Analysis of the relationship between issuing money, inflation and economic growth with the help of the SMR-model

Abstract

A model of the shifting mode of reproduction (SMR-4), considering inflation as an endogenous phenomenon, has been built. A new approach to explaining the non-neutrality of money in the short and long term has been proposed. Scenario calculations were performed using the SMR-4 model. The main theoretical result: it is shown that the well-known position on the neutrality of money in the long term is only a special case of the economy’s response to issuing money. Depending on the income indexation coefficient (w), issuing money in the long run can generate growth without inflation, can generate both growth and inflation at the same time, finally, it can lead to inflation against the background of a recession (stagflation). Using the SMR-4 model, it is shown that the preservation of restrictive monetary policy in Russia for the period up to 2022 can be explained by the overestimated level of the coefficient w. The latter reflects the state of the basic institutions of the economy. The higher it is, the less developed they are. The increased w index indicates a situation where capital owners spend their income on anything but investment in domestic fixed capital. Some measures have been proposed to change this situation.