from production to trade and intermediation, the expansion of speculation as a result of sharp changes in prices, credit operations are limited, since no one believes in debt, the financial resources of the state are depreciating, and 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 indexation of income and indexation of 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.

The money supply of a state is the amount of money available for spending by consumers of a particular country. In Russia, the circulation of money is regulated by the Central Bank. An increase in the money supply entails a decrease in interest rates, which, in turn, makes bank loans, and therefore more money, more accessible to the population.

The Central Bank increases the money supply by purchasing government securities, injecting more money into the banking system. An increase in the money supply reduces the value of the Russian ruble, but increases the amount of money that banks can issue in the form of loans to the public. When banks have more money to make loans, they lower the interest rates that consumers pay on their loans, which leads to more consumer spending because borrowed money becomes more accessible to them. When a country experiences a slowdown in the economy, the government increases the money supply to encourage the population to make more purchases and thereby improve the economic situation.

An increase in the money supply can also have a negative economic effect. It entails a depreciation of the ruble, which makes imported goods more expensive, and domestic goods for sale abroad cheaper. Given the close relationship between different states in the global economy, this phenomenon can spread to other countries and affect their economies. The cost of metal, cars and building materials may increase. As a result, due to rising costs of materials and construction work, commercial and residential property prices may also increase. But, at the same time, an increase in the money supply contributes to an increased issuance of loans by banks to the population, and, accordingly, it is significantly easier for citizens to receive additional money.

Successfully managing the global economy requires effective monetary policy. Increasing the money supply is one of many options for regulating the economy available to the country's government. In addition, the government can change tax rates, customs duties, bank reserve requirements, key interest rates, etc.

Increasing the money supply too much can lead to inflation and the value of the ruble will decrease relative to the currencies of other countries. This development of events leads to cheaper domestic products for foreign consumers and higher prices for their citizens.

For many years, the Central Bank and the Russian government have been monitoring the volume of money supply. This indicator has a direct impact on economic growth and gross domestic product (

The money supply is an absolute indicator of financial statistics, which is used to estimate the amount of money in circulation.

Money circulation is the movement of money in cash and non-cash forms in internal circulation in the process of circulation of goods, provision of services and making various payments. Money is a prerequisite for the existence of finance. The volume of cash turnover refers to the totality of cash flows. The study of money turnover is the task of banking statistics.

Cash turnover is equal to the sum of transactions for the receipt (write-off) of money for the period.

Money acts as:

1. measure of value;
2. medium of exchange;
3. means of payment;
4. a means of accumulation and savings;
5. world money.

These functions of money determine the system of monetary circulation indicators:

1. money supply and its structure;
2. the supply of banknotes in circulation of the national economy and the purchasing power of the monetary unit;
3. indicators reflecting transactions on accounts with deposits, gold reserves of the state;
4. indicators reflecting transactions with currencies in international economic relations.

Money supply (M2) is the totality of cash and non-cash funds of individuals and legal entities serving economic turnover in the territory of the Russian Federation.

Quantitative changes in the money supply in circulation affect the level of interest rates. And if interest rates rise, then there is a tendency to slow economic growth, reduce the country’s export capabilities, shrink the domestic market and, accordingly, reduce the demand for imported goods. By lowering interest rates, economic growth is stimulated, but preconditions are created for the development of inflationary processes.

In international financial statistics, the money supply is taken into account in the following groups:

1. M0 – cash;
2. M1 – banknotes, coins, traveler’s checks, demand deposits in depository institutions;
3. M2 – cash, demand deposits, deposits in commercial banks;
4. M3 – cash turnover, the assessment of which, in addition to M1 and M2, takes into account deposits in credit banks.

Volume of money supply

According to the quantity theory of money, the main role in determining the price level is played by the volume of money supply in circulation.

The quantity theory of money explains the level of commodity prices and the value of money by their quantity in circulation. Many important provisions of the theory of money, indicating their role in the reproduction process, originated in the 16th-18th centuries. based on the provisions of the quantity theory of money. Before the widespread adoption of the Keynesian model, quantity theory was the dominant macroeconomic theory. Its proponents dealt with such problems as the factors determining the absolute level of prices and the rate of interest, the theory of supply and demand for money. However, in the process of development of this concept, various directions emerged, interpreting various issues of monetary theory differently. In this regard, the statement of L. Harris is true that “... the quantitative theory should be approached not as a single theory, but as a paradigm, concept or school of economic thought, within the framework of which different authors considered different problems and came to different conclusions” .

The founders of this theoretical concept of money were the French thinkers J. Woden (1530-1596), C. Montesquieu (1689-1755) and the English philosopher D. Hume (1711 - 1776). The concept is based on the belief that the establishment of prices for goods and the determination of the value of money occurs only when the mass of money and the mass of goods collide. The works of this period are characterized by the denial of the reverse influence of the monetary sphere on the production process. In the works of the largest economists of that time, all the most important economic problems were analyzed in natural-material (real) categories. Money was only formally present in the analysis. The economic system in all its most important manifestations was reduced to natural commodity exchange.

The quantity theory of money organically fit into the classical direction of the theory of reproduction, which proceeded from the fact that under conditions of perfect competition and complete price elasticity in all markets, the system automatically, without any outside intervention, comes to equilibrium with the full use of all production resources.

The founders of the classical movement believed that the cost of monetary metals is determined by labor costs. Nevertheless, D. Ricardo argued that the number of metal coins in circulation can influence their value (purchasing power) and the prices of goods. The principles of the quantitative theory were also adhered to by the follower of D. Ricardo - J. St. Mill. In his writings, he wrote that, other things being equal, the value of money changes in inverse proportion to its quantity. This position of representatives of the classical theory of reproduction developed as a result of the understanding of money as a technical means of exchange. Therefore, the secondary role assigned to money by the classical school is not accidental.

K. Marx studied monetary problems in connection with the study of the economic mechanism as a whole. The basis of his research are historical and logical methods. For him, the problem of money arises several times: initially as a result of studying the essence and nature of goods and the process of exchange, and then in the process of functioning of capital.

Money and monetary circulation in Marx's works are considered as the starting point of the captain's analysis. From the point of view of Marxist theory, money is secondary in relation to production, however, its role is very significant. In the circulation of industrial capital, money capital, on the one hand, creates the necessary conditions for production, and on the other, serves as a form of realization of commodity capital. In the process of capital movement and the sale of social product, money contributes to the redistribution of production factors between industries, and therefore influences structural changes in the economy. In the development of money circulation, Marx thus sees an objective process of the evolution of certain forms of production relations.

In a number of works, Marx showed that with the advent of full-fledged metallic money, the exchange of goods was transformed into commodity-money circulation, where the commodity market and money circulation mutually determine each other. In this logical sequence, commodity circulation is the initial prerequisite for money circulation. Being secondary, money circulation only reflects and consolidates those processes that develop in commodity production and commodity circulation.

At the same time, according to Marx, money circulation cannot be assigned only a passive, dependent role, since it has its own laws of development and has a reverse effect on commodity circulation and commodity production. In addition, there is one more circumstance. The emergence of metallic currency placed it under the influence of strict state control, while the commodity market was subject to only indirect influence of state policy.

In general, according to Marx, money has the opposite effect on production. In particular, from the functions of money as a means of circulation and payment, K. Marx deduced the possibility of crises, which was explained by the appearance of a gap in time and space between the sale and purchase of goods.

In accordance with the theory of K. Marx, in order to service the circulation of a certain commodity mass, a certain amount of metallic money is required, which is determined by a number of factors (parameters) of reproduction:

Amounts of prices of goods;
speed of turnover of monetary units when servicing transactions;
development of credit relations.

With regard to paper money, the following is defined: if their quantity is equal to the amount of gold money needed for circulation, then they function in the same way as gold money and have the same purchasing power. But if the money circulation channels are filled with an excess amount of paper money (more than gold required), then their purchasing power decreases, which is manifested in an increase in the prices of goods. As a result, it was concluded that while the quantity of gold in circulation increases or decreases with the rise or fall of commodity prices, the latter begin to change under the influence of changes in the supply of paper money, since such can come into circulation in any quantity.

It should be noted that the law of monetary circulation presented above is formulated in relation to metallic monetary systems. For the modern period of paper-credit monetary systems, the sum of the prices of goods, expressed in fiat paper money, cannot serve as a starting point for determining their required quantity.

Development of quantitative theory at the end of the 19th and beginning of the 20th centuries. reflected in the works of Marshall's students - Livington, Pigou, Robertson, Keynes, who studied the factors (determinants) of the demand for money. The most complete study in this direction were the works of the American economist J. M. Keynes (1883-1946).

Money supply growth

The growth of the money supply can only accompany an increase in the national product, expressed in physical quantities. More money is required to pay higher wages, generate ever greater incomes, and enter into ever larger trade deals. This means that the successful development of the national economy in itself determines the need for a new issue.

The reason for the increase in money circulation may also be changes in the behavior of individuals, for example, when they seek to accumulate money. In this case, it is necessary to issue more banknotes; In order to compensate for the withdrawal of hoarded cash from circulation, banks have to issue additional means of payment necessary for issuing wages and servicing commercial transactions.

The total supply of banknotes then increases, but they circulate more slowly because owners hold them longer and in larger quantities, so that economic equilibrium is maintained without raising prices.

A decrease in the share of cash in the structure of the money supply indicates a relative weakening of inflationary pressure from aggregate demand. The accumulation of funds in the accounts of government bodies in the Central Bank of the Russian Federation has a restraining effect on the growth of the money supply.

In conclusion, it can be noted that after the introduction of economic sanctions against the Russian Federation, the quantity of goods decreased, but the money supply remained the same at approximately the same velocity of circulation. In the future, a decrease in the growth rate of the money supply is predicted. Thus, in the near future there will be a downward trend in the monetary base and then in the money supply.

Increase in money supply

A successful solution to the problem of monetization of the economy involves preparing investment demand for money. To do this, it is necessary to restore the trust of the main owner of money - the population - in the institution of the state, the country's financial markets and, as a result, in the national monetary unit. In this case, a rapid increase in the money supply is possible without causing inflationary shocks to the economy. The implementation of this decision is possible if a unified state program for stimulating investment activity in Russia is developed and adopted.

At the same time, solving the problem of increasing investment activity in society is impossible without increasing the monetization coefficient. A special indicator when analyzing the money supply is the monetary base, that is, the money supply in circulation, including cash, accounts and reserves of commercial banks and other financial assets. The concepts of “monetary base” and “money supply” do not coincide. The first is used to determine the degree of possible influence of the central bank on the money market and includes a number of indicators that are not included in the calculation of the money supply.

The monetary base is significantly smaller than the money supply, but this is exactly the monetary aggregate that the Central Bank of the Russian Federation can influence directly. The volume of cash supply directly depends on the ongoing monetary policy and the prospects for the implementation of the economic program; required reserves and balances on correspondent accounts are directly subject to the influence of the main bank, which cannot be said about the volume of the deposit base (a component of the M2 monetary aggregate) formed by the banking sector of the economy.

The procedure for the relationship of banking institutions with the corporate sector of the economy and the population, of course, is also regulated by the Bank of Russia, but the degree of its influence in this case is significantly limited and only implies the possibility of establishing a number of economic and administrative guidelines.

However, the “monetary base” parameter is an important component of the analysis of a country’s money market. This is an estimated indicator of the activity of the central bank, targeted from the point of view of carrying out real monetary policy.

Money supply structure

The main element of a market economy is money, which ensures the continuity of the national economic circulation, the circulation of income and expenses.

The money supply is a set of cash and non-cash means of payment that ensure the circulation of goods and services in the country at a certain moment.

Liquidity is the ability to quickly convert an asset into cash without losing its value or at minimal cost. Money (coins and paper money) are the most liquid assets. Bank demand deposits are also highly liquid assets because the owner can withdraw cash from them on demand.

The liquidity of individual components of the money supply varies. The money supply is usually structured according to the degree of liquidity of its components. As liquidity decreases, the components of the money supply successively include assets that are less and less capable of performing the function of a means of payment.

The structure of the money supply is characterized by monetary aggregates arranged in order of their consolidation (each previous aggregate is included in the next one).

To measure the money supply, the following monetary aggregates are used: M0, M1, M2, M3.

Unit M0 is cash (paper and metal) in circulation.

Aggregate M1 includes M0 plus money in current accounts of the population and in current accounts of enterprises, demand accounts in banks, traveler's checks. Money in the narrow sense means the aggregate M1, with the help of which most exchange transactions are carried out.

The M2 money supply includes M1 plus money in time and savings accounts at commercial banks, deposits in specialized financial institutions and some other assets. The funds included in this unit cannot be directly transferred from one person to another and used to carry out transactions. They serve primarily as a store of value. The monetary aggregate M2 is money in the broad sense of the word. It is most often used for macroeconomic analysis.

The M3 unit is the largest. It includes the M2 aggregate plus large time deposits, agreements to purchase securities with repurchase at a specified price, bank certificates of deposit, government (treasury) bonds, commercial paper, etc. This aggregate includes government short-term bonds (GKOs), federal loan bonds (OFZ), government savings loan bonds, government domestic foreign currency loan bonds.

The components of the money supply are reflected in the liability side of the consolidated balance sheet of the banking system. The dynamics of monetary aggregates strongly depends on the dynamics of the interest rate. When the interest rate increases, aggregates M2 and M3, which include assets that generate income in the form of interest, will grow faster than aggregate M1.

For financial stability in the country, the most preferable are the stability of the base interest rate and uniform dynamics of the money supply, adequate to the real needs of the economy.

Velocity of money supply

The velocity of money is the average annual number of turnovers made by money that is in circulation and used to purchase finished goods and services.

The velocity of circulation of money is equal to the ratio of the nominal gross national product to the mass of money in circulation:

V=U/M,
where V is the velocity of money circulation;
U is the nominal volume of GNP;
M is the mass of money in circulation.

The velocity of money circulation in the short term is usually a constant value, but in the long term it varies, but only slightly. This speed is completely manageable and depends on the operation of the country’s banking system and on the level of technical equipment of institutions that participate in monetary transactions.

The higher the technical equipment of banks, the more widely they use modern computers and satellite communication lines, the faster money turns around and the less it is needed for the normal functioning of the economy.

The money supply needed to carry out exchange and payment transactions depends on the demand for money and the supply of money by the banking sector.

Components of the money supply

The monetary aggregate is an indicator that measures the volume of certain components of the money supply. Monetary aggregates classify money into types depending on liquidity and scope of application.

The following aggregates are used: M0, M1, M2, M3, M4, which together make up the money supply. The principle of constructing the money supply is that less liquid ones are added to more liquid assets.

The M0 unit includes cash in circulation: banknotes, metal coins, and, in some countries, treasury notes. Metal coins, which make up a small share of cash (in developed countries 2-3%). These coins are usually minted from cheap metals. The real value of the coin is significantly lower than the nominal value, in order to prevent them from being melted down for the purpose of profitable sale in the form of bullion.

Aggregate M1 consists of aggregate M0 and funds in settlement and current accounts of banks and in demand deposits. Funds in the accounts can be used for non-cash payments, through transformation into cash and by transfer to other accounts. They can be immediately used in the function of money as a medium of exchange or means of payment.

Aggregate M2 contains aggregate M1, as well as time and savings deposits in commercial banks (sometimes short-term government securities are also included here). The funds from these deposits become available to the depositor only after a certain time stipulated by the agreement between the bank and its client.

Unit M3 contains unit M2, savings and deposit certificates of commercial banks, government loan bonds, other government securities, deposits in specialized non-bank institutions, as well as securities traded on the money market, including commercial bills issued by enterprises.

Aggregate M4 is equal to aggregate M3 plus various forms of deposits in credit institutions (stocks, bonds, i.e. monetary obligations, which require a lot of time to convert into “real” money). In Russia, this unit is not used as an independent unit.

Through the aggregate M0, the function of money as a means of circulation is realized, M1 is a means of circulation and payment, M2 and M3 are means of circulation, payment and accumulation.

Cash money supply

Cash is part of the monetary turnover of the national economy. Implemented by a constant circulation of cash. The volume, speed of circulation and transactions of participants in the circulation of funds are a reflection of the needs of society as a whole and of individuals.

Cash turnover is equal to the amount of payments made over a certain period. Regardless of the economic development of any country, cash circulation makes up a small part of the circulation of funds.

But only cash, as a legal means of payment, is required to be accepted in the country at any time of the day and in unlimited quantities.

The state of cash turnover is the purchasing power of the national currency.

Money supply - cash, non-cash and other funds for making payments. Cash reserves in the state.

The money supply includes all funds in the country: the government, banks, enterprises and citizens. It doesn’t matter where the money is: in accounts, cash or stored at home.

Regulation of the money supply

The main objectives of regulating the money supply are to optimize the amount of money in circulation, crowd out money substitutes, and reduce inflation.

In natural market conditions, the number of means of payment is regulated by the volume of production and price changes. K. Marx derived the formula for the amount of money in circulation at equilibrium in the market and sale for “real” money. It is defined as the sum of the prices of goods minus goods sold on credit, plus the money needed for due payments, minus mutually extinguishing payments and inversely proportional to the speed of circulation of the same monetary units.

The amount of money in circulation corresponds to real economic relations. There is always as much money as needed, depending on the demand for the national currency. If there is demand, the money supply grows without additional emission (the action of the bank multiplier). If the issue of money outstrips the commodity turnover's need for money, then the sum of the prices of goods increases accordingly.

From the market equilibrium formula (Fisher equation) we can derive the main relationships between the factors changing the amount of money in circulation:

Where M is the mass of money, V is the turnover rate of the monetary unit, P is the price of goods, G is the volume of the commodity mass.

From the formula it follows that M = PG/V i.e. The need for money in trade turnover is directly proportional to the cost of goods and inversely proportional to the speed of circulation of money. A slowdown in the velocity of circulation causes an increase in the demand for money. The compression of the money supply leads to a slowdown in the circulation velocity, which follows from the transformation of the formula V = PG/M.

The velocity of money circulation is difficult to calculate; indirect methods are used for this:

The ratio of GNP or national income to money supply expresses the relationship between money circulation and economic turnover;
- the ratio of the amount of transferred funds on bank current accounts to the average value of the money supply characterizes the turnover of money in the payment turnover;
- the ratio of the amount of money received at the cash desks of Bank of Russia institutions to the average annual mass of money in circulation characterizes the speed of return of money to the Bank;
- the ratio of the amount of receipts for the issuance of cash (including the turnover of the post office and Sberbank) to the average annual mass of money in circulation.

To analyze money turnover, indicators of the composition and structure of the money supply are used, i.e. monetary aggregates. All monetary aggregates are arranged in a hierarchical system, where each subsequent aggregate includes the previous one. They differ from each other in terms of liquidity, conversion into cash without loss of asset value.

Aggregate M0 consists of cash outside the banking system.

Aggregate M1 - monetary base - the starting monetary aggregate, which includes cash issued by the Bank of Russia (excluding cash in vaults), in circulation and bank cash desks; funds of commercial banks deposited with the Bank of Russia (required reserves, money in correspondent accounts); Bank bonds from credit institutions. These are the most liquid funds directly controlled by the Central Bank. The monetary base characterizes the financial scale of the country; its dynamics are determined by the Bank of Russia.

M2 - money supply, an aggregate of the money supply, including cash and non-cash money, including funds of legal entities and individuals in banks. M2 is adopted as the main indicator of money turnover and determines the level of monetization of the economy (the ratio of the amount of money in circulation to GDP). The standard value of M2, based on world practice, averages 60-80% (Switzerland - 138%, USA - 120, Japan - 112, China - 110, Germany - 67, USSR - 70, Russia - 15%).

The volume of money supply is regulated by the Bank of Russia using monetary policy instruments. The Bank of Russia and the Ministry of Finance of Russia are developing a monetary balance sheet taking into account the consolidated balance sheet of commercial banks. The balance sheet in a generalized form reflects the dynamics of cash flows, which must be regulated based on the needs of the economy.

M2 increases as GDP, exports, and demand for money grow. The main channel for the formation of M2 is internal credit. If M2 grows slower than the monetary base, then this indicates a decrease in the lending capabilities of banks. To justify the growth of M2, a money multiplier is used (the ratio of M2 to the monetary base), which characterizes a possible increase in M2 without consequences for the price level and inflation. The basis for the change in M2 is the share in the monetary base of funds of the population and legal entities in commercial banks. If the population trusts banks and keeps money in their accounts, then the Central Bank has the opportunity to increase M2. A change in the volume of money supply can also be the result of an acceleration (slowdown) of money circulation.

The demand for money is determined by the intensity of commodity transactions, transactions with economic and financial assets. Commodity transactions are related to the quantity of goods, prices of goods and other factors of economic activity. More money is required if either prices or the volume of commodities rise. It is possible that prices will rise with a simultaneous decrease in production.

According to the theory, the demand for money is inversely proportional to interest rates. During a stock market crisis, for example, financial assets are dumped and a rush demand for money and foreign currency arises.

From the formula of the equation of exchange it follows that the demand for money is inversely proportional to the speed of turnover, and the speed of turnover is directly proportional to the increase in prices and volume of GDP. When GDP decreases, an increase in the speed of money turnover expresses an increase in prices.

The depreciation of the national currency generates a steady demand for foreign currency, which can negatively affect the balance of payments. The national currency should be the main reference point for market participants, and the demand for dollars or euros should not exceed the demand for rubles.

As the demand for money increases, the situation of money shortage in the economy worsens. Ultimately, it is mitigated by the resource provision of economic entities. The presence of material resources increases the security of the ruble and the confidence of investors in it. The money supply is determined by the emission policy. Emissions are necessary for any development model. But a money supply that is safe for the economy is only possible if it corresponds to the demand for money.

There are three emission channels:

1) farm lending;
2) lending to the Government of the Russian Federation;
3) purchase of foreign currency.

The emission policy depends on the chosen monetary policy option. It, in turn, can be soft or hard. A soft monetary policy offers money in abundance and does not involve its withdrawal from the market. From the point of view of soft monetary policy, saturating the economy with money is useful, but only if there are signs of economic growth. In this case, inflation does not increase with M2 growth. Tight (monetarist) policies, on the contrary, are aimed at compressing the money supply in order to prevent price increases.

The issue is largely disconnected from the real sector; monetary resources mainly serve transactions in financial markets.

In recent years, the volume of money supply has been determined mainly by the Central Bank's operations with foreign currencies. The bank buys foreign currency earnings from exporters for rubles, since foreign currency resources are needed for payments on public debt and other needs.

Means of increasing the money supply are also the refinancing of commercial banks, ensuring full collection of proceeds (previously almost 100% was collected, now - 60-65%), replacing cash turnover with non-cash ones, blocking channels for concealing income, introducing electronic payments, etc.

An excess of the supply of money over the demand for it opens the way to inflation.

Inflation means the depreciation of money in relation to the real money equivalent, i.e. rising prices and decreasing value of the national currency. If buyers have money that can be spent on production, but they are not provided with goods, then this is demand inflation. Increased demand may come from the population, entrepreneurs, and the state. In addition, cost (supply) inflation is possible, when wages rise without return, prices for raw materials and taxes rise, and the market is forced to recognize rising costs due to lack of competition. Both types of inflation are the result of an imbalance in the economy and are manifested in the fact that the money supply grows and the scale of prices changes.

In a planned economy, prices are kept within specified parameters, and inflation does not manifest itself in an open form. The consequence of suppressing inflation in this way is a commodity shortage. In a market economy, depending on the scale and direction of government regulation, open inflation, up to hyperinflation, or moderate (regulated) inflation are possible. Open inflation occurs as a result of manipulation of the money supply without control over pricing, as a result of which money ceases to fulfill its functions.

According to the international standard, there are five signs of hyperinflation:

The population prefers to keep savings in non-monetary form or stable foreign currency;
- the national currency is immediately invested to maintain purchasing power;
- prices are indicated mainly in conventional units;
- purchases on credit are made at prices that compensate for the expected loss of purchasing power;
- inflation over the previous three years is close to 100%.

Russia was classified as a country with hyperinflation, which required, in particular, the recalculation of bank assets and liabilities taking into account the inflation index with compensation from profits.

Moderate inflation means an increase in the money supply over a relatively long period of time, which contributes to the growth of investments, the reduction of non-payments, and the attraction of loans.

Those. the accumulation of prerequisites for economic growth, without which it is impossible to increase the income of enterprises, and, consequently, payments to the budget. We are talking about a predicted stable inflation of 1.5-2% per year.

Stock speculators, financial institutions, exporters benefit from inflation, and the population always loses, losing both with rising inflation and with some measures to combat it (refusal of wage indexation, etc.). It receives the main blow from rising prices for both domestic and imported goods, when the state does not regulate the food and foreign exchange markets. Investments become impossible due to unavailability of loans.

Disturbances in monetary circulation can also manifest themselves in the form of deflation, which occurs as a result of restrictions on the money supply, budget expenditures, increased interest rates, and increased tax burden on the population. It leads to a decrease in prices, consumer demand, enterprise profits, economic growth rates, unemployment, and an increase in the purchasing power of the national currency.

Deflationary processes are also evidenced by the sale of raw materials to intermediaries at low prices with the subsequent receipt of the full price abroad (export of capital); transfer of money by sellers and buyers to real estate abroad; reduction of prices in a disguised form (non-payments, barter, offsets and other non-monetary payments). Affected by the deflationary syndrome, the population is making purchases in anticipation of further price reductions.

But if firms lower prices by improving technology, then such deflation benefits consumers because they can increase their purchases while prices are low.

Inflation factors are divided into structural and monetary. The former are rooted in the government's economic policies, which lead to a decrease in efficiency and rising costs and prices. The latter are determined by the state of monetary circulation, the volume of money supply, i.e. policy of the Central Bank.

Currently, the main causes of inflation are:

Growth in export revenue and its purchase by the Bank of Russia for rubles;
- increasing prices and tariffs for products and services of natural monopolies;
- growth of commodity demand in the absence of competition among producers;
- growth in household incomes, account balances of budgetary organizations, and social spending;
- monetary policy of the Bank of Russia: growth of foreign exchange reserves with excess liquidity and budget surplus;
- inflation expectations.

The IMF's standard recommendations for fighting inflation are to cut government spending, raise taxes, peg the exchange rate, or introduce a floating rate. However, there is no universal remedy for combating inflation. There are factors that clearly cause a decrease in inflation: the development of competition, control over natural monopolies, withdrawal of excess money (sterilization, reorganization), issue of debt securities, moderate monetary policy. Other factors are not so clear: while they have a positive effect on inflation, they negatively affect other economic parameters.

The Government of the Russian Federation and the Central Bank have to choose what, what factors to give preference to, without going beyond the framework of the economic strategy. For example, if we strengthen Russia’s status as a raw material appendage, then we must prevent the strengthening of the ruble, i.e. low inflation. And if the ruble is strengthened by reducing inflation, then the interests of exporters will be affected. An increase in the refinancing rate slows down economic growth, and liberalization of the foreign exchange market reduces the gold and foreign exchange reserves of the Central Bank.

Monetary methods (increasing interest rates, required reserve ratios, attracting ruble deposits, etc.) can help reduce inflation, but their side effect, for example on the scale of lending, and therefore on the rate of economic growth, is obvious. Thus, from the point of view of the consequences for the economy, reducing inflation by compressing M2 is problematic. An increase in the money supply does not automatically lead to an increase in inflation, since there are counteracting factors: the absorption of rubles by the real sector, an increase in balances in accounts with the Central Bank, and a reduction in loans to the Government of the Russian Federation.

The problem of inflation lies not in the number of banknotes, but in the fragility of the connection between money and production, long-term projects; they leave the economy without doing any useful work.

Converting the formula MV = PG to P = MV/G indicates that price increases (P) are inversely proportional to the volume of production. Thus, a reduction in production increases inflation even when the money supply is constant.

In the fight against inflation, it is important to change the psychology of economic entities, rid them of the fear of the depreciation of savings, and prevent an increase in current demand caused by rising prices for goods and services. A reduction in inflation expectations is possible when the government is committed to eradicating uncontrollable inflation and enjoys the confidence of the majority of the population. In this case, the confidence limit becomes a real force influencing economic behavior that can reduce inflation expectations.

Now in monetary regulation it is necessary to solve two problems:

Ease the restriction on money supply, move from an offer based on an increase in foreign exchange reserves to a flexible money supply, taking into account the needs of production and through the refinancing rate;
- suspend the withdrawal of money from the production sector and from the market by freezing it in the Stabilization Fund, issuing OBR, as well as from the country; allocate a budget for development and long-term lending.

So far, the Central Bank of the Russian Federation has functions of withdrawing money from the economy over the function of its monetization, which does not at all correspond to its main purpose.

Money supply indicators

In statistics, an indicator (coefficient) is studied that characterizes the increase in the money supply in circulation as a result of an increase in banking results - the money multiplier (M).

It is calculated by the formula:

M = (M2 + C + D + R) / H,
where M2 is the money supply in circulation;
N – monetary base;
C – cash;
D – deposits;
R – required reserves of commercial banks.

The money multiplier is the ratio of the money supply to the monetary base.

The tasks of monetary circulation statistics include studying the denomination of the money supply:

F = M2 / K – functionally weighted;
where K is the denomination of banknotes;
f – the corresponding number of bills.

The money aggregate is formed as a multiplier of money outside banks and demand deposits in the banking system, i.e. it represents all the money in the country’s economy that can be used as a means of payment.

The quasi-money aggregate represents liquid deposits of the monetary system, which are directly used as a means of payment and, as a rule, have a lower velocity of circulation than the money aggregate.

The quasi-money aggregate includes time deposits, savings deposits and foreign currency deposits.

The combination of money and quasi-money aggregates forms the broad money aggregate, which is one of the most important indicators of the state of the monetary sector.

When conditions for the formation of a high level of free liquidity in the banking sector prevail, the Bank of Russia can take measures aimed at limiting the growth of money supply by intensifying the use of sterilization instruments. For these purposes, the Bank of Russia makes decisions to increase interest rates on standing instruments, i.e. deposit operations carried out on standard conditions. As a result, there is an increase in the rate on deposit operations on standard conditions.

But the Bank of Russia’s ability to influence both the level of money market rates and the volume of free banking liquidity has certain limits. This is due to the fact that the permissible level of profitability on sterilization instruments of the Bank of Russia is limited above by the level of interest rates, which is calculated based on the parity of rates on the external and domestic financial markets. In these conditions, the Bank of Russia has a desire to increase the attractiveness of market instruments of monetary policy.

Quantity of money supply

The money supply is influenced by two factors: the amount of money and the speed of its turnover.

The amount of money supply is determined by the state - the issuer of money, its legislative power. The growth of emissions is due to the needs of commodity circulation and the state. In Russia, the main reason for the increase in the money supply is the state, the huge federal budget deficit, which was largely repaid by issuing money into circulation. At the same time, commodity turnover even decreased in real terms due to a drop in production rates.

Another factor influencing the money supply is the speed of circulation of money, i.e., its intensive movement when performing the functions of circulation and payment.

Money supply (M1 or M2 aggregates)

This indicator indicates the connection between money circulation and economic development processes.

Average annual money supply in circulation

This indicator indicates the speed of non-cash payments. Other indicators of the speed of money turnover are also used.

The speed of circulation of money is influenced by general economic factors, i.e. the cyclical development of production, its growth rate, price movements, as well as monetary (monetary) factors, i.e. the structure of payment turnover (the ratio of cash and non-cash money), the development of credit operations and mutual settlements, the level of interest rates for loans on the money market, as well as the introduction of computers for transactions in credit institutions and the use of electronic money in settlements. In addition to these general factors, the speed of circulation of money depends on the frequency of income payments, the uniformity of the population's spending of their funds, the level of saving and accumulation.

But since the speed of circulation of money is inversely proportional to the amount of money in circulation, the acceleration of its turnover means an increase in the money supply. An increased money supply with the same volume of goods and services on the market leads to the depreciation of money, i.e., ultimately it is one of the factors in the inflationary process.

Total money supply

M3 (total money supply in national currency) - M2 plus savings-target deposits and funds in securities of individuals and legal entities and local governments;
M4 (total money supply, including foreign currency) - MZ plus deposits (demand, fixed-term and savings-targeted) of individuals and legal entities and local governments.

The most important quantitative indicator of money circulation is the money supply, which is the total volume of purchasing and means of payment.

Many domestic scientists and prominent public figures have been considering the issues of what should be the money supply necessary to carry out the functions of money, what money should be in order to ensure effective development of the economy, what should be the monetary system, and how to achieve its optimal functioning. The Minister of Finance of Russia, Count E.F., also dealt with these problems. Kankrin.

He considered metallic money to be real wealth, real capital. However, at a sufficiently high level of development of human society, paper money appears, which replaces specie and “mentally becomes completely similar to it.” Not a single civilized state can do without them. Compared to metallic ones, paper money has a number of advantages. They are more mobile and greatly facilitate financial relationships. Their production and replenishment cost the state much less. In addition, paper money artificially increases free capital, creating additional opportunities for the development of production and trade.

But they also have serious disadvantages. Paper money credit is difficult to maintain. It is practically impossible to determine how many of them can be released at a given time. The very nature of paper money is the desire for its extreme multiplication, and excessive issuance disrupts the necessary balance in the monetary system, specie is forced out of circulation, and the rate of paper money falls. When they begin to take “artificial and unsuccessful administrative measures” to maintain their course, “then another new evil appears: their value begins to fluctuate; then the prices of things begin to fluctuate to the detriment of trade and morality and often become inconsistent with anything.”

At the same time, usury is flourishing, becoming the scourge of the country and diverting capital from more useful activities, therefore, according to Kankrin, paper money must be handled “smartly and judiciously from a state point of view” and when using it, a number of mandatory conditions must be observed. Paper money should serve only as an “addition” to metal money and be backed by an inviolable, albeit moderate, exchange fund. He considered the exchange fund the most rational basis for the paper monetary system, provided that it consisted not of state property, not of papers, but of coins. Paper money must be accepted at all public cash offices and exchanged there for hard cash, at least up to a certain amount. New releases should be made in a moderate amount and gradually, so that in the event of unfavorable consequences the issue can be stopped. However, secret releases are unacceptable. The newly released sums cannot be used to cover deficits in ordinary state budgets, but must be used for public enterprises that increase national wealth.

In case of war, it is better to resort to loans, the issue of state treasury bonds and special taxes, and only as a last resort - to the issue of paper money. And this must be done openly. And after the end of the war, appropriate measures should be taken as soon as possible to maintain their course.

All transactions with money (for example, exchange, destruction of worthless ones, etc.) must be carried out in such a way as not to raise any doubts in society. And, of course, it is necessary to produce paper money in such a way that it is difficult to counterfeit, and to do everything possible to counteract the issuance and sale of counterfeit ones.

The amount of paper money must correspond to the need for circulating means of payment, including metallic money in this number, Kankrin emphasized.

If there is too much paper money, it falls in value. In such a situation, Kankrin believed, it is best to stop their further production, leave them in circulation at the existing rate and wait for the opportunity to bring them to the value of silver, and the worst solution is to “turn them in full or in part into some kind of interest-bearing debt,” because . it will only add to the damage already done. The Kankrin reform from 1834 to 1844 led to the establishment of a system of silver monometallism in Russia and for a certain period ensured the stabilization of monetary circulation in the country and contributed to its economic development.

In Russia at the present stage, much attention is paid to calculating the money supply necessary for the socio-economic development of the country. As part of the monetary program, coordination is carried out at the macroeconomic level of the parameters of the monetary sphere for the coming year with the projected trends in the development of the budgetary sector, foreign economic and real sectors of the economy in order to achieve the planned inflation rates. The interconnected system of projected indicators presented in the monetary program includes indicators of the monetary base, assessed in accordance with the projected dynamics of demand for money, and the main sources of its formation: net international reserves of monetary authorities; net domestic assets of the monetary authorities, including net credit to the general government and net credit to banks.

Non-cash money supply

Part of cash flow. The movement of finances occurs in the order of transferring amounts from the payer’s accounts to the recipient using bank transactions.

About 80% of payments in the country are non-cash. It covers the distribution of national income, the acquisition of goods and services; payments for generating budget profits and expenses, financing organizations and other redistribution of funds.

Participants in non-cash payment relations are enterprises, state and commercial banks and financial institutions, and the population.

Cashless payments have advantages over cash: high speed of cash turnover. The gradual replacement of cash with non-cash and its rational organization is of great importance for banking resources, credit relations, and reducing the costs of money circulation.

The amount of the non-cash payment depends on the volume of products sold by the company, wholesale and procurement costs, and the size of the redistribution of funds. Economic development, the technological revolution in the banking sector, and the development of forms of savings determine the expansion of the non-cash money supply.

Total money supply

The total money supply is cash banknotes in circulation, bank deposits, funds in bank accounts, and other unconditional monetary obligations in a given country or countries, if a group currency is used.

The total money supply is calculated by the Bank of Russia as of the 1st day of the month based on data from the consolidated balance sheet of the banking system.

The total money supply includes:

MO monetary aggregate - cash in circulation;
- funds in settlement, current and special accounts of enterprises, households and local budgets;
- deposits of the population and enterprises in commercial banks;
- public demand deposits in savings banks;
- funds of insurance organizations;
- time deposits of the population in savings banks;
- certificates and government bonds.

Money supply multiplier

To manage the money supply, the money multiplier indicator is calculated.

The Central Bank regulates the value of the money multiplier through the mechanism of required reserves of commercial banks in the central bank.

The value of the money multiplier varies in time and space (it varies in different countries). In developed countries, the value of the money multiplier can exceed 2-3 times the value of the initial issue. In the process of regulating the size of the money multiplier (k) by the central bank, the concept of the monetary base arises, which is based on cash as the most liquid and deposits of commercial banks (mandatory) in the central bank. Monetary base = M0 + funds in required reserves (in the Central Bank of the Russian Federation) + funds of commercial banks in correspondent accounts of the Central Bank of the Russian Federation.

The monetary base shows how much money supply the Central Bank can operate.

Money supply = Monetary base * Money multiplier

Therefore, Money multiplier = M2 (money supply) / Monetary base.

There is an inverse relationship between the amount of required reserves of commercial banks in the central government and the value of the money multiplier.

The higher the required reserve ratio of commercial banks in the central one, the lower the value of the money multiplier.

If the money multiplier is high, there is an increase in non-cash turnover compared to cash, since the growth of the money multiplier always depends on the growth of cash and the balance on correspondent accounts with the Central Bank of the Russian Federation.

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 types of money.

Monetary aggregates are a grouping of bank accounts according to the rate at which funds in these accounts are converted into cash. The faster the funds in the accounts can be converted into cash, the more liquid the aggregate 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 funds to the bank for some time. 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 of interest rates on the 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 coefficient, equal

The monetization coefficient allows us to answer the question: is there enough money in circulation? It shows how much the gross product is backed by 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.