Monetary policy: concept, types, methods and tools. Monetary policy Monetary policy methods
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Autonomous non-profit organization
"RUSSIAN ACADEMY OF ENTREPRENEURSHIP"
Faculty of Economics and Management
Specialty "Finance and Credit"
Specialization "Banking"
COURSE WORK
on the discipline "Organization of activities of the Central Bank"
on the topic: "Monetary policy of the Central Bank: methods and tools"
Completed: student
correspondence course 5,
group VD-08-013
Gilyazeva Enghe Anyasovna
Checked:
Candidate of Economic Sciences, Associate Professor E.I. Kuznetsova
Moscow, 2012
Introduction
1. Central Bank Russian Federation
2. Monetary policy of the Central Bank
2.1 Main objectives, goals and forms of monetary regulation
central bank monetary credit
Introduction
Monetary policy is a set of interrelated measures taken by the Central Bank to regulate aggregate demand through the planned impact on the state of the loan and money circulation.
The central bank plays a key role and occupies a monopoly position not only in the sphere of issuing banknotes, but also in the sphere of the state's monetary policy, which is designed for short-term periods and is carried out by indirect methods. The objectives of monetary policy are: economic growth; mitigation of cyclical fluctuations in the market for goods, capital and labor; curbing inflation; achieving a balance of payments.
Today, any country in the world, even the smallest, has its own central bank. It has 2 main tasks. The first task is that the central bank must ensure the stability of the functioning of the banking and financial systems. In particular, he must prevent the occurrence of financial panic, the likelihood of which in financial system with a wide range of intermediary institutions is very large. In carrying out this task, the central bank plays the role of the lender of last resort.
Conducting monetary policy is the second main task. It is carried out mainly by instructing the Bureau of Operations on open market about control over the money supply, so that inflation is low and at the same time significant unemployment is not allowed.
The central bank is the central link of the monetary system of any state; it combines the features of an ordinary (commercial) banking institution and a government department. The central bank is endowed with the right to monopoly issue of banknotes, regulate money circulation and exchange rate, storage of gold and foreign exchange reserves... The most important function of the Central Bank is to develop a common credit policy.
Monetary policy is a very effective instrument of influencing the country's economy, which does not violate the sovereignty of most of the subjects of the business system. Although at the same time there is a limitation of the scope of their economic freedom (without this, any regulation of economic activity is generally impossible), the state influences the key decisions made by these entities only indirectly.
Ideally, monetary policy is designed to ensure price stability, full employment, and economic growth — these are its ultimate and ultimate goals. However, in practice, with its help, it is necessary to solve more narrow tasks that meet the urgent needs of the country's economy.
We must not forget that monetary policy is an extremely powerful and therefore extremely dangerous tool. With its help it is possible to get out of the crisis, but the sad alternative is also not excluded - the aggravation of the negative trends prevailing in the economy. Only very balanced decisions taken at the highest level after a serious analysis of the situation, consideration of alternative ways of influencing the monetary policy on the economy of the state, will yield positive results. Without the right monetary policy, the economy cannot function effectively.
1. CENTRAL BANK OF THE RUSSIAN FEDERATION
1.1 Status and objectives of the Central Bank of Russia
The central bank of the country is the main link in the banking system of any state. It reflects the national interest, pursues a policy in the interests of the state, forms the main principles of all banking activities.
In the banking system, the country's Central Bank plays a key role. The sustainability of the development of the national economy and its banking sector depends on its activities. By regulating the circulation of money in cash and non-cash forms, the Central Bank creates economic preconditions for the movement of goods and services from producer to consumer.
The independence of the Central Bank is relative within the framework of government structures, since its economic policy is determined by the priorities of the government's macroeconomic course and cannot be successful without coordinating its main elements with the government. The main goal of the Central Bank in the development of a market economy is to maintain monetary and foreign exchange stabilization for economic growth.
The Central Bank of the Russian Federation (Bank of Russia) was established on the basis of the law "On the Central Bank of the Russian Federation (Bank of Russia)" on December 2, 1990. Its main task in the conditions of a two-tier banking system was to maintain the stability of the functioning of the country's banking and monetary systems, organize management processes operations of banks at the macroeconomic level, coordination of the activities of banks and other credit and financial institutions.
The historical development of the banking system of Russia, the adopted legislative and regulatory acts were reflected in the Federal Law "On Amendments and Additions to the Law of the RSFSR" On the Central Bank of the Russian Federation (Bank of Russia) "dated April 12, 1995. the bank is still guided by it. This document, which defines the goals, functions, rights and obligations and mechanism of activity of the Central Bank, contains 95 articles (instead of 39 in the law "On the Central Bank of the Russian Federation (Bank of Russia)" on December 2, 1990).
The main objectives of its activities are:
Protection and resilience national currency- the ruble, including its purchasing power and the rate against foreign currencies;
Development and strengthening of the banking system of the Russian Federation;
Ensuring the efficient and uninterrupted functioning of the settlement system.
Profit making is not the goal of the Central Bank. In accordance with the Federal Law, this is a body of state leadership that acts as a "bank of banks" and is endowed with the rights and powers of monopoly issue of banknotes, regulation of money circulation, credit and banking activities, currency sphere, storage of gold and foreign exchange reserves. The central bank is not responsible for the obligations of the state, as well as the state is not responsible for monetary obligations bank if they are not adopted on the basis of federal law.
1.2 Structure of the Central Bank of Russia
The Central Bank, within the limits of its powers provided by the Constitution of the Russian Federation and federal laws, is independent in its activities from the administrative and executive bodies of state power and is accountable to the highest legislative body of its state - the State Duma of the Federal Assembly of the Russian Federation.
The supreme body of the Central Bank is the Board of Directors, which determines the main directions of its activities and carries out its leadership and management. This is a collegial body, which includes the Chairman of the Bank of Russia and 12 members of the Board of Directors. The chairman is appointed by the State Duma for a period of 4 years by a majority vote of the total number of deputies. Council members work on a permanent basis at the Bank of Russia.
The Board of Directors in accordance with Art. 16 of the Law performs the following tasks:
develops and ensures the implementation of the main directions of the unified state monetary policy of the state in cooperation with the Government of the Russian Federation;
the Central Bank approves the annual report and submits it to the State Duma;
considers and approves the expense account of the Central Bank for the next year;
determines the structure of its divisions;
makes decisions regarding:
creation and liquidation of institutions and organizations of the Central Bank;
setting mandatory standards for credit institutions;
the amount of reserve requirements;
changes in interest rates Central Bank;
determination of limits for operations in the open market;
participation in international organizations;
purchase and sale of real estate to ensure the activities of the Central Bank;
the application of direct quantitative restrictions;
issue and withdrawal of banknotes and coins from circulation, on the total volume of cash issue;
the procedure for the formation of reserves by credit institutions;
submits proposals to the State Duma on changing the authorized capital of the Central Bank;
approves the order of his work;
appoints the chief auditor by the Central Bank;
approves its internal structure;
determines the conditions for the admission of foreign capital to the banking system of the Russian Federation.
To improve the monetary system and coordinate the work of the Central Bank, legislative and executive authorities, ministries, departments, economic structures and credit institutions, the National Banking Council has been created under it, which includes two chairmen each from the chambers of the Federal Assembly of the Russian Federation and the Government of the Russian Federation, as well as the Minister of Finance of the Russian Federation and the Minister of Economy of the Russian Federation. The rest of its members are appointed by the State Duma on the proposal of the Chairman of the Central Bank. As an expert advisory body, it performs the following functions:
considers drafts of the main directions of the unified state monetary policy, foreign exchange regulation and foreign exchange control policy;
defines the concept of improvement and development of the banking system;
develops the basic principles of organizing the settlement system in the Russian Federation and regulating the activities of credit institutions;
carries out examination of draft laws and other regulations in the field of banking.
The law confirms the organization of the Central Bank according to the principle of a single centralized system with a vertical subordination scheme, including the central office, territorial offices, RCC, computer centers, educational and other institutions. National banks of the republics within the Russian Federation are territorial institutions of the Central Bank. As divisions of the Bank of Russia, they do not have the status legal entity... In addition, they cannot make decisions of a regulatory nature, as well as issue guarantees, sureties, promissory notes and other obligations.
The Central Bank of the Russian Federation has authorized capital, which serves as a security for its obligations, can create, at the expense of its profit, reserves and funds for various purposes, including an insurance fund formed by compulsory deductions from commercial banks on the terms and in the manner determined by the Bank's Charter. The rates of deductions of profit to these funds and the procedure for their spending are determined by the Board of Directors.
The Central Bank issues regulations that are binding on federal government bodies, subjects of the federation, bodies local government, as well as for all legal entities and individuals. They are not retroactive.
The reporting period is set from January 1 to December 31 of each year. The structure of the bank's balance sheet is determined by the Board of Directors. The annual report is submitted annually to the State Duma no later than May 15th. The latter considers it until July 1 of the next year and sends its conclusion to the Government and the President of the Russian Federation. After that, it is published no later than July 15 of the next year. In addition, the central bank publishes monthly its balance sheet, data on money circulation, including the dynamics and structure of money supply, summarized data on its operations.
The Central Bank transfers to the federal budget 50% of the actually received balance sheet profit for the year after approval annual report bank by the Board of Directors, the remaining profit - in reserves and funds for various purposes. He and his institutions are exempt from all taxes, collection of duties and other payments on the territory of the Russian Federation.
To review the annual report central bank Before the end of the reporting year, the State Duma makes a decision on its audit and appoints an audit firm licensed to conduct banking audits in the Russian Federation.
Internal audit of the Central Bank is carried out by the office of the chief auditor, directly subordinate to the Chairman of the Central Bank.
1.3 Functions of the Central Bank of Russia
The Bank of Russia performs its functions in accordance with the Constitution of the Russian Federation and Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)" and other federal laws. According to Article 75 of the Constitution of the Russian Federation, the main function of the Bank of Russia is to protect and ensure the stability of the ruble, and the issue of money is carried out exclusively by the Bank of Russia. In accordance with Article 4 of the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)", the Bank of Russia performs the following functions:
In cooperation with the Government of the Russian Federation, develops and implements a unified monetary policy;
Monopoly issues cash and organizes cash circulation;
Is the lender of last resort for credit institutions, organizes their refinancing system;
Establishes the rules for making settlements in the Russian Federation;
Establishes the rules for conducting banking operations;
Serves the accounts of budgets of all levels of the budgetary system of the Russian Federation, unless otherwise established by federal laws, through settlements on behalf of authorized executive bodies and state extrabudgetary funds responsible for organizing the execution and execution of budgets;
Carries out effective management of the gold and foreign exchange reserves of the Bank of Russia;
Decides on state registration credit institutions, issues banking licenses to credit institutions, suspends and revokes them;
Supervises the activities of credit institutions and banking groups;
Registers the issue valuable papers 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 implements 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 the rules of accounting and reporting for the banking system of the Russian Federation;
Establishes and publishes the official exchange rates of foreign currencies in relation to the ruble;
Participates in the development of the forecast of the balance of payments of the Russian Federation and organizes the compilation of the balance of payments of the Russian Federation;
Establishes the procedure and conditions for the implementation by currency exchanges of activities for organizing transactions for the purchase and sale of foreign currency, issues, suspension and revocation of permits for currency exchanges to organize transactions for the purchase and sale of foreign currency. (The functions of issuing, suspending and revoking permits for currency exchanges to organize transactions for the purchase and sale of foreign currency will be performed by the Bank of Russia from the date of entry into force of the federal law on amending the Federal Law "On Licensing Certain Types of Activities");
Analyzes and predicts the state of the economy of the Russian Federation as a whole and by region, primarily monetary, monetary, financial and price relations, publishes relevant materials and statistical data;
Carries out other functions in accordance with federal laws.
1.4 Monetary policy instruments and methods
According to the law, the Central Bank develops and implements, in cooperation with the Government of the Russian Federation, a unified state monetary policy. At the same time, he sets the main direction of the economic policy of the Government of the Russian Federation and uses economic levers to regulate the money supply in circulation and direct it to the relevant spheres of the economy. The main instruments and methods of the Central Bank's monetary policy are:
interest rates on Bank of Russia operations;
Required reserve ratios deposited with the Bank of Russia (reserve requirements). 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 changed by more than five points at a time;
operations on the open market (purchase and sale by the Bank of Russia of treasury bills, government bonds and other government securities, short-term operations with securities with a later return transaction);
refinancing of banks (lending by the Bank of Russia to banks, including accounting and rediscounting of bills);
currency regulation (purchase and sale by the Bank of Russia of foreign currency for foreign exchange market to influence the ruble exchange rate and the total demand and supply of money);
setting benchmarks for money supply growth;
direct quantitative restrictions (setting limits on refinancing
banks and the conduct of certain banking operations by credit institutions).
The main types of monetary policy (policy of cheap and expensive money).
We have already mentioned the policy of expensive money (restrictive) and the policy of cheap money (expansionist). In this section, I will consider what it is and what is the mechanism for implementing one or the other.
Let the economy face unemployment and falling prices. Therefore, it is necessary to increase the supply of money. To achieve this goal, a cheap money policy is applied, which consists of the following measures.
First, the central bank must purchase securities on the open market from the public and from commercial banks. Secondly, it is necessary to lower the discount rate and, thirdly, there is a need for standards for reserve deductions. As a result of the measures taken, excess reserves of the system of commercial banks will increase. Since excess reserves are the basis for increasing the money supply by commercial banks through lending, it can be expected that the money supply in the country will increase. An increase in the money supply will lower the interest rate, causing an increase in investment and an increase in the equilibrium net national product. From the above, we can conclude that the goal of this policy is to make credit cheap and easily available in order to increase the volume of total spending and employment.
In a situation where the economy is faced with excessive spending, which gives rise to inflationary processes, the central bank should try to lower overall spending by limiting or reducing the supply of money. To solve this problem, it is necessary to lower the reserves of commercial banks. This is done in the following way. The central bank must sell government bonds on the open market in order to trim the reserves of commercial banks. Then it is necessary to increase the reserve rate, which automatically frees commercial banks from excess reserves. The third measure is to raise the discount rate to reduce the interest of commercial banks to increase their reserves by borrowing from the central bank. The above system of measures is called the policy of expensive money. As a result, banks find that their reserves are too small to meet the statutory reserve requirement, that is, their current account is too large in relation to their reserves. Therefore, in order to meet the reserve requirement for insufficient reserves, banks should maintain their checking accounts by refraining from issuing new loans after old ones have been paid off. As a consequence, the money supply will contract, causing an increase in the rate of interest, and an increase in the interest rate will reduce investment, reducing total costs and limiting inflation. The goal of the policy is to restrict the supply of money, that is, to reduce the availability of credit and increase its costs in order to lower costs and contain inflationary pressures.
It should be noted the strong and weak sides the use of methods of monetary regulation when influencing the economy of the country as a whole. The following arguments can be made in favor of monetary policy. First, speed and flexibility compared to fiscal policy. It is known that the application of fiscal policy may be delayed for a long time due to discussions in the legislature. The situation is different with monetary policy. The central bank and other monetary authorities can make decisions on the purchase and sale of securities on a daily basis and thereby influence the money supply and interest rate. The second important aspect is related to the fact that in developed countries this policy is isolated from political pressure, in addition, it is inherently softer than fiscal policy and operates more subtly and therefore seems more acceptable politically.
But there are also a number of negative aspects. An expensive money policy, if carried out vigorously enough, can indeed reduce the reserves of commercial banks to the point where banks are forced to limit their lending. And this means limiting the supply of money. A cheap money policy can provide commercial banks with the necessary reserves, that is, the ability to lend, but it cannot guarantee that banks will actually lend and the supply of money will increase. In such a situation, the actions of this policy will be ineffective. This phenomenon called cyclical asymmetry, and it can be a serious hindrance to monetary regulation during a depression. In more normal periods, an increase in excess reserves leads to the provision of additional loans and, thus, to an increase in the money supply.
Another negative factor noted by some neo-Keynesians is as follows. The velocity of circulation of money tends to change in the direction opposite to the supply of money, thereby inhibiting or eliminating changes in the supply of money caused by politics, that is, when the supply of money is limited, the velocity of circulation of money tends to increase. Conversely, when policy measures are taken to increase the money supply during a downturn, it is very likely that the velocity of money will fall.
In other words, when money is cheap, the velocity of circulation of money decreases; in the reverse course of events, the policy of expensive money causes an increase in the velocity of circulation. And we know that total spending can be viewed as the money supply multiplied by the velocity of money. And, consequently, under the policy of cheap money, as mentioned above, the velocity of circulation of the money supply decreases, and, therefore, the total expenditures are reduced, which contradicts the goals of the policy. A similar phenomenon occurs with the policy of expensive money.
2. MONETARY POLICY OF THE CENTRAL BANK
2.1 Main objectives, goals, and forms of monetary regulation
Monetary regulation carried out by the Central Bank is one of the elements of the state's economic policy and is a set of measures 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. It aims to achieve stable economic growth, low inflation and unemployment. The laws on Central Banks emphasize their responsibility for the stability of monetary circulation and the exchange rate of the national currency.
By implementing monetary policy, the Central Bank, influencing the lending activities of commercial banks and directing regulation to expand or reduce lending to the economy, achieves stable development of the domestic economy, strengthening monetary circulation, and balancing internal economic processes. Thus, the impact on credit makes it possible to achieve deeper strategic objectives for the development of the entire economy as a whole.
Monetary policy is based on the theory of money, which studies, in particular, the process of the impact of money and monetary policy on the state of the economy as a whole. IN modern conditions states with market economy models use one of two concepts of monetary policy:
politics credit expansion, or "cheap" money;
the policy of credit restriction, or "expensive" money.
Credit expansion of the Central Bank increases the resources of commercial banks, which, as a result of issued loans, increase the total mass of money in circulation. Credit restriction entails limiting the ability of commercial banks to issue loans and thereby saturate the economy with money.
The development of monetary policy by the Bank of Russia is carried out in accordance with Art. 45 of the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)”. The Bank of Russia annually, no later than August 26, submits to the State Duma a draft of the main directions of the unified state monetary policy for the coming year and no later than December 1 - the main directions of the unified state monetary policy for the coming year. The draft is presented to the President and the Government of Russia.
The State Duma considers the main directions of the unified state monetary policy for the coming year and makes an appropriate decision no later than the adoption by the State Duma of the federal law on the federal budget for the coming year. Thus, the unity of the objectives of the monetary and financial policy is achieved.
Monetary policy is implemented using certain methods and instruments.
2.2 Methods of monetary policy
Monetary policy methods are a set of techniques and operations through which the subjects of monetary policy - the Central Bank as government body monetary regulation and commercial banks as "conductors" of monetary policy - they influence objects (demand for money and supply of money) to achieve their goals. The methods of conducting day-to-day monetary policy are also referred to as tactical monetary policy objectives.
The modern system of monetary policy methods is as diverse as monetary policy itself. The classification of methods of monetary policy can be carried out according to various criteria.
Direct and indirect regulation of the monetary sphere
Within the framework of monetary policy, methods of direct and indirect regulation of the monetary sphere are applied. Direct methods have the character of administrative measures in the form of various directives of the Central Bank concerning the volume of money supply and the price of financial market... The implementation of these measures gives the fastest effect from the point of vision central bank control over the price or maximum volume of deposits and loans, especially in an economic crisis. However, over time, direct methods of influence in the case of "unfavorable" from the point vision economic entities influencing their activities can cause an overflow, an outflow of financial resources into the "shadow economy" or abroad.
Indirect methods of regulating the monetary sphere affect the motivation of the behavior of business entities using market mechanisms. Naturally, the efficiency of using indirect methods of regulation is closely related to the degree of development of the money market. In transition economies, especially at the first stages of transformations, both direct and indirect instruments are used, with the former being gradually replaced by the latter.
General and selective methods of monetary regulation
In addition to dividing the methods of monetary regulation into direct and indirect, there are also general and selective methods of implementing the monetary policy of the Central Bank.
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. Their purpose is associated with solving particular problems, such as, for example, limiting the issuance of loans by some banks or limiting the issuance of certain types of loans, refinancing on preferential terms of certain commercial banks, etc. Using selective methods, the Central Bank retains the functions of centralized redistribution of credit resources. Such functions are unusual for the central banks of countries with market economies. The use of selective methods of influence on the activities of commercial banks in the practice of central banks is typical for economic policy pursued at the stage of a cyclical recession, in conditions of a sharp violation of the proportions of reproduction.
At the same time, direct methods of monetary policy are rough methods of external influence on the functioning of the subjects of the money market, affect the basis of their economic activity... They can contradict the microeconomic interests of credit institutions, lead to ineffective distribution of credit resources, to restrictions on interbank competition, and difficulties in the emergence of new financially stable institutions in the banking market.
Thus, the negative consequences of direct methods of monetary policy often prevail over the advantage of their application in market conditions, since they distort the market mechanism.
Therefore, the central banks of countries with developed market economies have practically abandoned direct methods of monetary policy and resort to them in exceptional cases when it is necessary to take “quick response measures”, for example, in conditions of a sharp economic crisis.
The practice of forming a market economy and its development has proven the low efficiency of direct methods of monetary policy. As a consequence, there is a widespread displacement of direct methods of monetary policy by indirect ones.
The choice of the type of monetary policy pursued, and, accordingly, the set of instruments for regulating the activities of commercial banks, is carried out by the Central Bank based on the state of the economic situation in each specific case. The main directions of monetary policy developed on the basis of this choice are approved by the legislative body. In this case, it is necessary to take into account the time lag between the implementation of a particular measure of monetary regulation and the manifestation of the effect of its implementation. Effectiveness of application different types monetary policy is determined by the extent to which the destabilization of monetary circulation is caused by "purely" monetary, and not general economic and political factors.
2.3 Monetary policy instruments
The influence of the subjects of monetary policy on its objects is carried out using a set of specific instruments. Monetary policy instruments are understood as a means, a method of influence of the Central Bank as a body of monetary regulation on the objects of monetary policy.
The Federal Law "On the Central Bank of the Russian Federation" (Article 35) defines the main instruments of monetary policy:
1. Operations on the open market.
2. Norms of required reserves deposited with the Central Bank (reserve requirements).
3. Interest rates on operations of the Central Bank.
4. Refinancing of credit institutions.
5. Foreign exchange interventions.
6. Establishment of benchmarks for the growth of the money supply.
7. Direct quantitative restrictions.
8. Issue of bonds in its own name.
Let us consider in more detail the instruments of the monetary policy of the Russian Federation.
Open market operations
Economic measures to regulate monetary policy also include operations of the Central Bank in the open market with securities. Open market policy refers to the sale and purchase of government securities by the Central Bank in order to influence the money market. The main task of the open market policy is to regulate the supply and demand for securities, to cause a corresponding reaction from commercial banks.
An open market policy is a quick and flexible tool. When selling and buying securities, the Central Bank tries with the help of an offer favorable interest to influence the volume of liquid funds of commercial banks and thereby to manage their credit issue. By buying securities on the open market, he increases the reserves of commercial banks and contributes to the growth of money supply. This is used especially effectively during a crisis. During a period of high market conditions, the Central Bank offers commercial banks to buy securities in order to reduce their lending opportunities in relation to the economy and the population.
The Central Bank can pursue such a policy in two ways. First, he can determine the level of purchase and sale and the interest rates at which banks can buy securities from him. The selling rate of securities is set differentially, depending on their term. In this case, the impact on the formation of market rates will be indirect. Second, the Central Bank can set the interest rates at which it is willing to buy securities.
The success of an open market policy depends on many factors. Commercial banks purchase securities from the Central Bank only when there is a small demand for loans from entrepreneurs and the population, and also when the Central Bank offers open market securities on terms more favorable for commercial banks than the terms of providing loans from commercial banks to entrepreneurs and the population.
When it is necessary to support the liquidity of commercial banks, and, accordingly, their lending activity, the Central Bank acts as a buyer in the open market. In this case, repurchase agreements are widely used, according to which the Central Bank undertakes to buy securities from commercial banks on the condition that the latter, after a certain period of time, carry out a reverse transaction, i.e. redemption of securities, but already at a discount - the so-called reverse transactions (REPO transactions). This discount can be fixed or floating between two boundaries. Reverse operations in the open market are characterized by a softer impact on the money market and therefore are a more flexible method of regulation.
Bank refinancing
Initially, the policy of refinancing commercial banks by the Central Bank was used exclusively to influence the state of monetary circulation. As the market relations refinancing is increasingly used as a tool for providing financial assistance to commercial banks. The central bank thus becomes the lender of last resort and acts as a “bank of banks”. Refinancing loans will allow them to minimize the stock of liquid funds as a result of using borrowings from the Central Bank. This is especially evident now in the banking system of Russia, where the main instrument for providing additional liquidity is the refinancing of banks. According to the decision of the Board of Directors of the Central Bank, during the restructuring of the banking system, banks will be provided loans to maintain liquidity, increase financial stability, as well as stabilization loans for up to one year within the guidelines of monetary policy. As the situation in the banking sector normalizes, it is planned to stop providing these loans.
Credit refinancing is distinguished by:
The form of security - discount and pawn loans;
Terms of use - short-term (for 1 or several days) and medium-term (up to 6 months);
Delivery methods - direct loans and loans sold by the Central Bank through auctions;
Target nature - adjusting and seasonal loans.
Interest rate policy or regulation of the official interest rate
The traditional function of the Central Bank is to provide loans to commercial banks. The rate of interest at which these loans are originated is called the discount rate or refinancing rate. By changing this rate, the Central Bank can influence banks' reserves, expanding or reducing their ability to provide loans to the population or enterprises. Depending on the size of the discount interest, a system of interest rates of commercial banks is built, the cost of credit increases or decreases in general, and thus conditions for limiting or expanding the money supply in circulation are created. Commercial banks independently determine the amount of the premium to the official refinancing rate of the Central Bank, depending on the financial condition of the borrower, profitability, prospects and priority of the loaned object.
The central bank regulates the level of interest rates in two ways:
By fixing rates for the provision of loans to commercial banks, which serve as a specific benchmark for market rates;
Through control over the rates of credit institutions.
In the first case, the Central Bank, setting the official discount rate, determines the cost of attracting resources by banks: the higher the discount rate, the higher the cost of refinancing banking operations. In the second case, only the cost of certain types of credit or the operation of only certain banks is subject to regulation.
The interest rate policy of the Central Bank in the post-crisis period is to regulate interest rates on all operations of the bank in the money market in order to maintain the required level of liquidity in the banking system.
The central bank does not directly affect the interest rates on transactions of commercial banks with their clients. These interest rates are determined by themselves and depend on the amount of money in circulation and the effectiveness of the intermediary activity of the banking system and financial markets.
During 1991-2008. The Central Bank has repeatedly changed the refinancing rate depending on the conditions in the money market. In 2008, the Central Bank raised the refinancing rate from 10 to 12% as of November 12, 2008, and from December 1, 2008, the rate will be introduced at 13%.
Rediscounting of bills has long been one of the main methods of monetary policy of central banks in Western Europe. Central Banks made certain requirements to the bill of exchange being discounted, the main one of which was the reliability of the debt obligation.
The promissory notes are rediscounted at the discount rate. This rate is also called the official discount rate, usually it differs from the loan (refinancing) rate by a small amount downward. The central bank buys the debt at a lower price than the commercial bank.
The scheme of rediscounting of bills of the Central Bank is simple: a commercial bank, which receives the status of an accounting bank from one of the divisions of the Central Bank, finances an exporting organization against a promissory note issued in the name of an accounting bank. The accounting bank, in turn, rediscounts (that is, sells before maturity) this promissory note to the Central Bank at a predetermined interest rate.
Discount (discount loans) are loans provided by the Central Bank to commercial banks against bills of exchange before their expiration. According to the current different countries By law, the Central Bank is authorized to buy and sell commercial and treasury bills from banks at a fixed discount rate. An important tool for influencing the state of monetary circulation is the use of quantitative restrictions on the accounting loans available to banks by setting limits total amount re-accounted borrowings. The limit applies to all bills rediscounted by the Central Bank and can be set individually for individual institutions or in the form of restrictions on the amount of loans provided to one borrower. Depending on the situation in the monetary sphere, the limits of rediscounting are either reduced or increased. By increasing the level of the limit, the Central Bank seeks to equalize the financial losses resulting from changes in market conditions, or to increase the credit resources of banks within the framework of the foreseen increase in the money supply. Therefore, raising the level credit limit does not mean that the Central Bank is pursuing an expansionary monetary policy, but is viewed as a mechanism for regulating banking liquidity.
Lombard loans provided by the Central Bank are commercial interest-bearing loans secured by securities. Loan sizes are set depending on the type of collateral. The value of the collateral must exceed the amount of the lombard loan. Lombard loans are provided only for short-term difficulties experienced by credit institutions. The interest rate of a pawn loan usually exceeds the discount rate by 1-3%.
Central Bank refinancing loans are divided into short-term - overnight loans, intraday loans - and medium-term loans - from 1-2 months to 6 months or up to 1 year.
Mandatory reserves - one of the main instruments for implementing the monetary policy of the Central Bank - are a mechanism for regulating the overall liquidity of the banking system. Minimum reserves is a mandatory rate of deposits of commercial banks with the Central Bank, established by law in order to limit credit opportunities credit institutions and maintaining at a certain level the size of the money supply in circulation. The obligation to fulfill reserve requirements arises from the moment of obtaining a license from the Central Bank for the right to carry out relevant banking operations and is necessary condition their implementation. The credit institution is responsible for observing the procedure for depositing required reserves. The procedure for depositing required reserves is carried out on the basis of the “Regulations on the required reserves of credit institutions deposited with the Central Bank of the Russian Federation”, developed by the Central Bank in 1996. The amount of required reserves as a percentage of the liabilities of a credit institution, as well as the procedure for depositing them with the Central Bank are established By the Board of Directors of the Central Bank. Required reserve ratios may not exceed 20% of a credit institution's liabilities. They cannot be changed by more than five points at a time. In case of non-fulfillment of the requirements by the credit institution, the amount of underpayment to the required reserves is collected, as well as fines for violation of the reservation procedure in the established amount, but not more than double the refinancing rate.
The obligation to fulfill the reserve requirements arises from the moment of obtaining the license. After the revocation of the banking license from the credit institution, the funds of the required reserves are transferred to the account of the liquidation commission or the bankruptcy commissioner and used in the manner established by federal laws and regulations of the Central Bank issued in accordance with them.
The central bank forms from the required reserves reserve fund the credit system of the Russian Federation, the funds of which are formed by reserving in it a certain share of funds from third-party enterprises and organizations attracted by commercial banks, these funds are used as credit resources. In the overwhelming part, these include temporarily free funds on settlement, current accounts, as well as funds made in deposits and deposits by enterprises, organizations and citizens. Loans from other banks are not included in these attracted funds.
The size of reserves - a part of bank assets that any commercial bank is obliged to keep in the accounts of the Central Bank, largely determines the credit capabilities of a commercial bank. He can issue loans and thereby expand the money supply only if he has free reserves in excess of the statutory minimum rate. By increasing or decreasing the official reserve requirements, the Central Bank can regulate the lending activity of banks and thereby control the money supply.
The regulation of minimum reserve requirements has a dual purpose:
firstly, it is designed to ensure a constant level of liquidity in commercial banks.
secondly, it is an important instrument of the Central Bank for regulating the money supply and the creditworthiness of commercial banks.
The Mandatory Reserve Fund was created in order, if necessary, to ensure that commercial banks can timely fulfill their obligations to clients to return previously attracted funds, since part of these funds are deposited and are not used by banks as credit resources.
The central bank, by changing the required reserve ratio, influences the credit policy of commercial banks and the state of the money supply in circulation. Thus, a decrease in the required reserve ratio allows commercial banks to use more fully the credit resources they have formed, that is, to increase credit investments. However, it should be borne in mind that such a policy leads to an increase in the money supply in circulation and, in conditions of a decline in production, causes inflationary processes.
If interest rates on required reserves are high, then the Central Bank limits the amount of money at the disposal of commercial banks. This reduces the creditworthiness of the latter and increases the interest on the loans they issue. Therefore, the reserved part of such deposits should exceed the amount of deposits with long storage periods.
The level of development of the banking system and the state of the economy as a whole also affect the size of the required reserve ratio. In countries with a developed banking system operating in a stable economy, the required reserves are set for a relatively long time.
Currency regulation
The need to regulate the exchange rate is due to the negative consequences of its sharp and unpredictable fluctuations. Maintaining the stability of the national currency rate is of great importance for ensuring the stability of prices and monetary circulation. A depreciation of the national currency leads to an increase in prices in the domestic market, i.e., to a decrease in the purchasing power of the national monetary unit... In conditions of a constant depreciation of the national currency, prices for goods on the domestic market are guided not so much by production costs as by the fall in the national currency rate. The depreciation becomes a factor of inflation.
The Central Bank regulates the exchange rate by:
Carrying out monetary policy;
Foreign exchange intervention;
The use of state reserves of international means of payment or foreign loans.
In practice, two main forms of monetary policy are usually used: discount and motto.
Discount (accounting) policy is carried out not only with the aim of changing the conditions of refinancing of domestic commercial banks, but sometimes aimed at regulating the exchange rate and balance of payments.
The central bank, buying or selling foreign currencies (mottos), acts in the right direction on the change in the exchange rate of the national monetary unit - this is the motto policy. Such operations are called "foreign exchange interventions". By purchasing the national currency at the expense of official gold and foreign exchange reserves (or through swap agreements), it increases demand, and, consequently, its rate. On the contrary, the sale by the Central Bank of large parties of the national currency leads to a decrease in its rate. The influence of the foreign exchange policy of the Central Bank in the form of transactions in the forward foreign exchange market is manifested in the stimulation of either export or import of capital. The direction of the desired movement of capital depends on the priorities of the Central Bank's policy in this economic situation, which can be expressed either in stimulating merchandise exports (dumping policy), or in maintaining the exchange rate of the national currency in relation to the foreign one.
Along with direct measures of foreign exchange regulation - discount and motto policies - and measures of direct foreign exchange regulation on exchange rate many other legal provisions have a significant impact. Among them, the following three groups of norms can be distinguished.
1. Norms of tax legislation:
Taxation of exchange rate differences;
Form of payments of taxes on foreign exchange transactions;
Taxation of transactions for the purchase and sale of foreign currency
2. Norms governing economic conditions development:
Legislative regulation of settlements in foreign currency on the territory of the country;
Requirements for enterprises wishing to use a foreign currency account and cash desk;
The rate of compulsory sale of foreign exchange earnings;
Interest rate on foreign currency loans written off to the prime cost;
Regulation of public procurement (selection of suppliers - domestic or foreign).
3. Norms of banking legislation:
Required reserves and the form of their transfer to the Central Bank. Many banks practice temporary restructuring of accounts before determining the amounts to be transferred as required reserves to the Central Bank, if the reserve ratio for foreign currency deposits is lower than for ruble deposits. Today it is one.
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Monetary policy methods Is a set of methods, instruments of influence of subjects of monetary policy on objects of monetary policy in order to achieve the set goals. The way in which day-to-day monetary policy is carried out is also called tactical monetary policy objectives, and this is done through appropriate instruments. The instrument of monetary policy is understood as a means, a method of influence of the central bank as a body of monetary regulation on the objects of monetary policy.
Direct and indirect methods are used in the framework of monetary policy.
Direct methodsmonetary policy are in the nature of administrative measures in the form of various directives of the central bank concerning the volume of money supply and prices in the financial market. The implementation of these measures has the most rapid effect in terms of central bank control over the price or maximum volume of deposits and loans, especially in the context of the economic crisis. However, over time, direct methods of influence in the event of an “unfavorable” influence from the point of view of economic agents on their activities may cause an overflow, an outflow of financial resources into the “shadow” economy or abroad.
Indirect methodsmonetary policy regulation of the monetary sphere affects the behavior of economic entities with the help of market mechanisms. Naturally, the efficiency of using indirect methods is closely related to the level of development of the money market. When transitional economy, especially at the first stages of transformations, both direct and indirect tools are used with the gradual replacement of the former by the latter.
In addition to direct and indirect methods, there are general and selective methods of implementing the monetary policy of central banks.
General methods are predominantly indirect and have an impact on the money market as a whole.
Selective methods regulate specific types of credit and are mainly prescriptive in nature. Their use is associated with solving particular problems, such as limiting the issuance of loans by some banks or limiting the issuance of certain types of loans, refinancing on preferential terms of certain commercial banks, etc. Using selective methods, the central bank retains the functions of centralized redistribution of credit resources, which are unusual for central banks of countries with market economies, since they distort market prices and resource allocation, and restrain competition in financial markets. The use in the practice of central banks of selective methods of influencing the activities of commercial banks is typical for economic policy pursued at the stage of a cyclical recession, in conditions of a sharp violation of the proportions of reproduction.
In world economic practice, central banks use the following main instruments of monetary policy:
Change in the ratio of required reserves or the so-called reserve requirements;
The interest rate policy of the central bank, i.e. changing the mechanism for borrowing funds from the central bank by commercial banks or depositing funds of commercial banks with the central bank;
Operations with government securities on the open market.
Mandatory reserves represent a percentage of the liabilities of a commercial bank. Commercial banks are required to keep these reserves at the central bank. Historically, required reserves have been viewed by central banks as an economic instrument that provides commercial banks with sufficient liquidity in the event of a massive withdrawal of deposits, to prevent the insolvency of a commercial bank and thereby protect the interests of its customers, depositors and correspondents. However, at present, changing the rate of required reserves of commercial banks, or reserve requirements, is used as the simplest tool used in order to quickly set up the monetary sphere. The mechanism of action of this instrument of monetary policy is as follows:
If the central bank increases the required reserve ratio, then this leads to a reduction in excess reserves of commercial banks, which they can use to carry out lending operations. Accordingly, this causes a multiplier decrease in the money supply, since when the required reserves ratio changes, the value of the deposit multiplier changes;
With a decrease in the required reserve ratio, a multiplier expansion of the volume of money supply occurs.
This instrument of monetary policy is, according to experts, the most powerful, but rather crude, since it affects the foundations of the entire banking system. Even a slight change in the required reserve ratio can cause significant changes in the volume of bank reserves and lead to a modification of the credit policy of commercial banks.
A change in the required reserve ratio affects the money supply through a multiplier. All other monetary policy instruments directly affect the size of the monetary base.
An increase in the monetary base leads partly to an increase in the amount of money in the hands of the population, partly to an increase in deposits in commercial banks. This, in turn, entails an intensification of the multiplication process and an expansion of the money supply by an amount greater than the monetary base.
Central bank interest rate policy is carried out in two directions: regulation of loans of commercial banks from the central bank and deposit policy central bank, which can also be called the policy of the discount rate or refinancing rate.
Refinancing rate- This is the percentage at which the Central Bank provides loans to financially stable commercial banks, acting as the lender of last resort.
Discount rate- the percentage (discount) at which the Central Bank takes into account bills of exchange of commercial banks, which is a kind of lending them secured by securities.
The discount rate (refinancing rate) is set by the Central Bank. Reducing it makes loans cheap for commercial banks. When commercial banks receive a loan, their reserves increase, causing a multiplier increase in the amount of money in circulation. Conversely, an increase in the discount rate (refinancing rate) makes loans unprofitable. Moreover, some commercial banks that have borrowed funds are trying to return them, as these funds are becoming very expensive. A reduction in bank reserves leads to a multiplier reduction in the money supply.
Determination of the size of the discount rate - one of the most important aspects of monetary policy, and a change in the discount rate is an indicator of changes in the field of monetary regulation. The size of the discount rate usually depends on the level of expected inflation and at the same time has a great influence on inflation. When the central bank wants to ease or tighten monetary policy, it lowers or raises the discount (interest) rate. The bank can set one or several interest rates for various types of transactions or conduct an interest rate policy without fixing the interest rate. Central bank interest rates are not binding on commercial banks in their relationships with customers and with other banks. However, the level of the official discount rate is a benchmark for commercial banks when conducting lending operations.
At the same time, it is the use of this tool that shows that the results of monetary policy are poorly predictable. For example, a reduction in the refinancing rate is seen as a measure leading to an expansion of the money supply. However, a decrease in the refinancing rate affects the market interest rate, which decreases, therefore, the demand for cash and other assets increases, the demand for which is inversely related to the level of the interest rate. In turn, the demand for deposits decreases - the multiplier decreases, but it is difficult to say how and in what period the reduction in the refinancing rate will affect the banking multiplier. Therefore, in monetary policy, it is necessary to distinguish between short-term and long-term periods. In the short term, a reduction in the refinancing rate is an “expansive” measure, in the long term it is a deterrent.
Deposit operations of the Central Bank allow commercial banks to receive income from the so-called free, or surplus, reserves, and the Central Bank is given the opportunity to influence the size of the money supply.
Central Bank operations on the open market are currently the main instrument of monetary policy in world economic practice. The central bank sells or buys at a predetermined rate of securities, including government securities, which form the country's internal debt. This instrument is considered the most flexible instrument for regulating credit investments and liquidity of commercial banks.
Central bank operations in the open market have a direct impact on the amount of free resources available to commercial banks, which stimulates either a reduction or expansion of the volume of credit investments in the economy, while simultaneously affecting the liquidity of banks, respectively, decreasing or increasing it. This impact is carried out through a change the central bank purchase prices from commercial banks or sales of securities to them. With a strict restrictive policy, which should result in an outflow of credit resources from the loan market, the central bank decreases the selling price or increases the purchase price, thereby increasing or decreasing its deviation from the market rate.
If the central bank buys securities from commercial banks, it transfers money to their correspondent accounts; thus, the lending opportunities of banks are increased. They begin to issue loans, which in the form of non-cash real money enter the sphere of monetary circulation, and, if necessary, are transformed into cash. If the central bank sells securities, then commercial banks from their correspondent accounts pay for such a purchase, thereby reducing their lending opportunities associated with the issue of money.
Open market operations are conducted by the central bank, usually in conjunction with a group of large banks and other financial institutions. The scheme for performing these operations is as follows.
1. Suppose that there is a surplus of money supply in circulation in the money market and the central bank sets the task to limit or eliminate this surplus. In this case, the central bank begins to actively offer government securities on the open market to banks or the public who buy government securities through special dealers. As the supply of government securities increases, their market price falls, and their interest rates rise, and accordingly their attractiveness to buyers increases. The population (through dealers) and banks are beginning to actively buy government securities, which ultimately leads to a reduction in bank reserves. A decrease in the volume of bank reserves, in turn, leads to a decrease in the supply of money in a proportion equal to the bank multiplier. At the same time, the interest rate rises.
2. Suppose now that there is a shortage of money in circulation in the money market. In this case, the central bank pursues a policy aimed at expanding the money supply, namely, the central bank begins to buy government securities from banks and the public at a favorable rate for them. Thus, the central bank increases the demand for government securities. As a result, their market price rises and their interest rate falls, making Treasury securities unattractive to their holders. The population and banks are beginning to actively sell government securities, which ultimately leads to an increase in bank reserves and (taking into account the multiplier effect) money supply. At the same time, the interest rate falls.
One can note the unpredictability of the results of monetary policy due to the fact that the open market is a financial market. An increase in sales on the open market leads to an increase in the supply of financial assets, and therefore to an increase in interest rates. In turn, the rise in interest rates will affect the increase in the multiplier, which will partly offset the effect of the reduction in the monetary base. Conversely, buying transactions on the open market can lead to an increase in the demand for financial assets, a decrease in interest rates and a multiplier.
The considered monetary policy instruments are usually used by the Central Bank in a complex in accordance with the objective of monetary policy.... The optimal combination of monetary policy instruments depends on the stage of development and structure of financial markets, the role of the central bank in the country's economy. For example, the policy of interest rates (refinancing rates), ranked second after the central bank's open market policy, is usually conducted in conjunction with the central bank's open market operations. Thus, when selling government securities on the open market in order to reduce the money supply, the central bank sets a high discount rate (higher than the yield on securities), which accelerates the sale of government securities by commercial banks, since it becomes unprofitable for them to replenish reserves with loans from the central bank, and increases the efficiency of open market operations. Conversely, when a central bank purchases government securities on the open market, it sharply lowers the discount rate (below the yield on the securities). In this situation, it is profitable for commercial banks to borrow reserves from the central bank and use available funds to purchase more profitable government securities. The expansionary policy of the central bank is becoming more effective.
In addition to the traditional monetary instruments discussed above, within the framework of monetary policy, the establishment of benchmarks for the growth of the money supply, as well as currency regulation, can be used.
Cash management- regulation of the circulation of cash, emission, organization of their circulation and withdrawal from circulation, carried out by the Central Bank.
Example 1. Of Russian practice: regulation of cash money supply. In the conditions when, in fact, there was only one State Bank in Russia, the problem of credit resources for its branches did not arise, because these resources were automatically created due to the functioning of the interbranch turnover system. During this period, the Government strictly planned and limited the transformation of the deposit issue into banknote, i.e. the transformation of non-cash money into cash, since in Russia there was an opinion that only cash circulated in monetary circulation, and the movement through bank accounts was only the circulation of bank records, but not money. The current activity of the Bank of Russia in the field of regulating money circulation and using it as a tool to stabilize the economy is directly related to the entry of our country into the international economic community and its assistance to the development of the Russian economy.
At present, the Bank of Russia is carrying out forecast calculations of cash turnover, the purpose of which is to determine the need for cash in the country as a whole, by region and by banks. With the help of such calculations, the volume and sources of cash receipts to the cash desks of commercial banks and the revolving cash desks of the Bank of Russia, the size and consolidated directions of issuing cash to organizations and individuals, as well as the cash issue result, i.e. the amount of the issue of cash into circulation or its withdrawal from circulation.
Foreign exchange regulation as a tool of monetary policy has been used by central banks since the 1930s as a reaction to capital flight in the context of the economic crisis and the Great Depression. Foreign exchange regulation refers to the management of foreign exchange flows and external payments, the formation of the exchange rate of the national currency. The exchange rate is influenced by many factors: the state of the balance of payments, exports and imports, the share of foreign trade in gross domestic product, budget deficit and sources of its coverage, economic and political situation, etc. The real exchange rate under specific conditions can be determined as a result of free offers for the purchase and sale of currency on currency exchanges. An effective system of foreign exchange regulation is foreign exchange intervention. It consists in the fact that the Central Bank intervenes in operations in the foreign exchange market in order to influence the national currency rate by buying or selling foreign currency. To increase the rate of the national currency, the central bank sells foreign currency; to reduce this rate, it buys foreign currency in exchange for the national one. The Central Bank conducts foreign exchange interventions in order to bring the national currency as close as possible to its purchasing power and at the same time to find a compromise between the interests of exporters and importers. Exporting firms are interested in a certain undervaluation of the national currency; they provide the bulk of the incoming foreign exchange earnings. Enterprises that receive raw materials, materials, component parts from abroad, as well as industries that produce products that are uncompetitive in comparison with foreign products, are interested in a slight overvaluation of the national currency.
(Monetary policy) of a country is a set of measures in the field of credit and monetary circulation aimed at achieving the economic well-being of the country. The choice of monetary policy is primarily determined by the goals that must be achieved. Experts include the following as possible goals of PrEP:
- Strengthening the national currency.
- Increasing the level of employment of the population.
- Increased economic growth.
- Stabilization of the national economy.
Principles of economic regulation
IN general view PrEP can be restrictive and expansive. The first type involves the introduction of restrictions on Bank operations, the second, on the contrary, is their stimulation.
It can be seen that the Central Bank can use a variety of tools to implement monetary policy. Among them:
- Regulation of the reservation rate. Everyone must keep part of their assets in an account with the Central Bank. The share of such assets is called the reserve ratio. Banks can provide lending services only when they have enough money in excess of reserved amount... By increasing the reserve ratio, the Central Bank is pushing commercial banks to raise interest rates, thus reducing the attractiveness of banks' proposals to consumers. At the moment, the reservation rate is 3.5% for accounts of legal entities, individuals, as well as for accounts in foreign currency. Violation of the standard threatens an unscrupulous bank with a fine, the amount of which cannot exceed two refinancing rates (the rate at which a CB loan is provided).
- Actions through. The Central Bank can also regulate monetary policy through purchases and sales of securities of commercial banks on the open market. The scheme is as follows: the purchase of the bank's securities leads to an increase in its reserves, and, consequently, to an increase in the money supply. Selling has the opposite effect.
- ... The Central Bank regularly issues loans to commercial banks. By changing the interest rate, the Central Bank can influence banks' reserves.
- ... It is carried out by the Central Bank in the form of interventions - the Central Bank enters the foreign exchange market and makes the purchase or sale of foreign currency, thus influencing the exchange rate.
Classification of PrEP methods
The most common classification of PrEP methods suggests dividing them into straight(administrative) and indirect(economic). Each type of method has its own advantages and disadvantages.
Direct methods affect the economic system as a whole. A good example of the direct method of monetary policy is changing the reservation rate. The attractiveness of these methods lies in the fact that the consequences of their implementation are much easier to predict, and the development does not require a lot of time and money. However, direct methods are considered crude, as they can lead banks to misallocate resources and push the banking market towards a monopoly. used direct methods until 1995, after which he abandoned them, however, he was forced to return to them in 1998, during a time of crisis.
Indirect methods allow, on the contrary, to avoid deformations and pathologies of market development, however, the consequences of their implementation are rather difficult to predict. Nevertheless, the transition from administrative to economic methods is now officially enshrined in regulatory documents.
Types of PrEP
There are two main types of PrEP: rigid and flexible.
As can be seen from the diagram, a tough policy is aimed at maintaining the money supply at the same level ( Δ M Is the increase in the money supply). money Sm vertical, since the interest rate is subject to change Δ r.
With a flexible monetary policy, the curve Sm it is horizontal, since, on the contrary, the Central Bank influences the money supply, preferring to maintain the interest rate at the level. The Central Bank resorts to flexible monetary policy when the task is to neutralize the impact of the rate of turnover of money on the national economy.
The type of monetary policy affects the demand for investment, which in turn affects the degree of dependence of production and employment on the supply of money. Below is a graph of the dependence of demand for investment on monetary policy:
It can be seen from the graph that the rigid one can significantly affect the size of the investment I (due to the amplitude change in the interest rate), while the flexible one is only insignificant.
Current issue: the impact of electronic money on monetary policy
The problem is the following: uncontrolled release electronic money can lead to a significant increase in the money supply, and hence to a rapid rise in inflation. may grow even if the money supply does not grow - this is facilitated by an increase in the speed of money turnover.
As a preventive measure, the Central Bank can take the following measures:
- The introduction of a mandatory reserve ratio for e-money issuers.
- Limiting the number of e-money issuers in order to simplify the control procedure over them.
- Introduction of an interest rate on the amounts raised from the issue of electronic funds.
In addition to the fact that the emission of electronic money increases inflation, it also "takes away" from the Central Bank a part of the emission income, which is also called seigniorage... Despite the fact that it will take a long time for the share income to fall to the level where it cannot cover the share income, the Central Bank should think about minimizing losses ahead of time. Experts do not exclude the possibility of monopolization of the issue of electronic money.
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Money-credit policy is a set of interrelated measures taken by the monetary authorities in the monetary sphere in order to regulate the reproduction process. Monetary policy, together with budgetary policy, forms the basis of modern state regulation of the economy.
The purpose of monetary policy is to regulate the economy by influencing the state of monetary circulation and credit.
There are two types of monetary policy: expansionary and restrictive. Activities carried out within the framework of the restriction type contain direct prohibitions and restrictions aimed at reducing the volume and tightening the conditions for conducting transactions in the money market. The expansionary type of monetary policy does not contain direct prohibitions and restrictions and is aimed at expanding the volume of transactions in the money market and creating favorable conditions their conduct.
Monetary policy comes in two flavors: total(general) and selective... Measures carried out within the framework of a total monetary policy apply to all institutions in the banking sector. Selective monetary policy targets either individual banking institutions or certain types banking operations.
The conduct of monetary policy and the achievement of its goals are carried out using various instruments. Monetary policy instruments are a set of specific measures and methods of state regulation of the economy aimed at changing the parameters of the money supply and the volume of credit investments in the economy.
Monetary policy instruments differ:
- by objects of influence (supply of money and demand for money);
- form (direct and indirect);
- the nature of the parameters (quantitative and qualitative);
- timing of exposure (short-term and long-term).
All these tools are used in a single system.
Objects of influence... Depending on the specific goals, monetary policy is aimed either at stimulating credit emission (credit expansion) or at limiting it (credit restriction). Through the implementation of credit expansion, the goals of raising production and reviving the conjuncture are pursued; with the help of credit restriction, an attempt is made to prevent the excessive oversaturation of the economy with money, which is observed during periods of economic booms.
By form administrative(straight) and economic(indirect). Administrative instruments are instruments in the form of directives, prescriptions, instructions emanating from the central bank and aimed at limiting the scope of activities of a credit institution. Economic instruments are understood to mean the ways in which the central bank influences the monetary sphere through the formation of certain conditions in the money market and the capital market. Economic instruments are more flexible than administrative ones, but the results of their application are not always adequate for the intended purpose. However, at present, central banks in most cases use indirect regulatory instruments.
By the nature of the parameters established in the process of influence of the Central Bank on the monetary sphere, the instruments of monetary policy are divided into quantitative and qualitative.
Through the use of quantitative methods, there is an influence on the state of the credit capabilities of banks, and, consequently, on money circulation in general.
Qualitative instruments represent a variant of direct regulation of the qualitative parameter of the market, namely, the cost of bank loans.
By exposure time monetary policy instruments are divided into long-term and short term in accordance with the tasks of implementing the immediate and long-term goals of monetary policy. Long-term (ultimate) goals of monetary policy mean those tasks of the Central Bank, the implementation of which can be carried out from 1 year to several decades. The short-term ones include the instruments of influence with the help of which the intermediate goals of monetary policy are achieved.
The choice and combination of monetary policy instruments depends primarily on the tasks that the Central Bank solves at a particular stage of economic development.
At the initial stages of the transition to market relations, the most effective are direct methods of intervention by the Central Bank in the monetary sphere: administrative regulation of deposit and credit rates commercial banks, setting the maximum volume of lending by the bank to its customers, changing the level of minimum reserves. As market relations develop, there is a transition to indirect methods of regulation, and above all to open market operations and changes in the level of interest rates.
The main economic (indirect) instruments of the Central Bank's monetary policy are the following:
- regulation of the official discount rate;
- open market operations;
- establishing minimum reserve requirements.
In almost all countries of the world, commercial banks resort to central bank loans, which are provided at a certain interest rate. The discount rate is the official rate applied by central banks in transactions with commercial banks for accounting for short-term government bonds for the rediscounting of commercial bills of exchange and other types of securities that meet the requirements of the central bank. In other words, the official discount rate is a fee charged by the Central Bank when securities are purchased from commercial banks before they are due.
The official discount rate is the benchmark for market loan rates. By setting the official discount rate, the Central Bank determines the cost of attracting credit resources by commercial banks. The higher the official discount rate, the higher the cost of central bank refinancing loans. The policy of changing the discount rate is a variant of regulating the qualitative parameter of the money market - the cost of bank loans.
The change in the discount rate relates to indirect instruments of monetary regulation. Its widespread use is justified by its ease of use. If the Central Bank pursues the goal of reducing the lending capacity of commercial banks, then it raises the discount rate, thereby increasing the cost of refinancing loans. If the aim of the Central Bank is to expand access to loans from commercial banks, then it lowers the level of the discount rate.
Since virtually all banks, to one degree or another, resort to central bank loans, the impact of the rates it sets extends to the entire economy. However, the Central Bank does not always succeed in achieving its intended goal. For example, an increase in the discount rate will not be effective if the money market is currently experiencing a downward trend in the cost of loans as a result of their increased supply, since in this case commercial banks will prefer to use cheaper loans from the interbank market rather than expensive ones. credit funds central bank.
The mechanism for providing loans to commercial banks by the Central Bank is defined by the term "discounting". The terms and conditions for issuing loans to commercial banks are characterized by a discount window policy.
Thus, a change in the discount rate changes the value borrowed money banks, affects the money supply, causing a multiplier effect.
Meanwhile, if the Central Bank predicts a change in the money supply in a certain amount, then it is necessary to change the amount of borrowed resources of banks. But at the same time, it remains unknown to what extent the discount rate should be changed for this. This relationship between discount (accounting) policy and resources makes this instrument of monetary policy the least significant.
Open market operations are operations of the Central Bank for the purchase and sale of securities (mainly liabilities of the treasury and state corporations, industrial companies and banks, commercial bills recorded by the central bank).
The open market operation mechanism is uncomplicated, which makes it attractive to use. Thus, if the Central Bank buys securities, the volume of banks' reserves increases by this amount. Moreover, the money supply will increase several times in relation to the amount purchased by the central bank. An increase in the money supply will lead, in turn, to an increase in economic activity. Accordingly, the sale by the Central Bank of securities commercial bank reduces the bank's own reserves, which will lead to a reduction in the money supply, will affect the cost of the loan. This contraction in the money supply over time can lead to a downturn in business activity.
Central bank open market operations involve a variety of technical procedures. They differ depending on:
- terms of transactions (direct purchase and sale or purchase and sale for a period with an obligation to repurchase at a predetermined rate);
- objects of transactions (operations with government or private securities); urgency of transactions (short-term - up to 3 months and long-term - from 1 year or more); areas of operations (only the banking sector or in conjunction with the non-banking sector of the securities market);
- method of setting interest rates (by the Central Bank or the market);
- source of initiative in the operation (Central Bank or money market participants).
Differences in the technical procedures for conducting open market transactions are due to a number of factors:
- the specifics of the credit and banking system, assuming a different composition of market participants;
- peculiarities of national legislation.
Central banks use two main types of open market transactions: forward and backward.
Direct operations are operations of the central bank to buy or sell securities on the open market without any commitment to transactions. If the central bank buys securities, it is not obliged to repurchase them after a certain period of time. Once the central bank sells securities, the buyer is not required to sell them to the central bank. Direct operations are carried out on the basis of:
- cash;
- regular delivery.
Operations on cash or on a cash basis assumes full settlement within the day of completion of the transaction. Regular delivery transactions include full settlement and delivery of securities to the buyer on the next business day.
The purchase of securities by the central bank on the open market leads to an increase in banks' reserves, which enables them to expand lending operations. The sale of securities by the central bank on the open market contributes to the reduction of banks' reserves and, accordingly, reduces their lending opportunities.
General operations on the open market (REPO operations) - operations for the sale and purchase of securities by the central bank with an obligation to resell - repurchase at a predetermined rate.
In accordance with a repo agreement, the central bank buys securities from a dealer and the latter agrees to repurchase these securities at a specified time and price. In essence, such a transaction is a central bank loan; the interest rate is set by auction among dealers. The purchase by the central bank under such an agreement is called a repo.
A repo transaction is complemented by a reverse, or pair, purchase and sale transaction. On such an operation, the central bank sells the securities to the dealer and also agrees to buy them back at a predetermined price and at a specified time. This is a loan received from a dealer by the central bank. REPO and reverse REPO are short-term contracts with maturity less than 15th. The duration of the transactions allows the central bank to temporarily change the reserves of the Akkov institutions.
Reverse operations are characterized by a softer impact on the money market and therefore are a flexible method of regulation. These transactions currently account for the largest share of the total volume of central bank transactions in the ... open market.
It is necessary to distinguish between active and defensive operations in the open market. Central Bank uses active open market operations to change the level of reserves of credit institutions. Direct purchases and sales of government securities are more or less permanent. Open market defensive operations are adjustments to maintain the current level of total reserves of banking institutions. From time to time, predictable and unforeseen situations arise in the economic system that temporarily change the total reserves and (or) the money supply. Short-term defensive operations are necessary to maintain stability in the economy and the expected level of reserves. This is why repo and reverse repo transactions are provided due to their short strength. Repo transactions provide temporary reserves, and reverse repo transactions take out temporary excess reserves.
With insignificant volumes of operations on the open market, they have a qualitative rather than quantitative impact on the liquidity of the banking system and snow circulation. However, as this regulatory instrument develops and improves, its impact on the quantitative parameters of the money market becomes more tangible.
An important feature of the central bank's operations in the open market is a quick response to short-term market trends, which allows it to exert a stabilizing effect on the state of money circulation and the economy as a whole.
The third instrument of monetary policy is setting minimum reserve requirements... Changing the norms of reserve requirements is one of the oldest methods of regulation related to indirect methods. For the first time, bank reserve rates were introduced in the United States in 1863 - half a century before the creation of the Federal Reserve System.
Minimum reserves- This is a mandatory rate of deposits of commercial banks in the Central Bank, established by law and defined as a percentage of the total amount of deposits of commercial banks.
The regulation of minimum reserve requirements has a twofold meaning: on the one hand, it guarantees a minimum level of liquidity of commercial banks, on the other hand, it is used as an important instrument of the central bank's monetary policy. As a result of changes in reserve requirements, the money supply and the volume of lending change.
In accordance with the money multiplier model (M = m MB), a change in the required reserves changes the value of the money multiplier, but, other things being equal, does not affect the money base.
A reduction in the reserve coverage rate increases the value of the multiplier, an increase in this rate decreases accordingly.
A decrease in the required reserve coverage ratio increases the value of the multiplier, a decrease in required reserves increases the money supply. An increase in the reserve coverage ratio reduces the value of the multiplier, an increase in required reserves reduces the money supply.
The multiplier effect also affects the total volume of lending. As a result of a decrease in reserve requirements, there is an increase in the credit multiplier and, consequently, the total volume bank lending... An increase in reserve requirements entails a decrease in the overall credit multiplier and reduces the total volume of bank lending.
The methods of establishing the base of reserve requirements in different countries are not the same, not only in quantitative, but also in qualitative terms. As a rule, they are set in relation to the liabilities of the bank or to the volume of growth in liabilities for a certain period, or to individual items of liabilities. In many countries, the required reserve ratios are differentiated by the types of deposits: time deposits and demand deposits, which is due to the differentiation by the degree of “monetary value” of various components of the money supply. Differentiation according to the degree of "monetary value" is necessary for differentiated management of the dynamics of various types of deposits. As a rule, demand deposits are subject to a higher reserve requirement ratio than those for time and savings deposits.
The mechanism for applying reserve requirements provides for the placement of commercial banks' deposits with the Central Bank at a level set as an average for a certain period. Since the value of the aggregate contributions is constantly changing, it is only at the end of a certain period that the average value of the contributions can be accurately established. As a rule, the estimated period for fulfilling reserve requirements is 1 month, although exceptions are possible.
Monetary (or monetary) policy- This is the policy of the state that affects the amount of money in circulation in order to ensure price stability, full employment of the population and growth in real production. The Central Bank implements the monetary policy.
The impact on macroeconomic processes (inflation, economic growth, unemployment) is carried out through monetary regulation.
Usually, the monetary policy of the Central Bank is aimed at achieving and maintaining financial stabilization, first of all, 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 fulfills its part - monetary policy, it is responsible for its implementation.
Monetary policy methods- a set of techniques and operations through which the subjects of monetary policy influence objects to achieve their goals.
Direct methods - administrative measures in the form of various directives of the Central Bank concerning the volume of money supply and prices in the financial market. Limits on the growth of lending or attracting deposits 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 the 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 realization of such a need, as well as between the awareness of the need, the formation of an opinion and the beginning of implementation.
Indirect methods of regulating monetary policy affect the motivation of the behavior of business entities using market mechanisms, have a long time lag, and the consequences of their application are less predictable than when using direct methods. However, their application 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 liberalization process, increasing the degree of independence of central banks.
General and selective methods are also distinguished:
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, particular problems are solved, such as limiting the issuance of loans to some banks, refinancing on preferential terms.
Operations in open markets.
The sale (purchase) of the Central Bank of government securities in open markets by commercial banks reduces (increases) the reserves of banks, and therefore reduces (increases) the credit capabilities of banks, increasing (decreasing) the interest rate. This method of monetary policy is applied in the short term and is highly flexible.
Change in the minimum reserve rate.
An increase in the central bank's reserve ratio reduces excess reserves (which can be lent), thereby reducing the bank's ability to expand the money supply through lending. This means of regulating the money supply is usually applied in the long run.
Change in discount rate.
The rate charged by the Central Bank for loans presented to commercial banks is called the discount rate. With a decrease in the discount rate, the demand of commercial banks for loans from the Central Bank increases. At the same time, the reserves of commercial banks and their ability to provide loans to entrepreneurs and the population are increasing. The bank interest for a loan is also decreasing. The supply of money supply in the country is increasing. On the contrary, when it is necessary to reduce business activity by reducing the money supply in the country, the central bank raises the discount rate. Raising the discount rate is also a way to fight 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 buying government securities on the open market, lowering the reserve rate, lowering discount rate... This lowers the interest rate, increases investment and increases business activity.
Expensive 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 issue is limited, government securities are sold on the open market, the minimum reserve rate is increased, and the discount rate is increased.
Along with the listed methods of state regulation, which have an internal economic orientation, 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 crediting, guaranteeing export credits and investments abroad, introducing and abolishing quotas, changing the value of duties in foreign trade.
The main instruments and methods of the monetary policy of the Bank of Russia are:
1) interest rates on Bank of Russia operations;
2) ratios of required reserves deposited with the Bank of Russia (reserve requirements);
3) open market operations;
4) refinancing of credit institutions;
5) foreign exchange intervention;
6) the establishment of benchmarks for the growth of the money supply;
7) direct quantitative restrictions;
8) issue of bonds on its own behalf.
The Bank of Russia regulates the total volume of loans issued by it in accordance with the adopted guidelines of the unified state monetary policy.
He can set one or several interest rates for various types of transactions or conduct an interest rate policy without fixing the interest rate. Bank of Russia interest rates represent the minimum rates at which the Bank of Russia conducts its operations. The Bank of Russia uses interest rate policy to influence market interest rates in order to strengthen the ruble.
"The amount of required reserves as a percentage of the credit institution's liabilities (the required reserve ratio), as well as the procedure for depositing * (247) required reserves with the Bank of Russia are established by the Board of Directors (Articles 36-37 of the Federal Law).
Required reserve ratios cannot exceed 20 percent of a credit institution's liabilities and can be differentiated for different credit institutions.
Required reserve ratios cannot be changed by more than five points at a time.
In case of violation of the required reserve requirements, the Bank of Russia has the right to write off the amount of underpaid funds from the correspondent account of a credit institution opened with the Bank of Russia in an indisputable manner, as well as to recover from the credit institution in court a fine in the amount established by the Bank of Russia. The specified fine cannot exceed the amount calculated based on the double refinancing rate of the Bank of Russia in effect at the time the court made the relevant decision.
Required reserves deposited by a credit institution with the Bank of Russia are not subject to collection. * (248)
After the credit institution's license to conduct banking operations is revoked, the required reserves deposited by the credit institution with the Bank of Russia are transferred to the account of the liquidation commission (liquidator) or the bankruptcy commissioner and used in the manner prescribed by federal laws and issued in accordance with the regulations of the Bank of Russia. When a credit institution is reorganized, the procedure for re-registering its required reserves previously deposited with the Bank of Russia shall be established in accordance with the regulations of the Bank of Russia. "(Article 38 of the Federal Law).
In Art. 39 of the Federal Law states that open market operations are understood as the 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 operations with these securities with a later reverse transaction.
In Art. 40 says that “refinancing means lending by the Bank of Russia to credit institutions.
The forms, procedure and conditions for refinancing are established by the Bank of Russia. "
In Art. 41 describes the concept foreign exchange intervention Bank of Russia. Foreign exchange interventions mean the purchase and sale of foreign currency by the Bank of Russia in the foreign exchange market in order to influence the ruble exchange rate and the total demand and supply of money.
In Art. 42 says that "the Bank of Russia can set the benchmarks for the growth of one or several indicators of the money supply, proceeding from the main directions of the unified state monetary policy."
The Bank of Russia has the right to establish direct quantitative restrictions. This means setting limits on the refinancing of credit institutions and the conduct of certain banking operations by credit institutions.
At the same time, he has the right to apply direct quantitative restrictions, equally applicable to all credit institutions, in exceptional cases for the purpose of pursuing a single state monetary policy only after consultation with the Government of the Russian Federation. (Article 43 of the Federal Law).
Article 44 of the Federal Law grants the Bank of Russia the right to issue its bonds. It says that “in order to implement monetary policy, the Bank of Russia may, on its own behalf, issue bonds placed and circulated among credit institutions.
The maximum amount of the total par value of the Bank of Russia bonds of all issues not redeemed as of the date of the decision by the Board of Directors to approve the decision on the issue (additional issue) of the Bank of Russia bonds is established as the difference between the maximum possible amount of obligatory reserves of credit institutions and the amount of obligatory reserves of credit institutions, determined on the basis of the current required reserve ratio ".
In order for monetary policy to be effective, it is necessary in the process of its development and implementation to take into account a variety of socio-economic, political, state-legal, international, psychological and other social factors that determine the processes of development or, conversely, a decline in the functioning of monetary and credit systems.