Salary 

The speed of circulation of money lies in the intensity of its movement. To correctly analyze the speed of money turnover, you need to pay attention to some of the nuances of this concept in the modern financial sphere. Along with this term, the closely associated term “money supply” is used. In this context, money is viewed as a means to achieve certain goals. This indicator measures the number of transactions. Accordingly, in these transactions the immediate operating unit is money. The time period must be at least a year. A high rate of cash turnover is an indicator of relatively rapid expenditure of funds and high market conditions (market activity). Also, the high circulation speed reduces the need for additional emission (printing new money). But there is also a negative reason for the high speed of money turnover - distrust in the national currency and the rapid desire of market participants to get rid of it. The slow circulation of the money supply indicates a low coefficient of placement of the national product. But there may also be a positive reason for the slow turnover of funds - this is the desire of market participants to save the money supply in long-term bank deposits. Which in turn is caused by confidence in the national currency and its value. The amount of money supply is inversely proportional to money circulation. Below the formula, methods for adjusting the speed of cash turnover will be discussed. With the development of economic progress thanks to electronic payments, the speed of money circulation has become more stable than before. The goods were always tied to money, and the distance of the same trade routes was relative. For example, merchant ships, with a good tailwind, could cover a distance in a week that would take months to sail under normal weather conditions. On land, war and weather conditions were also often obstacles. In those days, indicators of the rate of turnover of the money supply fluctuated much more often. There are facts in history when, after trading in ports, entire cities were left without cash coins. There was nowhere to borrow them at any interest rate.

The concept of money circulation implies the number of turnovers of the entire mass of monetary resources per year. This value is often calculated indirectly: the total number of transactions divided by the volume of money supply in circulation. To determine the speed in government monetary circulation, you will need the following formula:

1. Number of Turnovers created by money circulation:
   • KO = GDP / M (Money supply);
2. average duration of money supply turnover:
   • PO = M: GDP / D (Calendar days);
3. the obtained indicators are proportional:
   • KO = D/PO or PO = D/KO.

In the speed of circulation of money, one can highlight its main indicators. This group includes:

1. The speed of national currency turnover in the cash desks of central banks.
2. The speed of flow of cash in circulation.

The first indicator comes from the ratio:

• amounts received at the cash desks of the country's main bank;
• funds in current bank accounts;
• average indicator for the year for cash flows that are in circulation.

The second indicator displays the values ​​of cash flows, which correlate with each other:

• A) the amount of money issued through central cash desks;
• B) the average annual mass of monetary resources in cash circulation.

Of course, such an indicator as the speed of circulation of money is carefully controlled at the state level. After all, this parameter predetermines the financial capabilities of a particular state. Without indicators of the speed of payment flows and money, it is impossible to make any preliminary financial calculations for the future development of the state. When calculating the speed of circulation of the national currency, we must not forget that this is an average indicator. This means that some deviations are possible, but minor. Another important point: the money turnover rate shows the number of times per year that a monetary unit is used to purchase goods or services. This parameter is in some way indicative of obtaining a real picture of the “solvency” of the population. In other words, the velocity of money flow refers to the frequency of use of a specific monetary unit per year.

Regulation and control over the speed of cash turnover

The speed of money circulation is regulated in the following ways:

• analysis and accounting of the banking sector;
• regular control of cash flows;
• reserve funds of banknotes and coins are created;
• implementation of rules for storage, transportation and collection of national currency;
• Banknotes are regularly replaced and destroyed;
• rules for cash transactions are determined and introduced.

The issue of money, as well as the reverse process - the withdrawal of currency from circulation - is subject to state regulation. The entire monetary policy of any country is subordinated to this area. Regulation is carried out in accordance with state banking legislation. The speed of money turnover is directly related to the banking sector. These include:

• state banks;
• territorial branches of central banks;
• commercial banks of the state and foreign investors.

To simplify control over the speed of turnover of the national currency, territorial cash settlement centers are being created. They combine in their structure working cash registers and reserve funds with a reserve of banknotes and coins, which are not yet put into circulation, but only as needed. The cash desks accept and issue cash. There is a certain limit for currency balances. If the limit is too high, the surplus goes to the reserve fund. These funds are no longer in circulation.

Non-cash transfers – high-speed turnover of national currency

Today, an important role is played by the control and regulation of non-cash cash flows, which significantly increase the circulation speed of the national currency. When transferring funds from an account of one bank to accounts in another bank, transactions go through interbank intermediaries - Cash Settlement Centers. All RCCs are structural divisions of the state central bank. To transfer non-cash national currency, different forms are used:

• money orders;
• payment requirements;
• letters of credit;
• checks;
• collection operations.

Preferences for choosing forms for non-cash transfers are determined depending on the general economic situation in the state:

• inflation;
• nature of payment;
• financial reputation of counterparties.

The largest flow of non-cash transfers goes through:

• between organizations;
• enterprises and banks;
• government organizations and budgetary structures;
• between all types of organizations and the population.

It is prohibited to issue non-cash monetary forms. But it is important to understand that cash and non-cash funds are strongly interconnected. Any non-cash transaction begins with the deposit of cash into a bank account. Afterwards they appear on the credit accounts of counterparties, who can withdraw non-cash money through banks. For non-cash transactions, money is used exclusively in national currency. Non-cash transactions in foreign currency within the state are strictly prohibited, for obvious reasons.

The Euro currency was invented to make the money turnover of the rich look several times more modest.

The higher the velocity of money circulation, the higher the inflation. If in 1990 the value of this indicator was approximately 1.5, then there was a rapid increase in the velocity of money circulation - to 4.5 in 1994, 8.0 in 1995 and 7.0 in 1997. After August 1998 There was also an acceleration of money circulation.
Thus, when setting the task of remonetizing the economy, its solution must include the creation of an anti-inflationary protection block, which would include measures aimed, on the one hand, at reducing the share of M0 in M2, and on the other, would lead to a reduction in the velocity of circulation of money.
As for reducing the share of cash in the total money supply, this problem can be solved, for example, by the following measures:
prohibition of the use of cash in circulation between enterprises and stimulation of non-cash payments in the national economy;
strengthening the targeted nature of wage payments and social payments, excluding their preliminary entry into the financial or foreign exchange market;
the passage of budget funds to their recipients and taxes to the budget through the treasury system;
the use of special accounts (checks) for highly paid employees in relation to part of their income, which can only be used for the purchase of domestically produced durable goods, payment for housing and communal services, housing and dacha construction, etc. or investments in the banking system in the form of a deposit (gold certificate).
For the near future, it is unrealistic to set the task of significantly reducing the share of M0 in M2. Apparently, we can talk about achieving M0 equal to 34%-35%. This slight shift in the structure of the money supply reflects the features (and costs) of starting an economy based on expanding household consumer demand. Therefore, it is necessary to shift the center of gravity in anti-inflationary protection to reducing the velocity of money. To do this, we will first find out what factors in the transition economy of Russia caused a 5-6-fold increase in the value of this indicator in order to block their effect. In this regard, first of all, the role of two factors should be highlighted.
Firstly, this is an inflated profitability in the financial market, which accelerates the movement of money, or rather, leads to a massive flight of monetary capital from sectors of the real economy, depriving them of sufficient financial support. Therefore, the financial market should become the object of urgent and strict government regulation, aimed at a forced (albeit gradual) reduction in the profitability of instruments traded on it. The following measures should be provided:
a sharp reduction in yields on government securities, which is where a new policy for regulating the financial sector should begin. Income on government securities should not be higher than the average profitability established in the production sector (7% -8% per annum);
The Central Bank and the government should make a sharp reduction in the refinancing rate, abandoning the strict link to the inflation rate. In a crisis economy, inevitable losses and risks should be distributed evenly between financial and production agents. Therefore, the refinancing rate should immediately be sharply reduced to 20%-24%. Only in this case can we count on the availability of credit available to producers;
The reorientation of the financial and banking system towards credit and investment services for the real economy forces us to turn to the development of another effective measure: limiting the participation of banks in the purchase of shares of industrial enterprises. In this case, we can refer to the anti-crisis experience of the United States, when in 1933 President Roosevelt introduced a similar ban, which remains in place to this day;
To limit the movement of financial capital in the short term, which is especially dangerous for inflation, it is justified to use additional taxes in this area. This introduces another anti-inflationary anchor and ensures a surge of long-term capital investment in the economy;
The restrictions introduced on the financial market, leading to a large decrease in income there, will certainly result in the ruin of many commercial banks. By and large, this is not something to particularly regret, since a significant number of banks over the course of all these years have actually been parasitizing on public finances, often simply stealing them and taking them to other countries and offshore zones. Let us also add that financial and credit
The sphere, along with foreign economics, has become one of the main channels of “capital flight” from the country. Those commercial banks that have learned to work independently will survive, only it is advisable to help them. The remaining banks will most likely fail; they must pass into the hands of the state in order to create a network of 100-200 regional state-municipal commercial banks on their basis;
the reduction of available financial resources and the need to create a system of accessible credit for producers makes it advisable to return to the practice of a dosed (legally established) volume of financing budget expenditures through paid Central Bank loans with a preferential interest rate. It can be assumed that such credit resources should be used to organize the credit activities of the created network of state-municipal banks and with subsequent use for the development of the system of investment banks.
Secondly, the channel for fueling inflation through the acceleration of money circulation was the virtually free functioning of the foreign exchange market. In conditions of practically unlimited possibility of exchanging the ruble mass for foreign currency, the increase in money supply on the market contributed to increasing pressure on the ruble exchange rate. The previously existing currency corridor and the ultra-high yield of state bonds made it possible to temporarily keep it within certain limits, but, as it turned out, turning inflation into suppressed one. And as soon as this corridor was removed and the GKO pyramid collapsed, the accumulated speculative potential in the foreign exchange sphere exploded with an almost threefold fall in the ruble exchange rate followed by a subsequent jump in prices. The existing competition between the market for financial obligations and the foreign exchange market, from the point of view of the real economy, did not fundamentally improve the situation. After all, in both one and the other market, practically the same players participated, who at some stage received their profits in the financial market, and then moved to the foreign exchange market. Note that the policy of advanced internal convertibility of the ruble in a stagflationary economy was erroneous and should be assessed as premature (for example, in Germany the possibility of exchanging marks for foreign currency appeared only in the late 50s).
Therefore, in order to contain and muffle inflationary growth today, driven by an increase in the state’s monetary activity, it is necessary to break this inflationary chain. In this regard, we can refer to the experience of Malaysia, which, after the financial crisis in Asia (1997), relied on strict control over the flow of financial capital and over transactions with foreign currency. Such measures, while helping to curb inflation, simultaneously lay the groundwork for reducing interest rates on loans.
That is why, in order to reduce the speed of circulation of money and limit inflation, it is necessary to leave the foreign exchange market in the volume and those boundaries that are necessary to perform its main function - servicing export-import transactions. A set of measures should be provided to reduce as much as possible purely speculative demand for foreign currency. We present the following possible actions in the currency field:
in the conditions of abandoning the currency corridor and transition to a floating ruble exchange rate regime, the role of the Central Bank's exchange rate policy increases significantly. In order to still protect the ruble from purely speculative attacks, it is advisable
to gradually restore the expected boundaries of its fluctuations, but fixing their permissible sizes not around the dollar, but according to the ratios in the purchasing power parities of currencies. This will introduce a more reliable and accurate economic indicator into exchange rate policy;
It is possible that at the initial stage it will be necessary to use a double ruble exchange rate. One should operate within the limits of permissible fluctuations around the purchasing power parity of the ruble and serve the sphere of organized foreign economic activity, the other should be applied taking into account market conditions in other economic spheres (tourism, exchange transactions for the population, etc.);
To strengthen the ruble exchange rate, administrative measures should also be provided to limit speculation in the foreign exchange market (mandatory sale by exporters of most of the foreign exchange earnings as soon as possible, careful selection of banks operating in the foreign exchange market, additional taxation of foreign exchange transactions, etc.). In a critical situation, the most powerful and emergency measures are the introduction of a Central Bank monopoly on the import of foreign currency into the territory of the Russian Federation, as well as the restoration of a state monopoly on the export of raw materials and energy resources;
In order to weaken the interest of commercial banks in transactions with currency, it is advisable to establish for them a higher reserve rate for foreign currency accounts.
These are the possible logic of actions and individual measures designed to form a block of anti-inflationary protection. At the same time, we note that for the implementation of the policy of remonetization of the Russian economy, there is another scenario, different from the previously described. It is associated with the possibility of issuing special settlement money (non-cash ruble), through which the payment system could function, at least in the public sector. This option is an alternative to the first option and logically complements the idea of ​​separating the flows of budgetary and commercial money, restoring the Soviet experience of two-channel monetary circulation in a new form. In this case, it is planned to create a single settlement center that would perform the permanent function of ensuring non-cash mutual settlements, timely pay for government orders and allow mandatory payments to the budget. At the same time, the use of special settlement money should exclude their transfer into cash rubles and especially into foreign currency. One of the main objections to the advisability of using such money and the offset operation itself is that they do not allow for a strict monetary policy and impair the possibility of replenishing budget revenues with “real money”. It is also difficult to maintain the mutual impermeability of the two monetary channels, which weakens the effect of anti-inflationary protection. Such money itself is interpreted as “surrogate”, undermining the effectiveness of using legal banknotes issued by the Central Bank.
However, we note that the money supply in a normally functioning market economy is characterized by a complex composition to an even greater extent. It includes monetary aggregates with varying degrees of liquidity - from M0 to M3 and L. This actual variety of types of money gives the monetary system flexibility, while at the same time allowing for the expansion of the monetary base necessary for the normal operation of the economy with minimal consequences for strengthening
inflation trends. In particular, the monetary parameter L includes various types of treasury obligations, bills, bankers' acceptances, etc.
It can be considered that by the decision to abolish the use in 1998 of any forms of payment for payment of federal taxes, except cash, the government made a choice in favor of overcoming the crisis of non-payments using the first option. As already noted, the choice itself is far from indisputable and this issue may still have to be addressed. Therefore, the option of introducing a parallel monetary unit of account (non-cash ruble) should not be excluded altogether, considering it as a backup.
So, the economic arsenal has ways to curb inflation even with a more active monetary policy. At the same time, the most dangerous thing is not the mechanism of money emission itself, especially if it is necessary for the normal functioning of the economy, but what purposes and how additional portions of money are used. By reducing the velocity of money circulation (up to 5.5-6 revolutions per year), if it is ensured by a reliable regime of isolating the growing supply of money from the financial and monetary sphere, it becomes possible to keep inflation at a relatively acceptable level (up to 50% per year) and at the same time overcome the catastrophic shortage of credit resources in the real sector of the Russian economy. This means that with this development of events there is a real chance to launch economic growth. Table 2 shows the main macroeconomic parameters under the inertial development scenario, which, apparently, was the focus of the activities of the Primakov government, and under the anti-crisis development program.
table 2
Macroeconomic parameters under inertial and anti-crisis options for conducting economic policy Indicators for 1998 - assessment of 1999 - inertial version of 1999 - anti-crisis GDP (in % of the previous year) 94-95 97-92 102-104 Inflation (in % of the previous year) 180-185 130 150 M2 - billion rubles . 370 460 790-840 M0 - billion rubles. 155 180 285-300 M2: GDP in % 10-10.5 12-12.5 19-21 Cash income of the population (in % of the previous year) 120-125 150-160 …

Ministry of Agriculture of the Russian Federation

Federal State Educational Institution of Higher Professional Education Ural State Agricultural Academy

Finance Department

Department of Finance and Credit

Course work

Discipline: Money. Credit. Banks.

On the topic: “Money supply and velocity of money circulation”

Executor:

Burlakova I. Yu.

Student FK-311

Supervisor:

Bashkirtsev I. A.

Ekaterinburg, 2008

Introduction........................................................ ........................................................ ...............3

Chapter 1. Money circulation

1.1 The concept of money circulation.................................................... .........................4

1.2 The law of monetary circulation.................................................... ..............................8

1.3 Velocity of money circulation.................................................... ..............................12

Chapter 2. The concept of money supply.................................................... ...........................17

Chapter 3. Money supply of Russia.................................................... ...............................21

Conclusion................................................. ........................................................ .........25

Bibliography............................................... .......................27

Introduction

Money is an integral and essential part of the financial system of every country.

The importance of monetary circulation problems increases at critical stages of historical development, as evidenced by the experience of modern Russia.

The modern monetary policy of Russia has a short period of formation and, accordingly, experience in achieving its goals. The difficulties of its implementation are associated with the underdevelopment of market-type monetary and financial relations, as well as the difficult state of the economy.

Stabilization of monetary circulation is an important prerequisite for normalizing the economic situation, ensuring the market and creating conditions for economic growth. The breakdown of monetary relations and significant inflation lead to the undermining of market mechanisms, a drop in production, and the threat of destruction of the socio-economic system. Studying the features of these processes is especially relevant for the economy of today's Russia.

In market conditions, issues of clear organization of monetary settlements become particularly relevant, since the monetary stage of capital circulation plays a huge role in the activities of economic entities. The importance of a clearly organized system of non-cash payments increases many times over in the context of the need to overcome the non-payment crisis, when mutual debt and delayed payments at any one link affect the most important indicators of their production and commercial activities.

The course work is devoted to the topic of money circulation.

Chapter 1. Money circulation

1.1 The concept of money circulation

Money turnover- this is the movement of money when they perform their functions in cash and non-cash forms, serving the sale of goods, as well as non-commodity payments and settlements in the household. The objective basis of money circulation is commodity production, in which the commodity world is divided into goods and money, giving rise to contradictions between them. With the deepening of the social division of labor and the formation of national and world markets under capitalism, money circulation receives further development. It serves the circulation and circulation of capital, mediates the circulation and exchange of the entire total social product, including the income of various classes. With the help of money in cash and non-cash forms, the process of circulation of goods, as well as the movement of loan and fictitious capital, is carried out.

Money circulation is divided into cash and non-cash. Cash and non-cash forms of monetary payments of economic entities can function only in organic unity. There is a close and mutual dependence between them: money constantly moves from one sphere of circulation to another, changing the form of cash banknotes to a deposit in a bank, and vice versa. Receipts of non-cash funds into bank accounts are an indispensable condition for the issuance of money. Therefore, non-cash payment circulation is inseparable from the circulation of cash and together with it forms a single monetary circulation of the country, in which single money of the same name circulates.

Cash circulation is the movement of cash, serving mainly retail trade turnover. The means of circulation and payment in this case are real banknotes transferred by one entity to another for goods, works and services or in other cases provided for by law. It is served by banknotes, small change and paper money (treasury notes). In developed capitalist countries, banknotes issued by the central bank make up the overwhelming majority of cash circulation. A small part of the issue of money (about 10%) is accounted for by treasuries, which issue mainly coins and small-denominated banknotes - treasury notes.

A country's cash turnover is a part of money turnover equal to the sum of all payments made in cash over a certain period of time. This turnover is mainly associated with the receipt of cash income of the population and its expenditure.

Cash circulation is an unusually expensive thing and places a huge burden on the entire economy. The costs of the national economy associated with cash circulation amount to several percent of the total gross product.

The scope of use of cash is mainly related to the income and expenses of the population:

· settlements between the population and retail and public catering enterprises;

· remuneration of labor by enterprises and organizations, payment of other monetary income;

· contribution of money by the population to deposits and receipt of deposits;

· payment of pensions, benefits and scholarships, insurance compensation under insurance contracts;

· issuance of consumer loans by credit institutions;

· payment for securities and payment of income on them;

· payments by the population for housing and utilities;

· payment of taxes to the budget by the population, etc.

All over the world there is an intensive process of reducing cash circulation. Cash payments prevailed until the end of the 19th century. In modern conditions, the share of cash in the total amount of money, especially in industrialized countries, is small; for example, in the USA it is about 8%.

Non-cash circulation is the movement of money in non-cash circulation. They mean, first of all, bank deposits in customer accounts, the use of which is carried out using checks, credit cards, and electronic transfers. In money circulation, bills of exchange, certificates, and in a number of countries other obligations and requirements are also used.

Non-cash payments are payments made without the use of cash, through the transfer of funds to accounts in credit institutions and offsets of mutual claims. Non-cash payments are of great economic importance in accelerating the turnover of funds, reducing the cash required for circulation, and reducing distribution costs; organizing cash payments using non-cash money is much preferable to cash payments. The widespread use of non-cash payments is facilitated by an extensive network of banks, as well as the state’s interest in their development, both for the above reason and for the purpose of studying and regulating macroeconomic processes.

Differences in the organization of non-cash payments are due to the historical and economic development of individual countries. Thus, in the UK, earlier than in other countries, non-cash payments using bills and checks became widespread. Since 1775 Settlement and clearing houses arose here - special interbank organizations that carry out non-cash settlements on checks and other payment documents by offsetting mutual claims.

Commercial banks - members of the clearing house accept checks drawn on any bank or its branch for payment. All checks arrive at the clearing house, where they are sorted and cleared several times a day. Only the final balance of settlements is paid through accounts at the central bank. In a number of countries, the functions of clearing houses are performed by central banks. Clearing houses also exist at commodity and stock exchanges for the mutual offset of claims on transactions concluded here, which greatly simplifies and speeds up settlements.

In the USA, Canada, Great Britain, France, and Italy, the check settlement system has become widespread. In a number of countries of continental Europe (Austria, Belgium, Hungary, Germany, Holland, France, Italy, Switzerland), giro payments predominate - a type of non-cash payments, first through special giro banks, and then through commercial banks and savings banks. The essence of these calculations is the transfer of funds to special accounts based on instructions - orders of approval, i.e. written instructions on the transfer of funds from the payer's account to the recipient's account.

Settlement operations are among the most important banking operations. They include collection, transfer and letter of credit operations.

With the development and improvement of automation of banking operations since the mid-70s, developed countries began to use a system of electronic payments used for credit and payment transactions and monitoring the status of bank accounts through the transmission of electronic signals, without the participation of paper media. They help accelerate money turnover, improve credit and banking services for customers, and reduce costs associated with payment transactions.

Wire transfers are used to ensure the timely movement of funds from the sender of a money transfer to the recipient in wholesale payment transactions.

The electronic money transfer system currently operates automated banking machines that allow a bank client to independently connect to a banking computer and carry out the most common operations: receiving cash from an account, making a deposit, transferring funds across accounts, etc. Some banking machines are used only for cash dispensing money.

1.2 Law of money circulation

Commodity-money relations require a certain amount of money for circulation.

The law of monetary circulation, discovered by Karl Marx, establishes the amount of money needed to perform the functions of a medium of circulation and a means of payment.

The amount of money required to perform the functions of money as a medium of exchange depends on three factors:

Quantities of goods and services sold on the market (direct connection);

Level of prices of goods and tariffs (direct connection);

Velocity of money circulation (inverse relationship).

Weight factors are determined by production conditions. The more developed the social division of labor, the greater the volume of goods and services sold on the market; The higher the level of labor productivity, the lower the cost of goods and services and prices. The formula in this case is:

Sum of commodity prices

Average number of turnovers of the same monetary units (money circulation velocity)

With the advent of credit money, the law determining the amount of money in circulation takes on the following form:

The speed of circulation of money is determined by the number of revolutions of a monetary unit over a certain period, since the same money constantly changes hands over a certain period, serving the sale of goods and the provision of services.

During the functioning of gold money, its quantity was maintained at the required level spontaneously, since the function of the treasure acted as a regulator. This function established a relatively correct relationship between the money supply and the goods necessary for circulation. Extra money in circulation was eliminated; it went into treasure. With the growth of the commodity mass, money was returned from treasures.

With the advent of the function of money as a means of payment, the total quantity of money should decrease. Credit has the opposite effect on the amount of money. This reduction is caused by repayment through mutual offset of a certain part of debt claims and obligations. The amount of money for circulation and payment is determined by the following conditions:

The total volume of goods and services in circulation (direct relationship);

The level of commodity prices and tariffs for services (the relationship is direct, since the higher the prices, the more money is required);

The degree of development of non-cash payments (feedback);

The speed of circulation of money, including credit money (inverse relationship).

Thus, the law determining the amount of money in circulation takes on the following form.

	Sр.т.- Sк.т.+ Sд.п.- Sв.п.

Uk.d. - The amount of money needed as a medium of circulation and means of payment.

Sр.т. - The sum of prices of goods and services sold.

Sc.t. - The sum of the prices of goods sold on credit, the payment period for which has not arrived.

D.p. - Amount of payments on debt obligations

Sv.p. - Amount of mutually canceling payments

Zо.b. - Average number of turnovers of money both as a medium of exchange and as a means of payment

During metal circulation, the amount of money was spontaneously regulated by the function of the treasure, i.e. The money supply increased and decreased, freely adapting to the needs of commodity production, the amount of money was always maintained at the required level. This ensured the stability of money circulation.

In the absence of a gold standard, the law of paper money circulation began to operate, according to which the number of tokens of value was equated to the estimated amount of gold money required for circulation. In this situation, the stability of money was shaken, and its depreciation became possible.

Nowadays, in the conditions of demonetization of gold, i.e. loss of its monetary functions, the law of monetary circulation underwent modification. Now it is no longer possible to estimate the amount of money from the point of view of even an approximate calculation through gold. It has gone out of circulation and does not serve not only as a means of circulation and a means of payment, but also as a measure of value.

The measure of the value of goods and services has become money capital, which measures value not on the market during exchange by equating goods with money, but in the production process - goods with goods. Consequently, the amount of irredeemable credit money should be determined by the value of all valuables in the country through money capital. There is no spontaneous regulator of the total amount of money under the dominance of credit money. This implies the role of the state in regulating money circulation. The issue of credit money without taking into account the real value of goods produced and services provided in the country in the process of production, distribution and exchange will inevitably cause a surplus and ultimately lead to the depreciation of the monetary unit. The main condition for the stability of the country's monetary unit is the correspondence of the economy's need for money to its actual receipt in cash and non-cash circulation. In conditions of paper money circulation, the role of regulator of money circulation belongs to the state.

The differences between non-cash monetary payments and non-cash turnover, which is accomplished through the transfer of securities, are also manifested in the fact that the money supply in circulation does not include securities.

The money supply is a set of purchasing, payment and accumulated funds that serve economic relations and belong to individuals and legal entities, as well as the state.

The money supply in circulation is characterized by the value of the monetary aggregate M 2, which includes cash in circulation M 0 (the amount of cash in circulation outside banks, i.e. minus balances in bank cash desks, as well as balances in national currency at settlement , current accounts and deposits of non-financial enterprises, organizations and individuals who are residents of the Russian Federation. This aggregate does not include deposits in foreign currency).

Relatively recently, in the Russian Federation, to characterize the value of the money supply, the M 2 X indicator began to be used, which, in addition to the M 2 value, also includes all types of deposits in foreign currency (in ruble equivalent - X). In this case, to characterize the relative supply of money supply, the coefficient K 2 = M 2 X / GDP is used. The value of this coefficient (K 2) is intended to characterize the relative provision of turnover with means of payment. In the Russian Federation, the value of K2 in 1995 was 0.16, while in other (developed) countries its value reaches 0.6-1.0. This indicates a relatively low supply of means of payment in the Russian Federation, which is indirectly manifested in the growth of non-payments in the economy, delays in the payment of wages and pensions.

The total volume of money supply, including its growth, is largely determined by the increase in the absolute size of bank loans. From this side, the value of the money supply in circulation is the result of monetary policy.

In the Russian Federation, the structure of the money supply is characterized by a relatively large share of cash, which in certain periods reaches 35% of its total volume, which is much more than in developed countries. Therefore, as non-cash payments develop, the structure of the money supply will improve in the direction of reducing the share of cash and increasing the share of money in non-cash circulation.

To characterize the volume and components of the money supply in the Russian Federation, we present the following data.

These data confirm the relatively large share of cash in the total money supply, exceeding 37% by July 1, 1997. At the same time, the data presented characterize the presence of significant savings reserves by replacing cash turnover with non-cash payments.

The transition of money from non-cash circulation to cash causes a shortage of cash in the country; leads to the emergence of a shadow economy; promotes tax evasion by enterprises; indicates a decrease in the state’s ability to influence real economic processes.

The money supply is influenced by two factors: the amount of money in circulation and the speed of its turnover. The amount of money in circulation is determined by the state, based on the needs of commodity circulation and the Federal budget deficit. The speed of circulation of money is influenced by the duration of technological processes (heavy or light industry), the structure of payment turnover (the ratio of cash and non-cash money), the level of development of credit operations and mutual settlements, the level of interest rates for loans, and the use of electronic technologies in banking.

1.3 Velocity of money

Monetary units can be used again and again in a circular flow of income. The more often money is used for payments in a given period - the faster the money “turns around” - the smaller the required volume of money supply for a given volume of real income at a fixed price level. The rate of turnover of cash reserves is called the rate of circulation of money income because it equals the rate at which money is spent on goods and services within a given period of time. Hence, velocity of money is an indicator of the frequency with which the average unit of a national currency is used to carry out transactions during a given period of time. The speed of circulation of money mainly depends on the accepted customs of payment. In our society, for example, workers are paid weekly, every two weeks, or monthly, rather than daily or once a year. The frequency of receiving wages and salaries appears to influence the amount of money workers retain from one payday to the next; their average cash savings will decrease as the frequency of wages increases and vice versa. This inverse relationship between average savings and frequency of receipts is also true for other sources of family income, as well as for the income of entrepreneurial firms.

Thus, for a given level of income, the lower the average monetary savings of different economic units of the economy, the greater will be the rate of accumulation of money and vice versa. The average amount of cash savings, and, consequently, the rate of turnover of cash reserves is determined mainly by the generally accepted scheme of receipts and payments. True, some other economic variables also have an undeniable influence on the average amount of cash in families and business firms. The income and welfare of business units have the following impact: cash reserves tend to increase as income and general welfare increase. Interest rates also affect money holdings (and therefore the velocity of money). The higher the interest rates, the more unused cash is generated, and vice versa. Thus, we can expect the velocity of circulation to increase (average holdings of cash will decrease) as interest rates increase and decrease as interest rates decrease. However, the value of the so-called interest elasticity of demand for money (the degree of sensitivity of the desired amount of average cash savings to changes in interest rates) is problematic. Another significant factor related to people's choice of how much cash to hold on hand is expectations of upcoming economic events. For example, if high inflation is expected, the population holds less cash because... their purchasing power decreases as prices rise. On the other hand, expectations of lower prices and/or employment leads to a desire to increase monetary savings. Expectations related to upcoming interest rates may also have an impact on cash holdings. When interest rates are expected to rise, the public may hold off on deposits until higher rates are announced and therefore hold more cash.

Money is in constant movement between three entities: individuals, business entities and government bodies. The movement of money when they perform their functions in cash and non-cash forms constitutes monetary circulation.

The social division of labor and the development of commodity production are the objective basis of money circulation. Money serves the exchange of the total social product, including the circulation of capital, the circulation of goods and the provision of services, the movement of loan and fictitious capital and income of various social groups.

The beginning of the movement of money is preceded by its concentration among subjects. They are concentrated in the wallets of the population, in the cash registers of legal entities, in accounts in credit institutions, and in the state treasury. For the movement of money to arise, there must be a need for money on one of the two sides. The demand for money arises when carrying out transactions; money is needed for circulation and payments for goods and services. Their volume is determined by nominal gross domestic product. The greater the total monetary value of goods and services, the more money is required to complete transactions. There is also a demand for money for accumulation, which comes in various forms: deposits in credit institutions, securities, official government reserves.

The number of banknotes required for circulation is determined by the law of monetary circulation. All monetary circulation of countries is subject to this formula, also known as the equation of exchange. This equation expresses the rate of money turnover:

M*V = P*Q V = (P*Q)/M

V– speed of money turnover

M- amount of money

P– prices

Q– the size of all goods

The money turnover rate characterizes the speed at which money circulates in the economy, i.e. how many times over a certain period of time the ruble changes hands.

Suppose, for example, that in a given year 60 loaves of bread are sold at a price of 5 rubles per loaf. Then Q equals 60 loaves per year, and P equals 5 rubles. The total number of rubles involved in transactions is equal to:

РQ = 5 rubles/per loaf * 60 loaves/per year = 300 rubles per year.

Calculating the right side of the equation of the quantitative theory of money allows us to obtain the monetary value of the sum of all transactions made during the year, equal to 300 rubles per year.

Let us now assume that the total circulation in the economy is 100 rubles. In this case, we can calculate the velocity of money as follows:

V = (P*Q)/M = (300 rubles per year)/(100 rubles) = 3 times a year.

This means that in order for transactions worth 300 rubles to be completed in a year in an economy where 100 rubles circulate, it is necessary for each ruble to change hands three times in a year.

The speed of circulation of money is influenced by general economic factors, i.e. cyclical development of production, its growth rate, price movements, as well as monetary factors, i.e. the structure of payment turnover (the ratio of cash and non-cash money), the development of credit operations and mutual settlements, the level of interest rates for loans in the money market, as well as the introduction of computers for transactions in credit institutions and the use of electronic money in settlements. (non-cash money circulation). In addition to these general factors, the speed of circulation of money depends on the frequency of income payments, the uniformity of the population’s spending of their funds, the level of savings (money lying at home with consumers cannot service the turnover) and accumulation, etc.

Let's consider an example of the dependence of the speed of money turnover on the frequency (periodicity) of payment of income (wages, rent, interest and profit): if a salary of, for example, 100 rubles a month is paid to employees once a month, then 100 rubles are needed to service this transaction. If you pay it twice a month (that is, in two installments) of 50 rubles, then for this you may only need 50 rubles - pay at the beginning of the month, and then with the same 50 rubles (which the employee will spend for the month) - in the middle of the month . Thus, the more frequently wages are paid, the less money may be required to secure the transaction.

Or, for example, on the rate of economic growth. The higher it is, the less money is required in quantitative terms. Let's assume that you need to gradually spend 1000 rubles per month. Let spending be made twice a month and the velocity of circulation of the monetary unit will also be equal to a month. Thus, having spent 500 units at the beginning of the month, you will need another 500 units in the middle of the month to make the next expenses, since the 500 units spent earlier will only be returned in the next month. So you need to have 1000 units available. Now imagine that the speed of circulation of money in the economy has increased and is half a month. Now, having spent 500 units at the beginning of the month, by the middle of the month you again receive 500 units, which managed to turn around and returned to your system. You can make your second planned expenses for the same 500 units with which you carried out the operation at the beginning of the month. Thus, for the same amount of expenses you no longer need 1000, but only 500 units.

Chapter 2. The concept of money supply

One of the main guidelines of monetary policy is the money supply. It is this parameter of monetary circulation that influences economic growth, price dynamics, employment, and the smooth functioning of the payment and settlement system.

Money supply represents the total volume of cash and non-cash money.

Composition and structure of the money supply:

To measure the amount of money, special indicators are used - monetary aggregates, which are approved by law.

A monetary aggregate is a specific grouping of liquid assets that serve as measures of the money supply.

Different countries use different monetary aggregates, from the narrowest (“money base”) in Switzerland to the broad liquidity measure in the UK and “total credit” in Italy. Taking into account the experience of foreign countries, the Central Bank of the Russian Federation carries out calculations of the following monetary aggregates:

M0 – cash in circulation;

M1 = M0 + funds in settlement, current and special accounts of legal entities, funds of insurance companies, demand deposits of the population in banks;

M2 = M1 + time deposits of the population in Sberbank;

M3 = M2 + certificates and government bonds.

Equilibrium occurs when M 2 >M 1, strengthens when M 2 +M 3 >M 1.

The composition of monetary aggregates varies from country to country. Thus, in France there are 2 monetary aggregates, in the USA - 4, in Japan and Germany 3, and in England there are five monetary aggregates.

Currently, the monetary base indicator is used to characterize the money supply. It includes the M0 aggregate + cash in the cash desks of commercial banks, required reserves of banks in the Bank of Russia and funds in correspondent accounts of commercial banks in the Bank of Russia, thus, the monetary base is essentially equal to the M2 aggregate.

The money supply depends on two factors: the amount of money and the speed of its turnover

The circulation of money does not occur spontaneously - it is subject to certain laws. Their knowledge allows you to react more quickly to other changes, make appropriate corrective decisions and influence economic development in the most favorable way. These rules of circulation are called the laws of money circulation.

The basic law of monetary circulation, the formula of which was presented by K. Marx, connects prices, velocity of circulation and quantity of money:

However, it must be remembered that this formula is more valid for gold circulation. The fact is that when gold circulates as money, due to limited gold reserves, the relationship between the amount of gold (coins) and goods is established spontaneously, but relatively accurately: excess money is withdrawn from circulation and goes into the sphere of accumulation (treasures), and if there is a shortage the withdrawn part of the coins is returned to circulation.

When credit money appears, as mentioned above, a practically unsecured emission occurs, i.e. the amount of money can be arbitrarily large. In this case, inflation is inevitable, i.e. depreciation of money due to its increased quantity. In this case, it is necessary to track that part of monetary obligations that can be mutually repaid without additional issue. The above equation becomes:

where CD is the amount of money needed as means of circulation and payment;

SP – the sum of prices of goods sold;

K – the amount of goods and services sold on credit, the payment terms for which have not yet arrived;

P – amount of payments on debt obligations;

VP – the amount of mutually canceling payments;

O is the average number of turnovers of money as a means of payment and medium of exchange.

Irreplaceable credit money, acquiring the features of paper money, is introduced by the state authorities, which endows them with a forced exchange rate. Their emission Without taking into account the cost of goods produced and services provided in the country will inevitably cause their surplus and ultimately lead to depreciation.

In this regard, the question of the need to determine the required amount of money for circulation becomes of great importance. According to the classical theory of A. Marshall and I. Fisher, the amount of money is determined by the dependence of the price level on the money supply:

where M is the mass of money;

P – price of the product;

Y – velocity of money circulation;

Q – the number of goods presented on the market.

The velocity of circulation of money is an indicator of the intensification of the movement of money when functioning as a means of circulation and a means of payment and represents the number of turnovers of the money supply per year, where each turnover serves the expenditure of income.

This indicator is difficult to quantify, so indirect data is used to calculate it.

In most foreign countries, two indicators are usually calculated:

An indicator of speed in the circulation of income: it is calculated as the ratio of gross national product (GNP) or national income to aggregates M1 or M2. the dynamics of the calculated value shows the relationship between money circulation and economic development processes;

The money turnover indicator in payment circulation is defined as the ratio of the amount of money in bank accounts to the average annual money supply in circulation. This indicator determines the speed of non-cash payments.

Chapter 3. Money supply of Russia

An important problem of monetary policy is determining the amount of money needed in circulation, for which the indicators “money supply” and “monetary base” are used.

The peculiarity of the structure of the money supply in Russia is primarily determined by the following points: a high share of cash, the need to take into account the currency circulating in the country, and the presence of various money surrogates. At the same time, the components of the Russian money supply are largely isolated, since their convertibility into each other is difficult, associated with additional costs and limited by legal norms.

As mentioned above, in Russia the money supply is currently characterized by the aggregates M0, M1, M2, and the monetary aggregate M2X is also used - “broad money”, which is equal to the sum of M2 and all types of deposits in foreign currency.

The use of monetary aggregates depends on the purpose for which they are calculated. If you need to determine the amount of money outside commercial banks, then use the indicator M0, to measure the number of means of payment - M1, to measure the function of money as a means of storage - M2.

In the Russian Federation, the M2 indicator for 1994-2002 increased from 33.2 to 2119.6 billion rubles, or 63.8 times (Table 1)

Indicators
Volume M2, total, billion rubles.
Share of cash, %
Share of non-cash funds, %

Table 1. Structure and dynamics of the money supply in the Russian Federation for 1994 - 2003. (as of January 1)

The monetization coefficient, defined as the ratio of the volume of M2 to GDP, decreased from 62.4 in 1990 to 13.8% in 2001. In the total amount of money, non-cash funds predominate, their share increased until 2000; in 1999, a trend towards an increase in the share of cash, which was a consequence of the financial crisis of 1998.

During the years of reforms in Russia, there was a significant change in the structure of the money supply - a sharp increase in the share of cash and a corresponding reduction in non-cash money. In countries with developed market economies, the share of cash in circulation does not exceed 15%. If on January 1, 1992, with the start of price release, cash in circulation outside banks amounted to 18% of the M2 money supply, then by January 1 - about 40%, decreasing to 36% by the end of 1996 and 1997, to 35%. at the end of April 1998, and then a sharp increase after August 17, 1998. In 1997 - 2001, the Russian economy was steadily saturated with money due to the payment of arrears of wages and pensions. This was manifested in a slowdown in the velocity of money circulation: by the beginning of October 2001, it dropped to 7.2 (GDP/M2) against 10.4 in 1995. In 2000-2001, the degree of monetization increased.

As of September 1, 1998, the money supply amounted to 343.6 billion rubles. against 384.5 billion rubles as of January 1 of the same year. Over the past 5 months. 1998, the money supply fell by almost 30% in real terms. The reduction of the M2 aggregate meant the transfer of money into foreign currency, as well as a significant withdrawal of deposits from banks, which was caused by the worsening of the financial crisis in August 1998.

In 1998, the growth of M2 was planned at 18-26%, the actual growth was for 9 months. 1999 was 33.2%. The larger increase in M2 was caused by a 3.2% increase in GDP, against the forecast of an economic decline of 2%, rising prices for export goods and a rapid increase in balances in the accounts of exporters, an increase in the share of cash payments in the total volume of payments and a reduction in non-cash forms of payments, a decrease overdue wages and pensions.

The structure of M2 also changed due to an increase in the share of deposits of enterprises and time deposits of individuals, as well as due to a reduction in the share of transaction money.

For 2000, it was planned to increase the money supply by 21-25%, in fact for 9 months. In 2000 it amounted to 40.8%. The greater growth in M2 was due to an increase in GDP by 7.7%, against the forecast of 1.5%, a significant improvement in Russia’s trade balance due to rising world prices for raw materials and energy, increased control over the repatriation of export earnings, and curbs on the excessive strengthening of the ruble. Positive changes occurred in the structure of M2 due to an increase in balances in the accounts of legal entities and time deposits of legal entities, which indicates that organizations have relatively free funds. The level of monetization of the economy in 2000 increased slightly. At the current level of inflation, the process of increasing the degree of saturation with money cannot be faster. The economy must be prepared to effectively absorb the money supply. This caused a decrease in the growth rate of M2 in 2001-2002.

In fact, over the nine months of 2002, the money supply (M2) increased by 15.2%. The forecast for the growth rate of demand for money for the current year assumed a further decrease in the velocity of money circulation. The current dynamics of this indicator for January-September of this year confirms the assumptions made. The monetization of settlements continues to grow (although at an objectively slower pace than in the previous period), time deposits of the population are growing, which contributes to an increase in the share of long-term money in the structure of the money supply.

According to the Bank of Russia's forecasts, in 2003 we should expect some further decline in the velocity of money circulation and, accordingly, an increase in the degree of monetization of the economy. The increase in the money supply (according to the M2 aggregate) in 2003 will be 20-26%. At the same time, the Bank of Russia does not consider this calculation parameter as rigidly specified and, depending on the development of the economic situation, allows for the possibility of deviation from these guidelines.

The monetary base is also used to measure the amount of money in circulation. It includes the following elements:

Amounts of cash in circulation and in the cash desks of commercial banks;

Funds in the required reserve fund of banks;

Balances on correspondent accounts of commercial banks with the Bank of Russia.

In 1996 – 2001 the volume of the monetary base in Russia increased from 103.8 to 674 billion rubles, i.e. 6.5 times. The growth of the monetary base occurred due to all three of its elements.

Table 1. Initial data taken from the official website of the Central Bank of the Russian Federation

Table 2. Results

	MONEY TURNOVER RATE

Conclusion:

From the data obtained as a result of the calculation, conclusions can be drawn about a decrease in the velocity of money circulation in Russia. The Central Bank writes that this is happening “under the influence of structural changes in the composition of the money supply”: the share of less liquid components in its composition is growing, and the Central Bank also explains this favorable dynamics by rapid economic growth.

Conclusion

The decline in the rate of money turnover in Russia will continue this year. In the three months since the beginning of 2007, it fell by 15.8%. A year ago, the circulation rate fell twice as fast, by 7.6%.

The decrease in the speed of money turnover is one of the reasons for the decrease in inflation now in the country. This is clearly visible in the graph:

(Inflation is expected to be 7% in 2008.)

The Central Bank predicts a further decrease in the speed of money turnover in Russia, which in turn will undoubtedly affect the successful development of the country's economy.

Thus, money circulation is the circulation of cash flows in cash and non-cash form. Such circulation is possible due to the fact that someone has an excess of money (supply), and someone feels the need (shows) demand. Money circulation therefore serves the flow of goods, works and services, and it is through it that the functioning of the financial system (accumulation and redistribution of resources) is materialized. Therefore, money circulation is the blood vessels for the financial system.

Money circulation is carried out in cash and non-cash forms.

Cash circulation is based on principles suggesting that business entities of all forms of ownership are required to keep their funds in open accounts with bank institutions; cash necessary for paying wages or making other payments is received by business entities from bank cash desks; business entities can have cash in their cash register within the limits and use part of the proceeds for their own needs within the limits established by banking institutions, and all cash in excess of the established cash balance limits must be handed over to banking service institutions.

The state must constantly study the effect of these factors and influence them in the direction of reducing cash in circulation. Reducing the amount of money in circulation is achieved by accelerating its movement through bank cash desks, which makes it possible to service a larger cash flow with a smaller amount of cash. This, in turn, allows you to save on circulation costs associated with the production and storage of cash, and also strengthens their purchasing power, since in this case each unit has a relatively large mass of inventory and paid services.

Cash and non-cash forms of payment are simply necessary for the normal functioning of the economy. But, despite the importance of cash circulation and its inseparability from non-cash transactions, we can safely say that the future belongs to non-cash payments. Already now they are very relevant for the economy, and the vast majority of payment turnover in modern Russia is non-cash, although the Russian payment system is still very far from perfect.

Bibliography

1 Galitskaya S.V. Money circulation, credit, finance: Textbook. – M.: International Relations, 2002.

2 Information and analytical materials/ Bank of Russia. - // http://www.cbr.ru

3 Kolpakova G.M. Finance. Money turnover. Credit: Study Guide. – M.: Finance and Statistics, 2003.

4 Consultant Plus

5 General theory of money and credit: Textbook / Ed. prof. E.F. Zhukova. M.: Banks and exchanges, UNITY, 2001

6 Main directions of the unified state monetary policy for 2003 - //http://www.akdi.ru/ECONOM

7 Finance, money circulation, credit. - http://vfengec.vbg.ru/econ_lek

8 Shelopaev F.M. Finance, money circulation and credit: A short course of lectures. – M.: Yurait-Izdat, 2002.

The money supply refers to the money supply or the total amount of money in circulation.

In market economies, various groups of money are used. They're called monetary aggregates(parameters) and serve as alternative measures of the money supply

in circulation.

The following monetary aggregates are known:

M1 - this includes cash, demand accounts, other checkable deposits, traveler's checks, and sometimes credit cards;

M2 - consists of M1 plus small time deposits and other easily liquid savings (i.e. savings that are easily convertible into cash);

MZ - consists of M2 plus large time deposits.

M4 - includes MH plus certificates of deposit of large commercial banks.

In the USA, four monetary aggregates (parameters) are used to determine the money supply, in Japan and Germany - three, in England and France - two.

To calculate the total money supply in the Russian Federation, the following monetary units:

MO - cash;

M1 - equal to the MO aggregate plus settlement, current and other accounts, deposits in commercial banks, demand deposits in Sberbank;

M2 - consists of M1 plus time deposits in Sberbank;

MZ - includes M2 plus certificates of deposit and government bonds.

Under the velocity of money refers to the average annual number of turnovers made by money that is in circulation and used for the purchase of finished goods and services. The velocity of circulation of money is equal to the ratio of nominal gross national product (GNP) to the mass of money in circulation:

V - U: M, where

V - velocity of money circulation;

U is the nominal volume of GNP;

M is the mass of money in circulation.

It is known that GNP also characterizes the total volume of income and expenses in the economy, i.e. if we consider U as total income, then V is represented as the velocity of money in relation to income. V, thus, shows the average annual number of owners whose income included the same monetary unit.

The velocity of money circulation in the short term is usually a constant value, but in the long term it varies, but only slightly. Significant changes in the velocity of money circulation can be associated with qualitative transformations in the organization of money circulation, which occurs quite rarely and is quite predictable (for example, the widespread use of ATMs, with the help of which you can get cash using special cards in any place where they are installed or a wide range of introduction of “plastic money”).

Money circulation and its laws

Money circulation is the movement of money in cash and non-cash forms, serving the sale of goods, as well as non-commodity payments and settlements.

There are cash circulation and non-cash circulation. Cash circulation- movement of cash in the form of banknotes, small change and paper money (treasury bills).

Cashless circulation- movement of non-cash money - bank deposits in customer accounts.

The forms of non-cash payments are quite diverse. They depend on the historical and economic characteristics of individual countries, the specifics of the credit system, the degree of development of electronic communications, and the computerization of banking. The most common are checks, letters of credit, credit cards, electronic transfers, endorsements, bills of exchange, certificates, and in Russia also payment orders and payment demands-orders.

Non-cash circulation dominates, causing an increasing dematerialization of money circulation. The reasons for this are: 1. reduction of distribution costs; 2. acceleration of cash turnover; 3. convenience of cashless payments.

However, in some areas of economic life, the availability of money remains important.

Firstly, in transactions where one of the parties is the population. For example, in the Russian Federation a very small part of the population uses non-cash payments, although for countries with developed market economies the situation changes dramatically (for example, in the USA no more than 6% of the employed population receives wages in cash).

Secondly, in conditions of crisis shocks, most economic agents strive to have cash.

Thirdly, cash flow is difficult to control. It can act as a means of tax evasion and other illegal activities.

There is a relationship between cash and non-cash circulation: money constantly moves from one sphere of monetary circulation to another.

It is believed that it is cash that provides a person with convenience when making purchases, since the funds are in his pocket, and there is no need to go to the bank for every purchase. But they can be lost, they can be stolen, some of the cash can be counterfeit, etc.

In addition, storing money in the form of cash deprives a person of the opportunity to receive interest on the deposit. Therefore, you should decide how much cash you should have on hand, and how much you should put in the bank.

The cash money supply management model was developed in the 50s by economists W. Baumol and J. Tobin and was named the Baumol-Tobin model. According to this model, it is possible to determine the optimal number of visits to the bank or the optimal amount of cash based on the ratio of losses in the form of bank interest not received on this amount and the cost estimate of time savings from less frequent trips to the bank.

Monetary circulation in its various forms is regulated by economic law, which expresses the economic relationship between the mass of goods, the level of their prices and the speed of circulation of money.

K. Marx determines the amount of money needed for circulation as follows 1:

Average number of turnovers of money as a means of circulation and payment

K. Marx noted that in conditions when the function of money was performed by gold, the amount of money needed for circulation; was regulated spontaneously: if there was more money than the real need for it, then gold went out of circulation into private hoarding(private storage), if the need for money increased, then gold was moved from treasures into circulation. A similar situation arose in the case of the circulation of banknotes that were freely exchangeable for gold. When circulating paper money that is not redeemable for gold, the amount of money needed for circulation must be regulated by the state. According to the Marxist concept, the issue of paper money should be limited to the theoretical amount of gold money needed for circulation.

In economics, there is another point of view, which is shared by representatives of the quantitative theory of money and supporters of the monetarist concept.

American economist I. Fischer formulated the following exchange equation:

M. V = P. Q, where M is the money supply V is the velocity of money circulation P is the average price of goods and services O is the number of goods sold.

In other words, the amount of money in circulation multiplied by the number of its turnovers in acts of purchase and sale (V) equals the total volume of goods and services produced in the economy during the year.

Money supply- a set of consumer, payment and accumulated funds that serve economic relations and belong to individuals and legal entities, as well as the state.

The money supply is an important quantitative indicator of money and consists of two main components - active money, used in cash and non-cash circulation, and passive money (accumulations and savings, reserves, account balances).

The money supply is influenced by two factors:

1. the amount of money in circulation;
2. velocity of money circulation.

The volume of money supply is determined by the state - the issuer of money, its legislative power. The growth of emissions is due to the needs of commodity circulation and the state.

In Ukraine, the main reasons for the growth of the money supply are: excess state budget deficit and a significant reduction in the rate of production and commodity turnover.

Indicator of the mass of money in circulation ( M) has several meanings (monetary aggregates). NBU defines the following units:

1. M0= cash in circulation;
2. M1 = M0+ balances of cash deposits in bank accounts on demand;
3. M2 = M1+ balances of cash deposits in bank time accounts;
4. M3 = M2+ client funds for bank trust operations.

In addition, the NBU determines an indicator called the monetary base. It turns on the unit M0, cash in bank cash desks and reserves of commercial banks in their accounts with the NBU. This money does not participate in bank credit circulation and does not additionally increase the amount of money in circulation, but only serves as a basis for its growth.

Each unit has a specific purpose in the practice of managing money circulation, and together they give a holistic picture of the structure and dynamics of the money supply and money circulation.

Velocity of circulation of money and its impact on the mass and stability of money

Velocity of money- represents the intensive movement of money when they perform the functions of circulation and payment.

To calculate this indicator, the following methods are used:

1. The speed of movement of money in the circulation of the value of a social product or the circulation of income is defined as the ratio of GNP or ND to the money supply (aggregates M1 or M2). This indicator indicates the connection between money circulation and economic development processes.
2. The turnover of money in payment circulation is determined by the ratio of the amount of money in bank accounts to the average annual value of the money supply in circulation. This indicator indicates the speed of non-cash payments.

In addition, general economic factors are used, i.e. cyclical development of production, its growth rate, price movements, as well as monetary factors, i.e. the structure of payment turnover (the ratio of cash and non-cash money), the development of credit transactions and mutual settlements, the level of interest rates on loans in the money market, as well as the introduction of electronic systems for transactions in credit institutions and the use of electronic money in settlements.

In addition, the frequency and uniformity of income payments, the level of savings and savings have a significant impact on the speed of circulation of money.

The speed of circulation of money is inversely proportional to the amount of money in circulation, so the acceleration of its turnover means an increase in the money supply. An increased money supply with a constant volume of goods and services on the market leads to the depreciation of money, that is, ultimately it is one of the factors in the inflationary process.

The law of the amount of money required for turnover, its essence, requirements and consequences of violating the requirements

To ensure the stability of money, it is necessary to maintain proportionality between the commodity mass and the volume of monetary services to the population, on the one hand, and the money supply in circulation, on the other. The development of credit relations and banking contributed to a reduction in the need for cash. The amount of money needed for circulation is determined by the formula:

Where KD- the amount of money in circulation;
DH- the sum of prices of goods sold;
TO- the sum of prices of goods sold on credit;
P- payments for which payment is due;
VR- mutual settlements;
ABOUT- the number of revolutions of the monetary unit of the same name;
DR- monetary reserve for the sphere of circulation.

The excess of the number of monetary units in circulation over the sum of commodity prices (and as a result, the emergence of monetary units that do not have commodity coverage) leads to inflation.

The problem of monetizing gross domestic product

Performing the functions of means of circulation and payment, money continuously moves from one economic entity to another, thereby serving the purchase and sale of goods and services, that is, the implementation of GDP.

The process of movement of money serving the implementation of GDP is called money circulation.

There is an internal connection between the process of GDP realization and money circulation: the larger the nominal volume of GDP realization, the greater will be the flow of money circulation, and vice versa.

Nominal GDP is determined by two factors: the physical volume of goods and services sold ( Q) and their price level ( P). And the size of the money supply is determined by the mass of money in circulation ( M), and the velocity of circulation of the monetary unit ( V).

The mentioned quantities are taken into account in the exchange equation:

On its basis, it is possible to determine patterns of changes in basic market processes and indicators, in particular: the level of commodity prices, the velocity of money circulation, the mass of money in circulation.

The level of commodity prices is determined by the equation:

Velocity of money circulation:

The mass of money in circulation is characterized by the equation:

This equation is often called the law of money circulation.

The issue of filling the economy with money is extremely important for Ukraine. It is believed that the low (compared to other states) degree of monetization is perhaps the main reason for the growth of debt and other numerous problems.

The degree (level) of monetization of the economy is calculated as the quotient of the money in circulation divided by the volume of GDP. Both indicators are used in physical terms.

The increase in the money supply has its source in GDP growth. Increasing monetization means that a larger and larger share of GDP is retained in monetary form and vice versa.

Thus, an increase in the degree of monetization indicates an increase in economic mobility and an increase in the potential flexibility of the behavior of economic entities.

The article presents the dynamics and structure of the money supply from 1993 to 2015. Indicators of money circulation in the Russian Federation from 2005 to 2015 are also presented. and an analysis of the relationship between the velocity of money supply and various economic indicators was carried out.

The money supply is one of the main elements of any monetary system, so we considered it relevant to conduct a statistical analysis of money circulation in the Russian Federation.

Let us consider aggregate indicators of the structure of the money supply in the Russian Federation for 1993 - 2015, which are the main macroeconomic indicators, using the data in Table 1 as an example.

Table 1. Money supply and structure of the money supply in the Russian Federation for the period from 1993 to 2015.

	Money supply M0	Money supply M1	Money supply M2	Money supply in national definition

In recent years, the characteristics of the money supply have undergone significant changes. As can be seen from Table 1, the monetary aggregate M0, which represents cash in circulation, increased rapidly from 1993 to 2015, which meant an increase in the volume of money issued by the Central Bank of the Russian Federation.

How to determine the velocity of money circulation

However, in the period from 2008 to 2009 and from 2014 to 2015, there was a slight decline in this indicator by 5.1% and 1.9%, respectively.

Indicator M1 (aggregate M0 + funds of enterprises in banks, etc.) and M2 (aggregate M1 + household deposits in banks) tended to increase during the years under review, but from 2010 to 2011 they decreased by 16.8 % and by 42.2%.

As for the money supply in the national definition, it, equivalent to M1 and M2, decreased by 31.3% in the period from 2010 to 2011, then the situation stabilized.

The sharp rise and fall of all indicators is associated not only with a decrease in the volume of cash in circulation, but also with a reduction in the volume of deposits of the population, enterprises and organizations in bank accounts. It is worth noting that among non-cash and cash money, non-cash money prevails.

When considering the dynamics of money circulation, it would be advisable to analyze the relationship between the velocity of circulation of the money supply and various economic indicators.

Table 2. Indicators of money circulation in the Russian Federation from 2005 to 2015.

	Money supply M2		Cash in circulation	Velocity of money supply	Money velocity growth rate

Table 2 shows that during the period under review, the characteristic of the velocity of circulation of the money supply tended to a significant decline. Between 2005 and 2010. and from 2011 to 2015. it decreased by 63.5% and 69.6%, respectively. As for the growth rate of the velocity of money circulation, from 2005 to 2009. the indicators were spasmodic, but since 2010 there has been a significant drop of 62.6%. Consequently, the dynamics of these indicators indicates a decrease in the turnover of monetary aggregates, i.e., a decrease in their liquidity.

A slight decrease in cash in circulation in the structure of the money supply indicates a slight decrease in inflationary pressure from aggregate demand. We can also conclude that non-cash funds will exceed cash by 10-15%. Such an irrational relationship between these two areas negatively affects money circulation as a whole, because most of the cash does not participate in banking circulation, unlike non-cash funds. This phenomenon undermines the stability of the banking system, consequently, there is a reduction in cash in the credit sector.

The money supply is understood as the totality of generally accepted means of payment in the economy, the sum of cash and non-cash funds.

To measure the money supply, monetary aggregates are used: MO, Ml, M2, MZ. Monetary aggregates are classified depending on the degree of liquidity of monetary assets.

A liquid asset is one that can be used as a means of payment or converted into a means of payment and has a fixed nominal value. The composition and quantity of monetary aggregates used vary across countries.

To calculate the total money supply in the Russian Federation, the following monetary aggregates are provided:

1. MO - cash;
2. Ml is equal to the MO aggregate plus settlement, current and other accounts, deposits in commercial banks, demand deposits; the Ml indicator is intended to measure the volume of actual circulating medium, therefore it refers to the money supply in the narrow sense of the word;
3. M2 - consists of Ml plus time deposits. Using the M2 indicator, they try to measure the stock of highly liquid property owned by the population and which, under certain conditions, can turn into money. Therefore, M2 is the money supply in a broad sense;
4. MZ includes M2 plus certificates of deposit and government bonds.

The velocity of money is the average annual number of turnovers made by money that is in circulation and used to purchase finished goods and services.

What formula is used to calculate the velocity of money circulation, its concept and essence

The velocity of circulation of money is equal to the ratio of the nominal gross national product to the mass of money in circulation:

where V is the velocity of money circulation;

U is the nominal volume of GNP;

M is the mass of money in circulation.

The velocity of money circulation in the short term is usually a constant value, but in the long term it varies, but only slightly. This speed is completely manageable and depends on the operation of the country’s banking system and on the level of technical equipment of institutions that participate in monetary transactions.

The higher the technical equipment of banks, the more widely they use modern computers and satellite communication lines, the faster the money turns around and the less it is needed for the normal functioning of the economy.

The money supply needed to carry out exchange and payment transactions depends on the demand for money and the supply of money by the banking sector.

"Money supply. Velocity of circulation of money" and other materials on the topic "Macroeconomics"