Bazilinska Olena Economics
National University “
candidate of economics
sciences,
associate professor of finance
associate professor of finance;
The influence of
different types of monetary and budgetary policies on basic macroeconomic
indexes
The modern state of economy in
On definite stages of
For appraisement of influence of combinations of different types of
budgetary and monetary policies on the economic development let's construct the
simple model, which will prove the strength of influence of imprint parameters
of these policies on major macroeconomic indexes, that characterize
macroeconomic stability and the economic development.
Such indexes are:
l
for monetary policy- volumes and
rates of money mass accretion;
l
for budgetary policy- contracted
budget deficit, which is expressed in ratio of budget deficit to GNP (in
percents).
For determination of inflation the prices of industrial output producers
are used, as the change of consumer prices not always adequately depicts the
prices processes in the economy because of the significant share of consumer
goods in consumption sector as well as presence of administratively controlled
prices, for the period from 1992 to 2006.
So, the model consists of two
equations and has such appearance:
(1)
and
(2)
where 
- GNP volumes, mln. of grn.;
- money mass volumes, mln. of grn.;
- share of contracted budget deficit in GNP, %;
- index of producers prices;
- rates of money mass accretion, %.
The direct appraisement of equations parameters caused such results:
(
= 0,97, DW =
1,85) (3)
(6, 49)
(5,19) (-4,13) ( t- statistics)
and
( = 0,96, DW = 2,27) (4)
(0,85) (16,91)
(2,65) ( t-
statistics)
Both equations have high statistic appraisals, which exceed critical
meanings, so the designed model is of high quality. The meaning of Darbin and Watson statistics shows the absence of
autocorrelation between the remainders.
The analysis of model indexes shows that it is in general corresponding
to ideas of the economic theory concerning the influence of co-ordination of
budgetary and monetary policies on the economic processes in
According to this theory, the significant volumes of budget deficit lead
to GNP decrease and inflation increase [4], that was observed at the beginning
of 90-s, and the money mass increase, from one side is favorable to inflation
increase (when its proposition is higher than demand), and from the other side-
for GNP increase, when the increase of money proposition conforms to money
demand. According to foregoing estimations, the influence of monetary factor on
major indexes is not significant. The influence of budgetary factor on both
major indexes is rather significant.
The autonomic level of inflation is of extremely high value, that may be
interpreted as constant presence of inflation expectations in the economy as a
result of significant inflation level at the beginning of the 90-s.The action
of other factors influences the autonomic inflation level, among them are structural changes in the economy, prices liberalization etc.
It is necessary to mention that the model contains too short data row in
order to formulate any reliable conclusions, is rather simplified and does not take into account other factors and does not give the answer on the question, what is the critical budget deficit level, after which it influences on
the economic growth of Ukraine not in positive but in negative way.
For more precise appraisement of
influence of monetary and budgetary policies on major macroeconomic indexes we
should look at the period of stabilization (1996-2006) that
eliminates in large measure the action of foregoing
factors. In this case the appraisement of model indexes
has such appearance:
(
= 0,98, DW = 2,1) (5)
(9,57) (4,36) (7,87) (t-
statistics)
and
( = 0,96, DW
= 2,27)
(6)
(23,08) (10,25)
(-1,98) (t - statistics)
As we see, all the statistical characteristics are
optimum and show that the model is qualitative.
From the equation 5 we see that:
1.
The influence of money mass volumes on state's GNP has changed
radically. The role of monetary factor in forming of GNP
has grown in several times. But, the connection of this factor to GNP can be
even reverse as a result of money proposition increase in answer on demand increase because of GNP growth. In any
case the model shows that the extension of money
proposition, which is adequate to economic growth, is
necessary condition for provision of this growth.
2.
The autonomic factor is significant, as it shows the importance of other
reasons of GNP growth in
3.
The influence of budgetary factor has changed its direction from
negative to positive. This result is rather unexpected to
budget deficit and to some extent it is not corresponding
to our previous conclusion, that any budget deficit complicates
the task of maintenance of macroeconomic stability. But
the positive influence of budget deficit on GNP growth in
Let's analyze the equation 6:
1.
Not high level of autonomic (natural) inflation turns our attention. It
is nearly 6% that corresponds the expectations for transitional economy. As a
result of removal of such factors as structural changes in the economy, prices
liberalization, etc. the autonomic inflation level has stabilized.
2.
The influence of monetary factor on the inflation is not significant.
But the action of this factor decreased in more than 10 times.
3.
We observe the positive sign before the budget deficit index. It is so,
because during the stabilization period the decrease of the budget deficit
level began. Besides, it was financed not directly by emissive costs of the
National Bank of
The foregoing model has the same disadvantages, as the previous one, and
also does not answer the question, what level of budget deficit can be
economically safe. Taking into account the fact that the qualities of the model
have changed for budget deficit as well as GNP because of withdrawal during the
period of 1992-1995, and during 1995-2006 budget deficit on the average stayed
under 2% of GNP (when the average meaning during 1992-1995 was 9,3%), we can
suppose, that the economically safe budget deficit level, after which negative
consequences for the economic growth are possible, should be under 2% of GNP.
But apart from the deficit level itself, the question of sources of its
crediting is also important- this deficit may be economically safe only on
condition that crediting is held corresponding to market methods, through the
borrowing, while even indirect mainly emission crediting of budget deficit on
the theoretically safe level, will undoubtedly cause negative macroeconomic
results.
So, from the equations 3 and 4 we can conclude that at a high level of
budget deficit the opportunities of monetary policy in preservation of
macroeconomic stability (struggle with the inflation) are rather limited, and
its influence on GNP- is at all minimal. But, the analysis of indexes according
to the equations 5 and 6 shows that the positive influence of monetary policy
on macroeconomic processes increases while
conducting healthy budgetary policy and keeping of budget deficit level
and sources of its crediting in economically safe boundaries.
According to the results of conducted analysis of state of monetary and
budgetary co-ordination in
1.
In long-term perspective fixing of rules and principles is expedient, as
they determine for long period the basic parameters of monetary and budgetary
policies that do not contradict to each other, and reduce the necessity of
interaction in trivial questions.
2.
For total transition to co-ordination on the basis of long-term rules
and principles and taking into account the negative influence on the economy of
significant budget deficit (above 2% of GNP), it is expediently to predict the
presence of long-term principles for budgetary policy.
It is expedient for it to predict the establishment of constraint of
deficit level in national management sector in the Budgetary code of
3.
In short-term perspective it is expedient to preserve the practice
of
determination of the main goal of monetary policy with pointing
indicative character of other indexes that characterize monetary policy. But
herewith the main goal of
monetary policy should be considered as the goal index button prognoses. Herewith
it is inexpedient to give officially the prognoses of other indexes, that
characterize the state of monetary policy (exchange, money aggregates), because
it may be interpreted as definite obligations of the National bank of
4.
To realize the policy of re-orientation
on realization of internal borrowings (at the expense of national investors)
instead of conducting of engagement on the external capital market. Though, at
first sight, it may lead to definite increase of costs in attendance of state's
debts, in fact in long-term perspective it will have significant profit for the
parliament as well as the National bank.
5.
With the aim of the development of
state's shares and stocks market (mainly secondary) it is expedient to create
the institution of primary producers. It will be favorable for liquidity
increase of the market and it will guarantee timely and complete disposition of
shares and stocks by the state in the market. It will provide the opportunity
to realize buying or sale of state's shares and stocks for other subjects in
the organized secondary market at any time at a moderate price.
6.
It would be expedient to conduct
organization of parliament debts before the National bank (restructured debts
in credits of the National bank, which it has got for crediting of State's
budget deficit in Ukraine in 1994-1996) on market compacts and to follow the
compact of conducting payments as well as the compacts and terms of reckoning
the sums of excelling of income over the payments of the National bank, that
will be favorable for increase of trust of market to state shares and stocks
and it will expand the reckoning of National bank's tools for usage while
conducting monetary policy.
So, the considerate combination of monetary
and budgetary policies of
1.
Yuhimenko P. Monetary policy and structured reforms in the
economy of
2. The economy of
3.
Galchinskiy A. S. Macroeconomic and monetary premises of increase
policy.// Herald
of NBU.- 2004.- ¹8.- p.6-8.
4. Mankiv, Gregory N. Macroeconomics/ Trans. from eng.; ed.
trans. of S. Panchishin.- K.: Basis,
2000.- 588p.