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№ 1/2024

Nauk. pr. NDFI 2024 (1): 67–80https://doi.org/10.33763/npndfi2024.01.067

MONETARY POLICY

¹independent researcher
OrcID ID : https://orcid.org/0000-0003-2925-0276
²Profin Consulting LLC
OrcID ID : https://orcid.org/0000-0002-3960-6240

Using of banking instruments for economic growth

The monetary security of the economy is determined by the state of the banking system, which, with the expanded reproduction of productive capital, ensures self-regulation of the market equilibrium in terms of inflation within the limits set by the Central Bank (CB) and the growth of real GDP. If the money supply of the Central Bank in the market does not correspond to the level of demand for money in the economy, the country will experience problems with lending to the real sector, real GDP growth and inflationary processes. The banking system is part of the real sector of the economy, its regulator, whose instruments determine: nominal GDP by the product of the amount of money in circulation and the velocity of circulation, the possibility of issuing loans to production by existing deposits and established by the monetary base and credit multiplier with the existing part of the value added by production. Part of the value added by production in the total product for the existing technological order in the country's economy is a constant value. Industrial economies have a technological structure with a share of value added equal to half of the total product and a credit multiplier of less than four. Widely used in regulating economic growth, the interest rate of the Central Bank is determined by a function of the velocity of money and changes the credit multiplier in relation to cash deposits to the demand, keeping the amount of circulating money unchanged. During an economic recession, an increase in the interest rate of the Central Bank leads to a sharp decrease in the credit multiplier and loans to production and can lead to a complete lack of lending. The existing identity of the economy has been established - the ratio of nominal GDP to the monetary base of the Central Bank is equal to the product of the credit multiplier and the velocity of money. Every economy, upon reaching the limit value of the credit multiplier, enters into a recession of reduced GDP growth due to a lack of credit. Overcoming the recession by introducing the achievements of scientific and technological progress transfers the economy to the next stage of development or technological order with an increased part of the value added by production and an increase in the credit multiplier. In the pre-crisis of the COVID-19 period of 2006 - 2019. deindustrialization of the Ukrainian economy took place with a decrease in the part of the value added by production from 0.48 to 0.44, reducing the ability of the banking system to lend to production. The banking system of Ukraine in the context of the crisis pandemic in 2020-2021 was in banking equilibrium and ensured stable money circulation in the real sector with a money circulation velocity of 4 and an NBU interest rate of 8%

Keywords:economy, monetary security, credit, credit multiplier, market, demand, supply, labor, capital, money, reproduction, investment, depreciation, inflation, crisis

JEL: E22, G32, G34

Dunaev B. . Using of banking instruments for economic growth / B. Dunaev , V. Berezovyk // Наукові праці НДФІ. - 2024. - № 1. - C. 67-80.

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