The conceptual framework of the impact of money supply on economic growth

Nadezhda Palesheva,Natalia Sergievskaya,Andrew Prorokov

doi:10.1051/matecconf/201710608077

Abstract

Lately, in political and economic circles, a fierce debate on the need for additional monetary emission in Russia. The debate continues to this day. A number of economists and entrepreneurs are convinced of the need for cash injection into our economy to stimulate economic growth. They claim that lack of money hinders economic growth, because the lack of financial resources is hampering investment. At the same time criticized the Central Bank for a set them high key interest rate today at 10 %, which hampers not only investment in the real sector of the economy, but the current actual production. After all, profitability in most sectors of the real economy below 10%. Other economists, including the Government of the Russian Federation and the Central Bank of the country, hold the opposite point of view. They believe high inflation is the main constraining economic growth factor. According to them, only after a drop in inflation, the Russian economy will be able to start growth, and additional money creation will only fuel inflation. Therefore, the first step is to suppress the rising prices, lowering inflation to 4% per annum. In this direction and concentrated all the efforts of the monetary authorities, which are primarily in the key interest rate and limit the supply of money. Of course, the dispute about such issues as stimulating economic growth by an additional cash infusion, should be resolved through analysis of the theoretical foundations and the empirical data obtained in practice, as in Russia and other countries of the world.

Highlights

This paper discusses the relationship of three important macroeconomic indicators: gross domestic product, which reflects the economic growth; the money supply in the form of M2; inflation
In the absence of money in the economy, their only source may be the issue of money by banks who have narrowed them to the state
Today it is believed that due to Keynesian management techniques, the United States managed to recover from the great depression of 1929 – 1933, and in 1950 – 1960 years, the Western countries to overcome the consequences of the Second World war and to provide a stable and longstanding economic growth

Summary

Introduction

This paper discusses the relationship of three important macroeconomic indicators: gross domestic product (abbreviated GDP), which reflects the economic growth; the money supply in the form of M2; inflation. For the purposes of comparative and structural analysis, summarizing the various characteristics of the socio-economic situation over a period of time calculated nominal gross domestic product - GDP in current prices of the period under review. For analysis of change in gross domestic product over a certain period (first - year) calculated the rate of real GDP. At this rate, real GDP relative to the. For analysis and forecasting of macroeconomic processes over an extended period in this paper we used time series of real GDP in constant prices of the base period (year)

Methods

Results

Discussion

Сonclusions