1. Monetary policy and its
instruments.
2. Money: their functions and types.
3. Credit and lending: types and conditions.
4. Banks: their types and functions.

GRE

from
R
e
d
Legal Economic
Law
Decree
Resolution
enenie
standard
ny act
in
Administrative
public procurement,
Target programs
politicians
Monetary
fiscal
Currency
depreciation
Customs
with t
Permission
Ban
Limitation
Compulsion
but
Moral
call
Belief
Agreement
at
mediation
ve
states

Question 1 Monetary policy and its instruments

Money-credit policy
(DKP) - a set of state
measures regulating
monetary
systems, indicators of monetary
circulation, loan capital market
to regulate the economy.

OBJECTIVES OF PrEP

1. Impact on the course of the national
currencies;
2. Fight against inflation;
3. Increasing the level of employment;
4. Structural restructuring of the economy;
5. Stabilization of the pace
economic growth.

US Federal Reserve, 1913

Washington
Alan
Greenspan
(1987 –
2006)
Ben
Bernanke
(since 2006)
Janet
Yellen
(from 3 Feb.
2014)
International reserves (Aug. 2011):
$ 525.468 billion + 8133.5 tons of gold (70%) - June 2013

European Central Bank, 1 June 1998

Jean-Claude Trichet
(since 2003)
Frankfurt am Main
Mario Draghi
(from 1.11.2011)
International reserves
(Aug. 2013): $78.160 billion + 502 tons of gold (27%)

Central Bank of Japan, 1882

Tokyo
International reserves (Aug. 2013): $1.137.809 billion
+ 765.2 tons of gold (2%) – June 2013

Central Bank of China, 1948

Beijing
International reserves (Aug. 2013): $3.260.983 billion
+ 1054.1 tons of gold (1%) – June 2013

Central Bank of Russia, June 13, 1990

Moscow
V.V.
Gerashchenko
(1989-1991,
1992-1994,
1998-2002)
CM.
Ignatiev
(2002 –
2013)
Elvira
Sakhipzadovna
Nabiullina
(from June 24
2013)
International reserves (February 1, 2014): $498.9 billion
+ 1035.7 tons of gold (7.8%) - June 2013
($376 billion - 01/30/15)

Dynamics of gold reserves in Russia in the 20th century

PrEP tools

Currency denomination - change
nominal value of banknotes with
the purpose of their stabilization and simplification of calculations.
Monetary reform (in Russia in 1922, 1947, 1961
gg.).
Licensing of commercial banks and loans,
revocation of licenses.
Limiting the size of loans.
Changing the reserve requirement level.
Change in the refinancing interest rate
(discount rate) - discount policy.
Open market operations of public
valuable papers.

Changing the reserve requirement level.

1) If the Central Bank of the NRT
restrictive monetary policy
2) If the Central Bank ↓ NRT
expansionary monetary policy
In the summer of 2008 in Russia NRT - 8%
By May 2009, NRT decreased to 1.5%
July 1, 2009 NRT increased to 2%
(CB - 40 billion rubles were transferred to the Central Bank in reserve)
Since April 1, 2011 NRT for legal entities persons increased from 4.5 to 5.5%,
for physical persons – from 3.5 to 4%
(money supply decreased by 80 billion rubles)

Changes in the refinancing interest rate (discount rate) - discount policy.

1) If Central Bank %
expensive money policy
2) If the Central Bank ↓%
cheap money policy

Change in the interest rate of the RF Central Bank refinancing from 29.06.1998 to 19.06.2007

date of
% bid
refinancing
date of
% bid
refinancing
06/29/1998
80
February 17, 2003
18
07/24/1998
60
55
06/21/2003
16
14
45
38
06/15/2004
33
28
06/26/2006
January 29, 2007
04/09/2002
25
23
06/19/2007
10,5
10
08/07/2002
21
February 4, 2008
10,25
06/10/1999
01/24/2000
03/07/2000
03/21/2000
07/10/2000
November 4, 2000
01/15/2004
December 26, 2005
October 23, 2006
13
12
11,5
11

Change in the interest rate of the refinancing of the Central Bank of the Russian Federation from February 4, 2008 to June 1, 2010

date of
% bid
refinancing
date of
% bid
refinancing
04/29/2008
10,5
September 15, 2009
10,5
06/10/2008
10,75
11
September 30, 2009
10
9,5
12
13
November 25, 2009
July 14, 2008
November 12, 2008
12/01/2008
04/24/2009
May 14, 2009
06/05/2009
07/13/2009
08/10/2009
October 30, 2009
314
May
2011
September
12,5 8,25%
2011
G.
12
11,5
8%
December 28, 2009
February 24, 2010
March 29, 2010
04/30/2010
9
8,75
8,5
8,25
11
06/01/2010
8
7,75
10,75
February 28, 2011
8

KEY RATE - the interest rate at which the Central Bank issues loans to commercial banks PURPOSE - the fight against inflation

date of
key rate
date of
key rate
09/13/2013
5,5 %
7,0 %
06/16/2015
11,5 %
11,0 %
03/01/2014
04/25/2014
July 25, 2014
11/05/2014
12/12/2014
December 16, 2014
08/03/2015
7,5 %
8%
9,5 %
10,5 %
02/02/2015
17,0 %
15,0 %
03/16/2015
14,0 %
May 05, 2015
12,5 %
From January 1, 2016 KS = SR

Operations on the open market of government securities

1) If the Central Bank buys securities
cheap money policy
2) If the Central Bank sells securities
expensive money policy

Question 2 Money: their functions and types

Money
- financial means
which equates to
real means (bread,
clothes, raw materials) and can be
used when purchasing.

Monetary
system -
historically established in
every country and
statutory
state form
money organization
appeals.

Functions of money

1. Medium of exchange - money
act as an intermediary
when exchanging goods and services.
product
services
money
money
product*

Straight
commodity exchange (barter)
Inflation
product
product*
Concurrence of interests of the parties

2. Measure of value - the ability of money to measure the value of all goods and services through price.

Inflation
The value is measured by any
good that has value.

3. Means of accumulation
(formation of treasures) -
allows you to temporarily remove
money from circulation and save
portion of income in the form of savings
for future use.
INFLATION leads to
depreciation of savings

4. Means of payment -
money can pay for
consumed goods and services.
Credit relations
Inflation
Prepayment
Loan liquidation

5. World money - ability
money to be accepted as
payment in all countries of the world.
Example:
gold
major reserve currencies
dollar ($), Japanese yen (¥),
English pound sterling (£),
euro (€).

TYPES OF MONEY
CASH
MONEY
NON-CASH
MONEY
QUASI
MONEY

CASH -
cash,
which are physically transferred from the buyer
to the seller when paying for the good
Small coin -
banknote,
minted
metal,
used
to simplify
commodity circulation
Paper money
- signs of value,
which replace
in circulation
valid
money -
gold and silver

Paper money
bank note
- discharged
Treasury
ticket (note)
commercial bank
perpetual debt
commitment to
payment
the bearer of the specified
amounts in any
moment.
- paper money
=
marks issued
state
(treasury) for
covering the budget
deficit and
secured
state
property.

NON-CASH MONEY -
form of cash payments and
settlements without the physical transfer of money, and when
making appropriate entries in the accounts.
CHECK - a monetary document containing an instruction to the bank
from the owner of the previously made contribution to
pay to a third party (check bearer)
a certain amount.

The check is issued subject to the deposit
to the bank - a deposit.
TYPES OF DEPOSITS
Deposit up to
demand
Urgent
deposit
mixed
deposits
Perpetual
Deadline 3, 6,12 and
etc. months
1) NOW account
Fractionality
Interest-free
Interest
Penalty for
early
seizure
2) ATU account
(automatic
transfer
services)

QUASI (ALmost) MONEY -
securities that actually
all the functions of money
1. A bond is a debt obligation,
under which the owner is guaranteed payment
annual fixed income
in a certain amount after the expiration
some time period.

2. A share is a security that certifies an investment
capital in JSC and guaranteeing the receipt of a part
profit (dividend).
The nature
functioning on
stock market
1. Registered share -
purchased for a specific
name and registered in the account
AO book.
2. Bearer share -
involves free purchase and sale without registration.
According to the form of assignment
income
1. Simple (regular)
shares give the shareholder the right
votes, dividends
depends on the work of the AO in the year.
2. Privileged
shares do not give the right to vote
at the shareholders' meeting, but
provide privileges.

3. Promissory note - a written promissory note
in the form prescribed by law of one person to pay in
a certain time a fixed amount to another person.
Promissory note -
can not be transferred
third parties.
Bill of exchange -
transferred to third parties
with appropriate
record (endorsement) on
reverse side of the bill.

Monetary
mass is the totality of all
Money located in
cash and non-cash forms,
ensuring the circulation of goods and
services in the national economy.
Liquidity
– ability of assets
quickly and easily turn into money
without losing purchasing power.

Monetary Aggregates
(parameters through which the state
governs the economy)
M1 = cash and demand deposits
M2 = M1 + savings (non-checking deposits) and
small term deposits
M3 = M2 + large time deposits and deposit
enterprise certificates
L = M3 + Treasury bills, savings
bonds, i.e. short-term public
liabilities and securities
D = L+ all liquid funds, mortgages,
bonds
M3, L, D - general trends in the development of the economy

Irving Fisher's Equation of Exchange

MV=PQ
M - money supply in circulation
V - the average annual number of turnovers of the monetary
units
P - average annual price level
Q is the real volume of the national product
M=PQ/V
V=PQ/M P=MV/Q Q=MV/P

Question 3. Credit and lending: types and conditions

CREDIT (from lat. Credo - I believe, creditium loan) - a system of economic relations,
expressed in the movement of property or
money capital provided in
repayment loan,
urgency, material security
and, as a rule, for a fee in the form of%.
CREDITOR
BORROWER
MONEY

The purpose of the loan is to make a profit

Sources of credit
1)
2)
3)
4)
5)
depreciation funds.
Part of working capital released
temporarily out of circulation due to mismatch
time of sale of goods and time of purchase
raw materials, salary payments, etc.
Capital accumulation (advanced
reproduction).
Funds of the budget system, funds, etc.
Income and savings of the population.

Lending terms

recurrence
Creditworthiness - the availability of the borrower
readiness (desire) and opportunity (income) on time
and fully fulfill their obligations under
loan agreement.
warranty
Pledge of movable and immovable property;
Guarantee 1 - 2 persons.
Urgency
Loans: short-term (1 day - 1 year)
medium-term (up to 5 years)
long-term (more than 5 years)

Payment
Interest on a loan is a payment for the use of money
means.
Charge for the entire amount
%
By the amount
outstanding balance
If the bank issued 10 thousand rubles. at 50% per annum for 3 years
10 thousand (loan)
15 thousand (%)
25 thousand rubles
1 year: 5k + 50% of the whole amount (5k) = 10k
Year 2: 3k + 50% of the balance (2.5k) = 5.5k
Year 3: 2k + 50% of balance (1k) = 3k
18.5 thousand
Riskiness
Increased risks -% higher, conditions are tougher.

Loan types

1.Commercial loan - provision
goods with deferred payment (for sale).
The document is a bill.
2. Bank credit - cash loans
bank and credit organizations
legal entities.
3. Consumer credit - in the form
bank loans for consumer purposes
individuals (durable goods
use) or with deferred payment for such
goods - 25%.

4. Agricultural loan - issues
bank for long periods to cover large
investments in agricultural production on the security
real estate.
5. Mortgage loan - long-term loans under
pledge of real estate (land, apartment), for the purpose
purchasing this property.
6. State credit - state
loans to pay the budget deficit,
placed on the domestic market.
The borrower is the state. The document is a bond.
7. International credit - lending in
sphere international relations, at which
the object is currency and commodity resources.
Lenders and borrowers - banks, the state,
international organizations.

Question 4. Banks: their types and functions

A bank is a financial institution that
collects, stores and accumulates
financial cash,
making payments to clients,
provides loans,
issues securities and money
(issue of means of payment).

banking
system - set
credit and financial institutions,
including the Central Bank (CB),
commercial banks and
specialized financial and credit institutions of various
profile.
Central bank -
state credit
institution with functions
issue of money and regulation of all
credit and banking system.

Functions of the Central Bank

1) Monopoly right to issue cash
money. Controls the circulation of money
country.
2) Storage of the country's gold and foreign exchange reserves
(November 1, 2013 - $524.3 billion;
October 1, 2015 - $371bn)
$44 billion
of which monetary gold
$48.9 billion
3) Lending and payment transactions
government.
4) Issuance of loans commercial banks.
5) Implements PrEP.
6) Establishes the rules for conducting settlements in
country.

7) Manages the public debt.
8) Currency regulation and currency control.
9) Issuance (withdrawal) of a license for the right to banking and
lending activity of CB and other
credit organizations.
10) Determination of minimum dimensions
authorized capital of CB
(2010 - 90 million rubles, 2011 - 180 million rubles,
2012 - 300 million rubles).
11) Defines the operations that can
carry out design bureaus, their rules, accounting,
reporting.
12) Control and audit of all financial and credit
institutions.

Commercial banks -
financial institutions that
accept deposits (deposits) and
issue loans to individuals and
legal entities.
Number of commercial banks in Russia
01.2008 01.2009 01.2010 01.2011 01.2012
In Moscow
555
543
522
514
502
In Russia
1136
1108
1058
1012
978
01.2013
01.2014
01.2015
In Moscow
494
489
450
In Russia
956
923
834

Functions of commercial banks

1. Passive operations - raising funds
means of physical and legal entities in
demand and term deposits.
2. Active operations -
a) lending to the state, the population and
enterprises;
b) organizing the issue and placement of securities
papers;
c) creation of means of payment in the form
bank deposits that are used with
with checks, plastic cards, bills,
electronic transfers, i.e. CREDIT
MONEY

3. Commission and intermediary and
trust operations:
a) transfer clients' money to other banks;
b) acquire securities by proxy for
clients, manage his property;
c) making payments to individuals and legal entities. persons;
d) leasing - the acquisition by the bank of property and
renting it out;
e) currency exchange;
f) safe-banking services;
g) carrying out operations with precious metals
in accordance with applicable law;
H) advising, providing economic and
financial information.

Types of commercial banks

By ownership of the authorized capital:
1) JSC, 2) LLC.
For a set of banking services:
1) Universal, 2) Specialized.
According to the territorial nature of the action:
1) Regional 2) Interregional.
By industry:
1) Agricultural, 2) Industrial, 3) Construction, etc.
By loan terms:
1) Long-term investments (investment),
2) Short-term investments (savings).
By size:
1) Large, 2) Medium, 3) Small.

Types of commercial banks

By organizational structure:
1) Single banks,
2) Banking groups and associations (holdings)
Functionally:
1) Issue,
2) Mortgage,
3) Investment,
4) Innovative,
5) Deposit,
6) Exchange,
7) Savings,
8) Foreign trade,
9) Accounting,
10) Trust,
11) Clearing.

Specialized financial institutions - carry out lending to certain sectors of the national economy

Specialized financial institutions -
lending to certain
sectors of the national economy
Savings and loan associations, credit unions -
accept deposits from the public → in commercial and
housing construction.
Insurance companies - through life insurance and
property accumulate funds for long-term
period → I finance large industrial,
trading corporations.
Pension fund - at the expense of contributions to the Pension Fund with
enterprises and from physical persons carried out long-term
lending (securities: bonds, stocks,
federal loans).
Investment companies (banks) - issue
securities placed on the stock market.

1 slide

3 slide

Even love has not driven as many people crazy as philosophizing about the essence of money. Gladson Prime Minister of Great Britain Money will not feed you, clothe you, shelter you or entertain you until you spend it or invest it. People will do almost everything for money, and money will do almost everything for people. Money is a captivating, repetitive, mask-shifting mystery. Inscription on the Federal Reserve Bank of Philadelphia (1957)

4 slide

5 slide

Money, banks and monetary policy Money and the money market Demand for money and equilibrium in the money market. The banking system and the money supply. Money-credit policy. Instruments of monetary policy. What is money? The history of the emergence of money - to consider independently.

6 slide

Money is a special commodity that serves as the only universal equivalent that expresses the value of all goods and is an intermediary in their exchange. Consider in detail on your own Functions of money: Measure of value Means of circulation Means of accumulation Means of payment World money

7 slide

The law of money circulation Fisher's theorem MV=PQ, hence M= PQ/ V, where M is the mass of money P is the sum of commodity prices Q is the quantity of goods V is the velocity of circulation KD=Ʃ TP - CR + P - VP/ CO, where Ʃ TP - the sum of commodity prices KR - credit P - payments by terms VP - mutual payments SO - velocity of circulation

8 slide

Monetary aggregate - an indicator of the amount of money or financial assets classified as money supply, their liquidity is close to unity). There are: 1. M0 - cash 2. M1 -M0 plus funds on settlement, current and special accounts of enterprises and organizations 3. M2-M1 plus fixed-term deposits of the population in Sberbank 4. M3-M2 plus certificates and government bonds They differ from each other composition of the money supply and liquidity. Liquidity decreases from M0 M1 M2 M3.

9 slide

The money market is a market in which the demand for money and its supply determine the level of the interest rate, the “price” of money: it is a network of institutions that ensure the interaction of the demand and supply of money. In the money market, money is “not sold” and “not bought” – this is the specificity of the money market. They are exchanged for other liquid funds at an opportunity cost, measured in units of the nominal rate of interest.

10 slide

Money market Since the supply of money is determined not by their price, but is regulated by the state, it is completely inelastic. In reality, the money supply depends on the objectives of the monetary policy: Fixed interest rate (MS2). Constant price quantity level (MS1). Modification of points 1 and 2 (MS3). s D surplus % supply lack of supply Q MS1 MS3 MS2

11 slide

Details Banking system Central bank - (state) Emission - has a monopoly right to issue money Commercial banks - collect money from depositors at % and issue loans to customers at %. The difference between % is bank profit Non-banking sector - bank-like organizations _ Pension Fund, insurance companies BANKING SYSTEM Bank is a specialized financial institution Level 1 Level 2

12 slide

One of the main functions of a bank is to provide loans. A loan is a transaction between economic agents for the provision of money or goods on credit at an interest rate. Basic principles of lending: 1 - repayment (be sure to return what you took, but with%); 2 - urgency (return of money on time); 3 - security (a loan is issued against material security); 4 - payment (payment of% for the use of the loan).

13 slide

FORMS OF LOAN: Commercial Banking Consumer Mortgage State International Lombard

PAGE_BREAK--Modern glossaries and economic dictionaries give the following definitions of the concept of monetary policy:
1. Monetary policy is a set of measures aimed at changing the money supply and the volume of credit.
2. Monetary policy is a set of measures in the field of money circulation and credit aimed at regulating economic growth, curbing inflation, ensuring employment and equalizing the balance of payments.
3. Monetary policy is “the course pursued by the state and measures taken in the field of money circulation and credit, aimed at ensuring the stable, efficient functioning of the economy, maintaining the monetary system in good condition. The main components of such a policy are operations on the open market, accounting policies, and the presence of mandatory minimum reserves. The most widely used methods of monetary policy include: changing the discount rate, open market operations, changing reserve requirements, as well as selective methods of regulating certain types of credit.
4. Monetary policy is “a set of measures of the central bank and the government aimed at changing the money supply in circulation, the volume of loans, interest rates and other indicators of monetary circulation in order to reduce the level of inflation, sustainable growth of the money supply and create prerequisites for stable economic growth.”
Thus, there are many authors explaining the formulated concept of monetary policy, but there are no fundamental differences in the interpretation of the real essence of this term by different authors.
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 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 project is preliminary 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 goals of conducting monetary and financial policy is achieved.
The fundamental goal of monetary policy is to help the economy achieve a general level of production characterized by full employment and the absence of inflation. Monetary policy is to change the money supply in order to stabilize the aggregate output, employment and price levels. At the same time, the central bank is the main, but not the only regulatory body. There is a whole range of regulatory bodies. By exercising credit regulation, the state pursues the following goals: by influencing the lending activities of commercial banks and directing regulation to expand or reduce lending to the economy, it thus achieves stable development of the domestic economy, strengthening money circulation, and supporting national exporters in the foreign market. Thus, the impact on credit makes it possible to achieve deeper strategic objectives for the development of the entire economy as a whole. For example, the lack of available cash for enterprises makes it difficult to carry out commercial transactions, domestic investments, etc. On the other hand, excess money supply has its drawbacks: the depreciation of money, and, as a result, the decline in the living standards of the population, the deterioration of the monetary situation in the country. Accordingly, in the first case, monetary policy should be aimed at expanding the lending activities of banks, and in the second case, at its reduction, the transition to a “dear money” policy.
With the help of credit regulation, the state seeks to mitigate economic crises, to contain the growth of inflation, in order to maintain the conjuncture, the state uses credit to stimulate investment in various sectors of the national economy.
Credit policy is implemented by indirect and direct methods of influence. The difference between them is that the central bank either has an indirect effect through the liquidity of lending institutions, or sets limits on lending to the economy (ie, direct quantitative restrictions on credit).
In a market economy, the monetary policy of the central bank is based on the principle of "compensatory regulation". The principle of compensatory regulation includes a combination of two sets of measures:
· policies of monetary restriction (restriction of credit operations by raising the level of interest rates, slowing down the growth rate of the money supply in circulation);
· policies of monetary expansion (stimulating credit operations through a decrease in the rate of interest and an increase in the money supply in circulation).
The policy of monetary restriction (policy of "expensive money") is applied in the context of a cyclical revival of the economic situation. The policy of monetary expansion (the policy of "cheap money") is applied in the crisis phase of the cycle, in the conditions of falling production and increasing unemployment. It consists in stimulating credit operations of banks, introducing more favorable credit conditions.
The main objectives of the state's monetary policy vary depending on the level of socio-economic development at which this state is located.
The priority of the objectives of monetary policy is determined by the state of public finances, the stability of the state economy or its absence, the presence of a balance in revenues and expenditures of the state budget or its imbalance.
In general, the main objectives of the state's monetary policy are:
regulation of economic activity of agents of economic relations;
Achieving a level of production characterized by minimal unemployment;
Creation of an inflation-free economy.
The benefits of monetary policy include:
speed and flexibility (money supply can be changed without legislative procedures);
· independence from political pressure (there is a law on the Central Bank, which defines its functions and powers);

Chapter 2Main instruments and methods of monetary policy
2.1 Accounting and refinancing policies
Pursuing monetary policy, Central banks themselves determine the instrument that regulates the best money supply in circulation. If the policy is aimed at strengthening production, employment, expanding the issuance of loans and increasing the money supply, then it is called expansive. The advantage is the cheapening of money by reducing interest rates on loans from Central Banks. Producers and investors can already receive loans through commercial banks to finance production. But the economic system is not always ready to use such preferential funds and they may not be used to strengthen production activities, and the money supply can only be used to raise prices. This is where Central Banks should pursue a restrictive monetary policy (restrain the issuance of additional money), in order to prevent inflation, insist on reducing the budget deficit.
The official discount rate acts as a fee charged by the Central Bank when purchasing securities from commercial banks before they become due. At the same time, this rate is a benchmark both for rates on other types of Central Bank loans and for market rates. By setting the official discount rate, the Central Bank determines the cost of attracted credit resources by commercial banks. The higher the level of the discount rate, the higher the cost of refinancing loans of the Central Bank. It follows that the policy of changing the discount rate is a variant of regulating the qualitative parameter of the money market - the cost of bank loans.
By manipulating the official discount rate, the Central Bank influences the state of not only the money market, but also the financial market. Thus, an increase in the discount rate entails an increase in rates on loans and deposits in the money market, which, in turn, leads to a decrease in demand for securities and an increase in their supply. Demand for securities is falling both from non-banking institutions and from credit institutions, since direct financing becomes more profitable with expensive loans. The supply of securities, in turn, increases. A decrease in the official discount rate, on the contrary, reduces the cost of loans and deposits, which leads to the opposite processes: the demand for securities increases, their supply decreases, and the market value rises.
Thus, the accounting policy of the Central Bank is a mechanism of direct impact on the liquidity of credit institutions through changes in the cost of refinancing loans, which indirectly affects the country's economy as a whole.
In the Russian Federation, the refinancing rate is official.
Refinancing, in the broad sense of the word, refers to the provision of temporary loans to commercial banks in cases where they are in dire need of additional resources. The Central Bank of the Russian Federation, implementing the refinancing policy, pursues a priority goal - the impact on the state of the monetary sphere.
By conducting short-term lending to commercial banks, the Central Bank, on the one hand, acts as lenders of last resort, and on the other hand, becomes participants in the interbank market. By changing the interest rate on its loans, the Central Bank can influence the state of monetary circulation and determine the direction of monetary policy, namely the policy of cheap or expensive money.
As market relations develop, refinancing is increasingly being used as a tool for providing financial assistance to commercial banks. In other words, refinancing allows you to protect yourself from an unexpected lack of liquidity, otherwise commercial banks would have to keep a large amount of liquid assets themselves, which would have an extremely unsatisfactory impact on the income side of the balance sheet. And, finally, refinancing can be proposed as a tool to prevent banking crises; By providing loans, Central banks temporarily replenish the reserves of commercial banks, preventing the “domino” effect in the banking system.
It is very important to remember that a liquidity crisis implies a temporary inability of banks to meet their payment obligations with available means of payment; this phenomenon should not be confused with insolvency, which implies the inability of the bank to repay its liabilities with assets in the medium and long term.
Initially, the policy of refinancing banking institutions by the central bank was used solely to influence the state of monetary circulation.
Through refinancing, the central bank acts as a "lender of last resort"; that is, it is the guarantor of the smooth functioning of the banking and financial system as a whole.
Credit and banking institutions experiencing temporary financial difficulties were able to apply to the central bank for loans. Refinancing loans allow them to minimize their liquidity holdings as a result of borrowing from the central bank. In this sense, refinancing loans are an integral part of the safeguard mechanism, a source of temporary resources needed to replenish depleted resources. The possibility of obtaining refinancing loans or their scale depends on a number of factors, and above all on the state of the country's monetary and credit sphere, the financial situation of the borrower.
As a rule, banking institutions are the object of refinancing. Refinancing loans are provided only to stable banks experiencing temporary financial difficulties. In cases where the activities of a potential borrower are questionable by the central bank, loans are issued only after receiving an audit firm's opinion on the financial condition of the bank.
The possibility of obtaining a loan depends on many factors, namely the state of the country's monetary and credit sphere and the financial situation of the borrower.
Refinancing loans vary by:
- the form of collateral (“accounting” and “lombard loans”);
- methods of provision (direct loans and loans provided on the basis of auctions);
- terms of provision (short-term for several hours "intraday" or days "overnight", medium-term up to 1 month "lombard loan" and long-term up to 1 year "stabilization loan");
- impact on financial market sectors (in the Organized Securities Market - "REPO transactions".

2.2 Characteristics of the main tools and methods of monetary regulation
The Federal Law of April 26, 2007 "On the Central Bank of the Russian Federation (Bank of Russia)" provides the following main instruments and methods of the monetary policy of the Bank of Russia:
1) interest rates on operations of the Bank of Russia;
2) norms of required reserves deposited with the Bank of Russia (reserve requirements);
3) open market operations;
4) refinancing of banks;
5) currency regulation;
6) setting benchmarks for the growth of the money supply;
7) direct quantitative restrictions.
8) issue of bonds on its own behalf.
Let us consider the main instruments of monetary policy, with the help of which the central bank implements its policy in relation to commercial banks.
As already mentioned, two directions of monetary regulation are possible. The first is the stimulation of credit and the money supply, i.e. credit expansion, or the "cheap money" policy. The second is the containment of credit and money emission, i.e. credit restriction, or "dear money" policy. The classic and main instruments of conducting monetary policy are:
· discount policy (change of the refinancing rate);
· regulation of bank reserves (changes in the norms of required reserves);
· operations on the open market with securities and foreign currency, as well as some other measures of a strict administrative nature.
Determining the priority of monetary policy instruments depends on the goals that the central bank decides at a particular stage of the country's development. So, in modern conditions, discount policy and open market operations are of greatest importance in the countries of Western Europe and the USA, and the establishment of minimum reserve requirements is gradually receding into the background. In countries where market relations are expanding, such as the Russian Federation, the establishment of minimum reserve requirements is given a key place, and open market operations are just beginning to develop.
continuation
--PAGE_BREAK--The refinance rate is the percentage at which the central bank lends to financially sound commercial banks, acting as the lender of last resort. Discount rate - the percentage (discount) at which the central bank takes into account bills of commercial banks, which is a kind of lending secured by securities.
The wording of the concept of refinancing in the Federal Law of June 27, 2002 "On the Central Bank of the Russian Federation (Bank of Russia)" in Chapter VII, Article 40, is as follows: "Refinancing means lending by the Bank of Russia to credit organizations" .

Chart 2.1
Dynamics of changes in the refinancing rate from 2002 to 2008
\s
The discount rate (refinancing rate) is set by the central bank. Reducing it makes loans cheap for commercial banks. When commercial banks receive credit, the reserves of commercial banks 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 reserves are trying to return them, because. they get very expensive. The reduction in bank reserves leads to a multiplier reduction in the money supply.
Among the instruments of monetary policy, the policy of discount rates (refinancing rates) ranks second in importance after the policy of the central bank in the open market (and in some countries is the main tool for managing the money supply) and is usually carried out in combination with the activities of the central bank in the open market.
Most of the central banks of countries with market economies in the process of monetary regulation use a system of reserve requirements.
Reserve requirements represent a certain portion of a bank's cash that they are required by law to keep as reserves with the central bank.
These reserves are among the mandatory. At the same time, commercial banks may also have voluntary reserves, which are kept on the same account with the required reserves and represent the balance of funds in excess of the amount of required reserves. Therefore, the required reserves are called minimum reserves.
Traditionally called the dual purpose of reserve requirements.
· current regulation of banking liquidity;
current regulation of the loan market and emissions credit money commercial banks.
Historically, the emergence of a mandatory reserve system was associated with the need to provide banks with the modernity of fulfilling their obligations to depositors and creditors, for which it was necessary to always have cash in a certain amount.
This cash can be used to timely repay the bank's obligations to depositors and creditors, both directly and through lending by the central bank to banks that need to maintain liquidity, i.e. refinancing systems.
Gradually, this instrument began to play another role - to ensure the regulation of the volume of loans issued and the issue of credit money, which became possible with the legislative consolidation of the right of the central bank to change the rate of contributions to the mandatory reserve fund.
In modern regulations that determine the feasibility of using a minimum reserve system in the countries of the European Union, the emphasis is on ensuring through this system the stability of money market rates and on regulating the structural liquidity of the banking system.
The reserve requirement system in Russia was formed taking into account the goals that it is designed to solve in the process of monetary regulation, and international experience in this area.
Official documents of the Bank of Russia, in particular Regulations of the Central Bank of the Russian Federation No. 225-P dated March 25, 2004, indicate that reserve requirements are applied in order to regulate the overall liquidity of the banking system and control monetary aggregates by reducing the money multiplier.
An important element of the mandatory reserve mechanism is to determine the composition of the reserved obligations.
The composition of the reserved liabilities covers the following types of attracted resources:
· demand deposits of enterprises, organizations, individual entrepreneurs;
· means of the federal budget, budgets of subjects of the Russian Federation and local budgets which are on accounts in banks;
· Funds of credit institutions on correspondent accounts (residents and non-residents) in rubles and foreign currency;
· loans received from non-resident banks, including overdue loans and interest on them;
· deposits and other attracted funds of non-resident banks, including overdue deposits and interest on them;
· deposits (demand and term) and other attracted funds of individuals, including non-residents;
· balances of funds reflecting the settlement of securities (customer funds for brokerage operations, including non-residents), settlements with the Ministry of Finance of Russia, etc.;
Securities issued by the bank (bonds, certificates of deposit and savings, bills of exchange and banker's acceptances, etc.);
· account balances reflecting customer funds in settlements (letters of credit payable, settlement checks, offsets, transit accounts, etc.);
One of the elements of the reservation system is the reservation rate (norm).
This element directly reflects the process of regulating the money supply and liquidity of the banking system.
The reduction in the reserve ratio is associated with the need to expand the money supply by intensifying the lending activities of banks.
The increase in the reserve ratio is theoretically justified by the intensification of inflationary processes and the need in this regard to reduce the money supply through the credit multiplier.
At the same time, the limitation of credit emission by an increase in the reserve ratio should not lead to a reduction in the volume of means of payment in the conditions of an economic recovery, even if it is accompanied by some increase in inflation rates.
The required reserve ratio as an instrument of monetary policy regulates not only the amount of money supply, but also its structure. The money supply is heterogeneous in its liquidity, sources of origin, origin.
Thus, on May 26, 2008, the Board of Directors of the Bank of Russia decided to change the mandatory reserve requirements. According to the Central Bank of the Russian Federation, from July 1, 2008. the required reserve ratios will be raised: for liabilities of credit institutions to non-resident banks in the currency of the Russian Federation and in foreign currency from 5.5% to 7%; on liabilities to individuals in the currency of the Russian Federation from 4.5% to 5%; on other liabilities of credit institutions in the currency of the Russian Federation and liabilities in foreign currency from 5% to 5.5%.
The monetary policy of the Central Bank of the Russian Federation is focused on maintaining the most optimal structure of the money supply in the market, and therefore provides for the differentiation of mandatory reserve requirements.
Differentiation of the norms of mandatory reserves, depending on the types of deposits, is due to the need to regulate the dynamics of the development of individual deposits. Establishing a higher reserve rate for demand deposits compared to term and savings deposits stimulates the development of the latter.
Establishment high stakes on deposits in foreign currency is aimed at curbing the inflow of capital from abroad and the investment by banks of their resources in foreign currency.
The operations of the central bank in the open market are currently the main instrument of monetary policy in world economic practice.
Open market operations are transactions for the purchase or sale of securities by the central bank in the open market. An open market is understood as a set of financial intermediaries (banks, insurance, investment companies, etc.) that carry out transactions with government securities. The central bank sells or buys securities at a predetermined rate, including government securities that form the country's domestic debt. This tool is considered the most flexible tool for regulating credit investments and liquidity of commercial banks.
The operations of the central bank in the open market have a direct impact on the amount of free resources available to commercial banks, which stimulates either the reduction or expansion of credit investments in the economy, while simultaneously affecting the liquidity of banks, respectively, reducing or increasing it. Such influence is carried out by changing the purchase price from commercial banks or the sale of securities to them. With a strict restrictive policy aimed at the outflow of credit resources from the loan market, the central bank reduces the sale price or raises the purchase price, thereby, respectively, 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, and thus the banks' lending capacity is increased. They start issuing loans that are in the form of non-cash real money are included in the sphere of monetary circulation, and, if necessary, are transformed into cash. If the central bank sells securities, then commercial banks pay for such a purchase from their correspondent accounts, thereby reducing their credit opportunities associated with the issue of money.
The Federal Law of June 27, 2002 “On the Central Bank of the Russian Federation (Bank of Russia)”, Chapter VII, Article 39, contains the following wording of open market operations: “Open market operations are understood to be the purchase and sale by the Bank of Russia of treasury bills, other government securities, short-term transactions with securities with the completion of a reverse transaction later”.
In developed countries with a highly liquid government securities market, open market operations are the main instrument of monetary policy. In the US, for example, the Treasury bills market is the most liquid and is characterized by a large trading volume. This allows the Federal Reserve System to conduct transactions that affect the dynamics of the monetary base, but do not affect the price and yield of bills. In developing economies where the financial market is underdeveloped, the effectiveness of such operations is more limited.
In addition to the traditional monetary instruments discussed above, monetary policy can also set benchmarks for the growth of the money supply and carry out currency regulation.
Currency 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 GDP, the budget deficit and sources of its coverage, the economic and political situation, etc. The real exchange rate in these specific conditions can be determined as a result of free offers on buying and selling currencies on foreign exchange markets. An effective form of foreign exchange regulation by the Central Bank of the Russian Federation is foreign exchange intervention. It lies in the fact that the central bank intervenes in operations in the foreign exchange market in order to influence the exchange rate of the national currency by buying and selling foreign currency. To increase the exchange rate of the national currency of the Central Bank of the Russian Federation, the central bank sells foreign currency, to reduce it, it buys it in exchange for the national currency. The Central Bank conducts foreign exchange interventions in order to bring the exchange rate of the national currency as close as possible to its purchasing power and at the same time find a compromise between the interests of exporters and importers. Exporting firms are interested in some undervaluation of the national currency, they provide the bulk of the incoming foreign exchange earnings. Enterprises that receive raw materials, materials, components from abroad, as well as industries that produce products that are not competitive compared to foreign ones, are interested in some overestimation of the national currency.
Along with foreign exchange intervention, the Central Bank of the Russian Federation may take a number of administrative measures to regulate the exchange rate in a direction that is consistent with strengthening monetary circulation and increasing the efficiency of interstate economic relations. For example, the introduction of a "currency corridor" contributes to the regulation of the exchange rate. The unregulated dynamics of the exchange rate has a negative impact on the development of domestic money circulation, on the financial position of enterprises engaged in foreign economic activity, and on the financial position of banks.
The Central Bank of the Russian Federation mainly adheres to a floating exchange rate system, limiting intervention in the foreign exchange market to operations to smooth exchange rate fluctuations that are adequate to the monetary program.
In general, the effective use of monetary policy instruments is determined by a number of factors, of which the following can be distinguished:
· the choice of an intermediate goal of monetary policy (inflation targeting, monetary or currency targeting), determined by the degree of economic liberalization and independence of the central bank, its tasks, and its functions in the economy. In addition, the intermediate goals of monetary policy are closely interrelated. For example, if, in a freely convertible currency, the central bank seeks to fix the interest rate at a certain level, then in the development of monetary policy measures, it will have to accept the exchange rate of national currencies set by the market. Conversely, when choosing an objective of monetary policy associated with restrictions on the exchange rate, he must take into account the emerging level of interest rates. If the central bank sets the goal of maintaining the real interest rate at a positive level to stimulate investment, then it should simultaneously pursue an inflation targeting policy, etc.;
· the choice of the concept of monetary policy: the policy of credit expansion, or "cheap" money, or the policy of credit restriction, or "expensive" money. Choosing the right concept is very difficult. On the one hand, inflationary factors may operate in the country, requiring a reduction in the money supply, which involves the use of credit restrictions, but on the other hand, the economy needs investments, for which it is necessary to pursue a policy of credit expansion. Therefore, monetary regulation should be combined with a flexible budget and tax policy;
the level of functional independence of the central bank. Functional independence implies the independence of the central bank in the choice of instruments for conducting monetary policy. Functional independence also manifests itself in the fact that the central bank is not obliged to automatically issue money to the government to finance public spending and give preference to it in granting loans. In addition, for functional independence, the nature of the monetary policy instruments used and the control over the credit system carried out by it is important, namely: the use of predominantly market or administrative methods of control;
continuation
--PAGE_BREAK--· whether the central bank will strictly follow the established monetary policy settings (monetary program) or will change them depending on the emerging trends in the economy, i.e. will pursue a discretionary monetary policy, suggesting freedom of action; monetary policy should have a strategy and tactics, but allow the reaction of the central bank to temporary changes in the economic situation. Rigid adherence to established monetary policy benchmarks, such as growth in the money supply, with changes in the demand for money during the year, can lead to undesirable inflationary consequences or restrictions aggregate demand. And this, in turn, reduces the credibility of the actions of the central bank;
· how the time lags of monetary policy are taken into account, since the relative unpredictability of monetary policy is connected precisely with the problems of time lags;
What methods of monetary policy will be applied;
· The stability of the banking system is extremely important for the effective implementation of monetary policy. The banking sector is the channel through which the impulses of monetary regulation are transmitted to the entire economy. The central bank regulates the economy not directly, but through the monetary system. Influencing credit institutions, it creates certain conditions for their functioning. Consequently, the regulation of the activities of commercial banks by the central bank can also be considered as one of the directions of monetary regulation of the economy by the central bank.
2.3 Other Methods of Monetary Regulation
In addition to the economic methods by which the central bank conducts monetary policy, it can also use administrative methods of influence in this area.
These include, for example, the use of quantitative credit restrictions. This method of credit regulation is a quantitative limitation of the amount of loans issued. In contrast to the methods of regulation discussed above, the restriction of credit is a direct method of influencing the activities of banks. Also, credit restrictions lead to the fact that borrowing enterprises fall into an unequal position. Banks tend to lend primarily to their traditional customers, usually large enterprises. Small and medium-sized firms are the main victims of this policy.
Also, the central bank can set various standards (coefficients) that commercial banks are required to maintain at the required level. These include capital adequacy ratios for a commercial bank, balance sheet liquidity ratios, maximum risk per borrower ratios, and some supplementary ratios. These standards are mandatory for commercial banks. In addition, the central bank may establish non-binding, so-called valuation standards, which commercial banks are encouraged to maintain at the proper level.
If commercial banks violate banking legislation, rules for banking operations, or other serious shortcomings in their work, which leads to infringement of the rights of their shareholders, depositors, clients, the central bank can apply the most severe administrative measures to them, up to the liquidation of banks.
The use of administrative influence on the part of the Central Bank of the Russian Federation in relation to commercial banks is not systematic, but is applied as an exclusively forced measure.
In addition to the three main monetary policy instruments mentioned above, the Central Bank of the Russian Federation can use secondary selective regulation, which concerns the stock exchange.
In order to avoid excessive speculation on the stock exchange, the Central Bank of the Russian Federation establishes a “margin” prescribed by law, i.e. a percentage of the sale price of a security that must be paid on purchase, either in cash or in securities, while an IOU may be issued on the other part. Margins are raised to limit speculative stock buying and lowered to revitalize the stock market.
The state and the central bank can influence banks through verbal persuasion. There may be political statements, general decisions, just calls for this or that action. The state appeals to the bankers' sense of public duty. In general terms, warnings may be given regarding the availability of credit in the future. Sometimes exhortations have some effect, because bankers are just as sensitive to public opinion as others.

Chapter 3. Analysis of the monetary policy of the Central Bank of Russia
3.1 Implementation of monetary policy in 2007
IN this section Let us analyze the monetary policy pursued in 2007 and consider its results.
Table 3.1 presents an estimate of the indicators of the monetary program for 2007. It can be seen from the results obtained that the main indicators: the monetary base, net international reserves, net domestic assets exceeded the planned indicators.
Table 3.1
Evaluation of indicators of the monetary program for 2007 (billion rubles)

01.01.2007
01.06.2007
01.01.2008
01.01.2008
Growth for 2007
Fact
Fact
Program
Grade
Grade
Monetary base (narrow definition)
3208
3264
3687
4087
879
cash in circulation (outside the Bank of Russia)
3062
3110
3504
3896
834
required reserves
146
154
183
191
45
Net international reserves
7998
10517
9574
11009
3011
in billion US dollars
304
399
364
418
114
Net domestic assets
479
7253
5887
6922
2133
Net Credit to General Government
3696
4851
5326
4951
1255
Net credit to the federal government
3350
4186
5086
4551
1201
balances of the consolidated budgets of the subjects
346
664
240
400
54
Net credit to banks
810
2006
637
1542
732
gross credit to banks
28
0
5
5
23
correspondent accounts, deposits
838
2006
642
1547
708
Other net unclassified assets
283
397
76
429
146
Graph 3.1 shows the fluctuation of the consumer price index, i.e. inflation compared to 2006. As you know, one of the parts of monetary policy is aimed at curbing inflation. So, for example, inflation for the 1st quarter of 2008 amounted to 4.8% against 3.4% for the same period of the previous year. The acceleration of consumer price growth occurred primarily due to the high rates of growth in the cost of food products and paid services to the population. The policy of the state is aimed at reducing inflation, but it is already clear that this year the government will not cope with the task set and inflation will increase.
Graph 3.1
Dynamics of the consumer price index
(in % to the corresponding period of the previous year)
\s

In 2007, the ruble money supply increased by 47.5% (including 15.5% in the fourth quarter), which is less than in 2006 (48.8% and 16.1%, respectively). The ratio of the growth rates of consumer prices and the monetary aggregate M2 caused an increase in the ruble money supply in real terms over the past year by 31.8% (in 2006 - by 36.5%).
Table 3.2
Money supply M2 (national definition) in 2007
date of
Money supply M21
Money supply growth rate, %
Total
including
to previous
to 01.01.2007
cash
non-cash
month
01.01.2007
8 995,8
2 785,2
6 210,6
12,3
-
01.02.2007
8 700,8
2 630,1
6 070,6
-3,3
-3,3
01.03.2007
8 902,0
2 682,0
6 220,1
2,3
-1
01.04.2007
9 412,6
2 741,2
6 671,4
5,7
4,6
01.05.2007
10 006,0
2 859,4
7 146,6
6,3
11,2
01.06.2007
10 699,3
2 896,6
7 802,6
6,9
18,9
01.07.2007
10 857,7
3 027,5
7 830,2
1,5
20,7
01.08.2007
10 923,5
3 087,0
7 836,5
0,6
21,4
01.09.2007
11 156,8
3 170,6
7 986,2
2,1
24
01.10.2007
11 494,0
3 220,9
8 273,2
3
27,8
01.11.2007
11 421,7
3 259,1
8 162,6
-0,6
27
01.12.2007
12 163,3
3 373,4
8 789,9
6,5
35,2
01.01.2008
13 272,1
3 702,2
9 569,9
9,1
47,5
1 Monetary aggregate M2 represents the amount of cash in circulation (outside banks) and balances in the national currency on the accounts of non-financial organizations and individuals who are residents of the Russian Federation.
Growth in the volume of cash in 2007, as in previous years, was largely due to the continued increase in household cash income. At the same time, against the backdrop of lower rates of growth in household incomes, the growth rates of the monetary aggregate М0 in 2007 slowed down and amounted to 32.9% against 38.6% in 2006 (14.9% in the fourth quarter of 2007 against 16.0% in the same period of 2006). At the same time, in 2007, households' operations to purchase cash foreign currency to a lesser extent than in 2006 held back the growth of cash ruble funds (net sales of foreign currency in cash by authorized banks through exchange offices amounted to USD 3.3 billion in 2007 vs. $7.0 billion in 2006).
The non-cash component of the M2 monetary aggregate increased by 54.1% in 2007, including 15.7% in the 4th quarter (in 2006 as a whole - by 53.9%, in the 4th quarter - by 16.1% %).
The growth of deposits of individuals in the national currency in 2007 took place in the context of an increase in real incomes of the population, as well as the strengthening of the ruble against the US dollar. At the same time, the growth rates of household deposits decreased from 51.6% in 2006 to 41.3% in 2007.
Chart 3.2
Growth rates of the M2 monetary aggregate (month to the previous month, %)
\s
As a result of an increase in the volume of bank lending and an increase in the income of non-financial organizations, the total amount of funds on their accounts in commercial banks increased by 67.9% in 2007 (by 56.4% in 2006). At the same time, "demand" deposits increased by 53.4%, and time deposits - by more than 2 times (in 2006 - by 48.8 and 82.1%, respectively).
In the structure of the ruble money supply, the share of cash in circulation as of January 1, 2008 decreased by 3.1 percentage points (to 27.9%) as compared to January 1, 2007, the share of demand deposits increased by 1.0 percentage points (to 32 .3%), and time deposits - by 2.1 percentage points (up to 39.8%).
The growth rates of deposits in foreign currency (in dollar terms) amounted to 26.8% in 2007 (in 2006 - 7.2%) and were two times lower than the growth rates of deposits in national currency (54.1%). The share of deposits in foreign currency in the structure of the money supply, according to the monetary survey methodology, decreased from 11.4% as of January 1, 2007 to 9.3% as of January 1, 2008.
In 2007, the money supply growth rate, according to the methodology of the monetary survey, was 44.2% (in 2006 - 40.5%). In 2007, net foreign assets and domestic claims remained important as sources of money supply growth. With an increase in the money supply by 4.5 trillion. rub. the increase in net foreign assets amounted to 3.0 trillion. rub., and internal requirements - 2.5 trillion. rub. (for 2006 - 2.9; 2.1 and 1.3 trillion rubles, respectively).
Chart 3.3
Main Sources of Money Supply Growth According to Monetary Survey Methodology in 2007
\s
At the same time, in 2007, the importance of bank loans to non-financial organizations and the population as a source of money supply increased. Claims on this group of borrowers in 2007 increased by 4.3 trillion. rub. (in 2006 - by 2.7 trillion rubles). At the same time, the growth of the money supply continued to be constrained by the accumulation of funds in the accounts of government bodies with the Bank of Russia, mainly in the accounts of the Stabilization Fund of the Russian Federation.
The velocity of money circulation, calculated on the basis of the M2 monetary aggregate in average annual terms, decreased by 18.8% in 2007 (by 13.2% in 2006). The level of monetization of the economy (according to the M2 monetary aggregate) increased from 26.1% to 32.2% over the past year.
The money multiplier increased from 2.182 as of January 1, 2007 to 2.407 as of January 1, 2008, or by 10.3% (against 5.2% in 2006).
Chart 3.4
Dynamics of the money multiplier* (actual value and trend)
\s*
The money multiplier is the ratio of the monetary aggregate M2 and the monetary base in a broad definition
In 2007, the broad monetary base increased by 33.7% (by 41.5% in 2006). The main source of growth in the monetary base in 2007, as in 2006, was the Bank of Russia's purchases of foreign currency in the domestic foreign exchange market. Net foreign assets of the monetary authorities grew in 2007 by 3.7 trillion. rub. (in 2006 - by 2.8 trillion rubles). The growth of the money supply was held back by the Bank of Russia by increasing the amount of liquidity absorption. The increase in government deposits with the Bank of Russia in 2007 amounted to 2.0 trillion. rubles, exceeding the same indicator in 2006 (1.5 trillion rubles).
The structure of the monetary base in broad terms in 2007 changed as follows. The share of cash increased from 74.3% as of January 1, 2007 to 74.7% as of January 1, 2008. The share of funds on correspondent accounts of credit institutions with the Bank of Russia decreased from 15.5% to 14.6%. The share of funds in the accounts of required reserves decreased from 5.3% to 4.0%. The share of Bank of Russia bonds held by credit institutions decreased from 2.5% to 1.8%, while the share of credit institutions' deposits with the Bank of Russia increased from 2.4% to 4.9% as of the respective dates.
In January-July 2007, banks had sufficient free reserves and even had excess liquidity. The unstable situation that arose in the world financial markets in the summer of 2007 as a result of problems in the US mortgage market led to a deterioration in the terms of external borrowing for Russian economic agents and, as a result, a decrease in the degree of participation of the Bank of Russia in the domestic foreign exchange market. Against the background of the continuing growth of the balances of funds on the accounts of the state authorities with the Bank of Russia, this led, starting from the second half of August 2007, to a reduction in the banks' liquid ruble funds. At the same time, banks experienced a strong liquidity deficit in October-November 2007. At the same time, the seasonal need of credit institutions for free reserves in December was largely satisfied by transfers of funds from the budget, which ultimately led to a reduction in tension in the money market.
continuation
--PAGE_BREAK -- In Q4 2007, due to the current situation with banking liquidity, the Bank of Russia decided to temporarily reduce the required reserve ratios by 1 percentage point, and in the period from 10/11/2007 to 01/14/2008 they amounted to:
- for liabilities to non-resident banks in the currency of the Russian Federation and foreign currency - 3.5%;
- for liabilities to individuals in the currency of the Russian Federation - 3.0%;
- for other liabilities of credit institutions in the currency of the Russian Federation and liabilities in foreign currency - 3.5%.
In 2007, the decision to change the required reserve ratios was also taken in the second quarter. Since July 1, they have been differentiated and increased by 0.5 or 1 percentage point, depending on the type of obligations.
From November 1, 2007, the coefficient for calculating the average amount of required reserves was increased from 0.3 to 0.4, which, in particular, led to an increase in the amount of required reserves maintained on average by credit institutions on correspondent accounts and correspondent sub-accounts with the Bank of Russia from 96, 8 billion rubles in October to 124.1 billion rubles. in December (in January 2007 - 46.5 billion rubles). In addition, the number of credit institutions that were granted the right to average the required reserves constantly increased during the year and in December 2007 amounted to 767, or 67.2% of the total number of operating credit institutions.
From the above analysis, the following conclusions can be drawn:
1. In recent years, the Central Bank has basically only lowered the refinancing rate in order to increase the money supply. But the last decision of the Board of Directors of the Bank of Russia was the decision to raise the refinancing rate by 0.25% to 10.75, which will result in a decrease in the amount of money in circulation and, as a result, a decrease in inflation.
2. In the medium-term programs of the government of the Russian Federation, one of the main goals is to lower the inflation rate to the level of 6-7% per year. However, it can already be said that this year it will not be possible to cope with inflation again.
3. The monetary base increased from 3208 to 4087 billion rubles. This figure exceeded the originally planned volume. The monetary base is one of the main indicators used to monitor economic processes. By changing the value of the monetary base, the Bank of Russia regulates the volume of the entire money supply and thereby affects the price level, business activity and other economic processes.
4. The velocity of money circulation, calculated on the basis of the M2 monetary aggregate in annual average terms, decreased by 18.8% in 2007 (by 13.2% in 2006). These figures indicate a decrease in price growth in the country.
5. The level of monetization of the economy (according to the M2 monetary aggregate) increased from 26.1% to 32.2% over the past year.
6. Growth in the volume of cash in 2007, as in previous years, was to a large extent associated with the continuing increase in household cash incomes. At the same time, against the backdrop of lower rates of growth in household incomes, the growth rate of the monetary aggregate М0 in 2007 slowed down and amounted to 32.9% against 38.6% in 2006.
3.2 Monetary policy instruments and their use for 2008
In 2008, the Bank of Russia plans to continue improving the system of monetary policy instruments and their operational use to ensure a stable state of the monetary sphere under various scenarios of the country's socioeconomic development.
The priority will be the consistent activation of the interest rate policy and the increase in the importance of the interest rate channel in the transmission mechanism of monetary policy as the necessary economic prerequisites are formed. The key factors include: a significant decrease in the positive balance of payments predicted in the medium term, a corresponding decrease in the participation of the Bank of Russia in operations in the domestic foreign exchange market. The consequence of this should be a slowdown in the dynamics of the money supply. Under these conditions, one can expect an increase in the influence of rates on Bank of Russia operations on interest rates in the Russian economy.
Consistent narrowing of the corridor of interest rates on Bank of Russia operations in the money market in 2008 will remain a strategic direction of interest rate policy. In the context of the lifting of restrictions, the inflow of capital will increase the lower boundary of the corridor taking into account the risk of a large-scale inflow of foreign capital.
The Bank of Russia will use tools to absorb free banking liquidity. At the same time, in 2008 the main sterilization channel (in terms of absorbed funds) will continue to be the use of the budgetary mechanism as part of the transition from February 1, 2008 to the formation of the Reserve Fund and the Future Generations Fund.
Market instruments used on an auction basis (auctions for the sale of OBRs and deposit auctions) will play a leading role in tying up free cash resources by the Bank of Russia. The transition to the issuance of short-term OBRs will help simplify the use of this sterilization tool and, accordingly, increase demand for it from money market participants. At the same time, in 2008 the Bank of Russia will continue to use standing instruments that ensure short-term liquidity tying (deposit operations at fixed rates on standard terms).
In addition, if long-term absorption of liquidity is required, the Bank of Russia intends to sell government securities from its own portfolio (without a repurchase obligation). In 2008, it is planned to consider changing the structure of the government securities portfolio owned by the Bank of Russia by exchanging federal loan bonds (OFZ) with non-market characteristics for more liquid issues, which will increase the efficiency of using this instrument.
Mandatory reserve requirements will continue to be used by the Bank of Russia as a direct tool for regulating the liquidity of the banking sector.
In the event of a significant increase in banking liquidity, in particular as a result of an intensive inflow of short-term foreign capital into the Russian economy, when the use of other instruments for its absorption cannot give the desired effect,
The Bank of Russia admits the possibility of raising the required reserve ratios. At the same time, in order to enable credit institutions to efficiently manage their own liquidity, the Bank of Russia may continue to gradually increase the required reserve averaging ratio. The Bank of Russia takes into account the possibility of changes in the liquidity level of the banking sector associated with external shocks, including the risks of a significant reduction in the level of liquidity in the face of continued uncertainty regarding the direction of cross-border capital flows, as well as changes in world prices for Russian exports.
In the event of a decrease in the level of bank liquidity, including a short-term one, the Bank of Russia is ready to intensify the use of instruments for providing funds to credit institutions on auction and fixed terms. To this end, direct REPO auctions, Lombard credit auctions, and the use of standing instruments (Lombard loans provided at fixed interest rates, currency swap transactions) will continue. In order to ensure uninterrupted settlements, credit institutions will be provided with intraday and overnight credits from the Bank of Russia on a daily basis.
In order to improve the efficiency of refinancing (crediting) operations of credit institutions, the Bank of Russia during 2008 will continue to work on creating a unified refinancing mechanism. At the same time, the main task of the Bank of Russia is to create a system that will provide any financially stable credit institution with the opportunity to receive intraday loans, overnight loans and loans for up to 1 year against any type of collateral included in the “single pool” of collateral.
The planned measures are aimed at ensuring prompt access of credit institutions to a sufficient amount of funds provided through the operations of the Bank of Russia.
In 2008, work will continue to include in the Lombard List of the Bank of Russia securities that meet the requirements of the Bank of Russia, as well as to expand the range of counterparties of the Bank of Russia for refinancing operations and the number of credited accounts of credit institutions opened in all territorial branches of the Bank of Russia.
In connection with the planned expansion of the composition of property accepted as collateral for Bank of Russia loans, during 2008 the Bank of Russia will develop a mechanism for attracting specialized organizations, including the Deposit Insurance Agency, to organize public auctions for the sale of property accepted as collateral for Bank loans Russia and not circulating in Russia on the organized market, in case of non-repayment by credit institutions - borrowers of loans from the Bank of Russia.

3.3 Monetary policy principles for the medium term
In accordance with the medium-term strategy for the socio-economic development of the country, the Government of the Russian Federation sets the inflation target for a three-year period. The main goal of monetary policy in the next three years is a gradual reduction of inflation to 5-6% in 2010. At the same time, the task set for 2008 is to reduce inflation to 6-7% on a December-to-December basis.
At the moment, the government of the Bank of Russia is coping with the task set. So in January this figure was 2.3, in March 4.8, and in April 106.3%. From such dynamics it is clear that the government will not be able to contain inflation and by the end of the year it is likely to exceed 10%.
In 2008, the principles of the unified state monetary policy, which have been formed in recent years, will be used, however, in the medium term, a change in the macroeconomic conditions for its implementation is expected, which will require a shift in emphasis from the programming of the money supply to the use of the interest rate and the transition from exchange rate management to a regime of free floating exchange rate.
External changes are mainly related to the uncertainty in the dynamics of world energy prices, which form the basis of Russian exports. In accordance with the forecast of socio-economic development in 2008 and especially in the next two years, a possible decrease in these prices will entail a reduction in the trade balance and a decrease in foreign exchange inflows. High prices for Russian exports have recently been a fundamental factor in choosing a managed floating exchange rate regime, under which the Bank of Russia actively counteracted excessive ruble appreciation by intervening in the domestic foreign exchange market. Changes in the terms of trade will reduce the imbalance between supply and demand in the domestic foreign exchange market and reduce the need for the presence of the Bank of Russia on it. It is expected that by 2010 the increase in foreign exchange reserves may be significantly reduced and the increase in net foreign assets of the monetary authorities will no longer be the main source of money supply growth.
Under these conditions, in order to ensure that the volume of the money supply matches the demand for money, the Bank of Russia will need to intensify bank refinancing operations. At the same time, the possibilities for the influence of monetary policy on the dynamics of inflationary processes with the help of the interest rate will expand.
The most important internal condition that will have an impact on the conduct of monetary policy is a change in the principles of formation of the state budget. The main new points of the budget strategy are: planning and approval of the federal budget for a three-year period in the form of a law; division of revenues into oil and gas and non-oil and gas revenues with determination of the size of the oil and gas transfer allocated to federal budget expenditures as part of the transformation of the Stabilization Fund of the Russian Federation into the Reserve Fund and the Fund for Future Generations.
The transition to a “rolling” three-year budget formation horizon will contribute to a more even spending of state budget funds throughout the year, as a result of which the dependence of the dynamics of the money supply on seasonal fluctuations in the movement of budget funds will decrease.
The implementation of the interest rate policy by narrowing the corridor of interest rates on refinancing operations of credit institutions and absorbing their free funds makes it possible to influence the change in the limits of fluctuations in money market rates. Reducing the volatility of short-term interest rates in the interbank market and the formation of a long-term segment of the money market are considered by the Bank of Russia to be among the main objectives of its open market operations.
At present, the value of money in the economy is formed in conditions of a high level of liquidity, which is formed as a result of the receipt of large volumes of foreign exchange earnings and active foreign exchange interventions of the Bank of Russia. As the volume of interventions by the Bank of Russia in the domestic foreign exchange market decreases, the rates on market-based bank refinancing instruments (direct REPO operations) will have an increasing influence on the formation of money market interest rates. Lowering the refinancing rate in line with lower inflation rates will help maintain a stable value of the real interest rate and lower inflationary expectations of market participants. At the same time, the level of rates on liquidity binding operations will be affected by the differential of domestic and foreign interest rates.
In order to maintain macroeconomic stability, the Bank of Russia will continue to apply and develop elements of the inflation targeting regime, the most important of which are the priority of the target to reduce inflation over other targets and the medium-term nature of its establishment.
In order to fully introduce inflation targeting, the Bank of Russia will need to switch to a freely floating exchange rate regime, as well as implement measures aimed at using the interest rate as the main monetary policy instrument that performs a signaling function and affects the monetary conditions for the functioning of the economy.
When making monetary policy decisions, the Bank of Russia will rely on a wide range of macroeconomic and financial indicators, as well as monetary aggregates that characterize current monetary conditions and are indicators of future inflationary pressure.
3.4 Monetary Policy Targets and Monetary Program for 2008-2010
In accordance with the scenario conditions and the main parameters of the forecast of the social and economic development of the Russian Federation for 2008 and for the period up to 2010, the Government of the Russian Federation and the Bank of Russia set the task of reducing inflation in 2008 to 6-7%, in 2009 to 5.5%. -6.5%, in 2010 to 5-6% (based on December to December). The specified target for the general level of inflation in the consumer market corresponds to core inflation of 5-6% in 2008, 4.5-5.5% in 2009 and 4-5% in 2010.
According to the socio-economic development forecast for the Russian Federation for 2008, the growth rate of domestic demand may be somewhat lower than in 2007, the ruble will not appreciate as intensively as in previous years, which causes a slight decrease in the growth rate of demand for money compared to 2007 year.
In this regard, the Bank of Russia assumes, depending on the forecast options, an increase in the M2 monetary aggregate by 24-30% per year.
In 2009-2010, the rate of growth in the demand for money will slow down. At the same time, the growth rate of M2 money supply may be 20-24% in 2009 and 16-20% in 2010.
The monetary program for 2008-2010 is presented in three versions, corresponding to the scenarios for forecasting the social and economic development of the Russian Federation for 2008-2010.
Depending on the scenario options, the growth rate of the monetary base in 2008 may be 18-24%, in 2009 15-20%, in 2010 12-17%.
The main source of growth in the monetary base in 2008-2009, as in the previous period, will be the increase in net international reserves (NIR) of the monetary authorities. However, if in 2008, according to all three options, the projected increase in NIR will exceed the increase in the monetary base that is acceptable in terms of achieving the inflation target, which will require the monetary authorities to implement a set of measures to absorb excess liquidity in the banking sector, then starting from 2009 year (according to the third option from 2010), an increase in net domestic assets (NDA) of the monetary authorities is expected, including _ due to an increase in gross credit to banks. At the same time, in 2010, according to all the options under consideration, credit to banks may become the main source of growth in the money supply, since a significant increase in demand from credit institutions for refinancing instruments of the Bank of Russia is predicted.
continuation
--PAGE_BREAK--

“Protecting and ensuring the stability of the ruble is the main function of the Bank of Russia in accordance with the Constitution of the Russian Federation” (Draft EDKP of the Central Bank of the Russian Federation dated, p. 3). Source: according to the Central Bank of the Russian Federation. 2 RUB/USD exchange rate index (to the previous day) M. Ershov. RSPP. October 22, 2015

“The stability of the ruble is ensured by maintaining price stability (highlighted by us. - M.E.), which is the main goal of monetary policy” (Draft EDKP of the Central Bank of the Russian Federation dated, p. 3). Recall that only from November 2014 to January 2015, inflation almost doubled (from 8 to 15%). This jump was caused by a sharp depreciation of the ruble from 45 to almost 70 rubles per dollar. Exceeding the target level of 5% by about two-thirds is due to the weakening of the exchange rate (E.S. Nabiullina, Speech in the State Duma of the Russian Federation) Sources: Central Bank of the Russian Federation, Rosstat. 3 Inflation and exchange rate (ruble/dollar) M. Ershov. RSPP. October 22, 2015

“A sharp, almost two-fold drop in oil prices below $50 per barrel, the need to repay significant amounts of external debt in the face of financial sanctions led to a weakening of the ruble, an increase in its volatility and an increase in inflationary and devaluation expectations.” (Draft EDKP of the Central Bank of the Russian Federation dated, p. 3). 4 *data for Canada include oil and gas exports Sources: Bloomberg, IMF, national statistics Share of oil exports in GDP and devaluation of national currencies (%)* The depreciation of the Russian ruble was more significant than in other oil exporting countries (even , whose share of oil exports in GDP is higher than in Russia) M. Ershov. RSPP. October 22, 2015

1. Limited the provision of ruble liquidity. However, this also limits the access of funds for the rest of the "ruble" economy. 2. Raised interest rates. It also slows down growth. Regulator for the stabilization of the foreign exchange market: 5M. Ershov. RSPP. October 22, 2015

The growth of the Russian economy and the rates of the Bank of Russia gg. GDP Rates of the Central Bank of the Russian Federation * at the end of the year. Sources: Rosstat, Central Bank of the Russian Federation. * 6M. Ershov. RSPP. October 22, 2015

For Russia: “In order to meet the inflation target set by the Bank of Russia for 2015 … the Bank of Russia should be prepared to raise interest rates further over the next year” by the IMF. Russian Federation – 2014 Article IV Consultation C. 3. For the US: “Premature rate hikes could tighten financial conditions or undermine financial stability, hindering economic growth” 2015 Article IV Consultation with the United States of America Concluding Statement of the IMF Mission IMF mission recommendations: M. Ershov. RSPP. October 22, 2015

M2 Growth Rates (YoY, %) The high level of interest rates combined with the constant decline in liquidity, which is declining and will be even smaller given the volume of external debt repayments, creates problems for economic growth Sources: CBR. Monetary Base Growth Rates (yoy, %) 8M. Ershov. RSPP. October 22, 2015

On the draft monetary policy of the Bank of Russia for 2016 and the period of 2017 and 2018 M. Ershov

State policy to stabilize economic development. Instruments of state economic policy State budget Central bank Directions of state policy Budgetary and financial Credit and monetary Goals of the state economic policy Stabilizing the pace of economic development Preventing cyclical recessions Preventing runaway inflation and hyperinflation Achieving full employment

Monetary policy mechanism Increasing the money supply during a downturn to increase spending Restricting the money supply during inflation to reduce spending Mechanism Changing the money supply Monetary policy objectives Achieving full employment No inflation

Monetary Policy Mechanism Lending Limits, Direct Regulation of Interest Rates (Direct Regulation) Indirect Regulation – Change in Reserve Requirements – Change in the Central Bank’s Discount Rate – Open Market Operations

Change in the required reserve ratio Bank reserve - the funds of commercial banks that they are obliged to keep in the Central Bank as security for their operations Reserve ratio - the ratio of the amount of reserves to the amount of deposits established by the Central Bank

Change in the required reserve ratio Change in the reserve ratio Increase in the reserve ratio Decrease in the money supply in commercial banks Reduction in the credit capacity of banks Decrease in the money supply Decrease in the reserve ratio Increase in the money supply in commercial banks Increase in the credit capacity of banks Increase in the money supply

Change in the discount rate of the Central Bank Discount rate (refinancing rate) - the rate at which the Central Bank issues loans to commercial banks

Change in the discount rate Increase in the discount rate Decrease in the amount of loans from the Central Bank Increase in interest on loans from commercial banks Decrease in the money supply Decrease in the discount rate Increase in loans from the Central Bank Decrease in interest on loans from commercial banks Increase in the money supply

Open market operations Open market - a market where any entity can trade and whose prices are determined only by supply and demand

Operations on the open market Purchase of securities - from the public - from commercial banks Additional funds in the accounts of commercial banks Increase in active operations Increase in the money supply Sale of securities - to the public - to commercial banks Decrease in funds in the accounts of commercial banks Decrease in active operations Decrease in the money supply