Impact of Monetary Policy of the Central Bank on the Economic Growth in Russia in the Conditions of Unstable Economy

By Giblova, Natalia M. | Review of European Studies, January 1, 2015 | Go to article overview

Impact of Monetary Policy of the Central Bank on the Economic Growth in Russia in the Conditions of Unstable Economy


Giblova, Natalia M., Review of European Studies


Abstract

The purpose of this Article is to identify major trends in monetary management and to analyze the main directions in monetary policy of the Bank of Russia and their correspondence to Russia's economic and political realities. In the course of the research, statistical method was used as the basic one, as well as methods of scientific abstraction, analogy, comparison, and diagram analysis. The Article analyzes Russian practices of applying monetary policy tools by the Bank of Russia and evaluates the efficiency of this policy. The impact of monetary management tools on the scope of bank crediting to businesses and the pace of economic growth are investigated. The Author underlines negative aspects of the Bank of Russia's policy based on the analysis of statistical data characterizing Russia's economy status, and describes the effects of the Bank of Russia's policy in regard to inflation targeting. In accordance with international experience and major tendencies in this area, there possible directions of improving Russia's monetary policy are proposed, in particular, the shift of milestones towards achieving positive pace of economic growth and pursuing a double-purpose policy, which, in the Author's opinion, is of paramount importance at the present stage of Russia's economy development in the conditions of economic and political instability, crisis and shocks.

Keywords: monetary policy, interest rate, inflation targeting, refinancing, economic growth

1. Introduction

In international practices, monetary policy has been traditionally one of the most important tools of governmental influence on economic life. Despite a long path of development of economics as self-sufficient science, the very concept as to the necessity and reasonability of monetary management on financial market by the government started to be actively developed only in the 20th century, during the time of prevalence of liberal model not involving any deep penetration of "the machinery of government" into economic processes. Economic crises between the late 19th and early 20th century, in particular, the Great Depression in the United States (1929-1933), revealed the vulnerability of this model and its inability to cope with severe consequences of crises without governmental intervention. Precisely since then, the use of various tools of governmental influence on financial market, including monetary stock in the economy, on which both inflation process and the pace of production expansion and economic growth depend, became one of the basic functions of national regulators on financial market.

Questions of the issues associated with the theory and practice of state monetary policy were reflected in works of many authors. Among Russian economists, the following can be distinguished: M. A. Abramova, J. S. Golikova, S. R. Moiseyev, A. V. Ulyukayev, A. J. Simanovsky, G. A. Tosunyan, etc. In foreign countries, the specific issues of monetary policy were worked out at different times by W. Allen, S. L. Brue, C. R. Mcconnell, F. Mishkin, N. Mogud, S. Rinhart, G. Sather, W. Smith, J. I. Harris, D. L. Hicks, G. Hogarth, J. Schumpeter, etc.

It should be noted that, in this day and age, major economies still place special emphasis on monetary policy and its target-oriented constituent (for example, the United States, China, the United Kingdom, Japan, Switzerland, etc.).

However, some important aspects of monetary policy, in particular, conformance to the requirements of modern economic status of Russia, flexibility in the conditions of unstable economy and crisis on financial market, are underrepresented in the works available. Both the Russian government and the Central Bank underestimate the potential of monetary management tools.

In view of the pressure on Russian economy, monetary policy tools may currently become active means of influencing the rates of industrial production growth.

Despite the analysis of Russia's financial market statistics and mainly Russian experience in terms of the impact of monetary policy on economic growth, the present study may be of practical importance also for other economies belonging to the group of countries with developing markets. …

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