Assessment of the Impact of the Money supply on Russian GDP Growth Rates

• Published in: Finansy: teoriâ i praktika (Online) Vol. 29; no. 1; pp. 34 - 44
• Main Authors: Ivanchenko, I. S., Nivorozhkina, L. I.
• Format: Journal Article
• Language: English; Russian
• Published: Government of the Russian Federation, Financial University 06.03.2025
• Subjects: econometric modeling; inflation; inflation targeting; monetary policy; monetization of the economy; stochastic model; the economic growth
• ISSN: 2587-5671; 2587-7089
• DOI: 10.26794/2587-5671-2025-29-1-34-44

The subject of the study is the dynamics of real and nominal GDP in Russia for the period from 1995 to 2024 inclusive. In this study, the impact of the money supply on the economic growth rate and the level of inflation in the Russian Federation is assessed, and a forecast of such an impact is made for 2025. The purpose of the study is to determine, using quantitative methods, the degree of influence of the money supply on the dynamics of Russian GDP and inflation in order to identify the direction and limits of monetary management of the economy. The relevance of the study is that the results allow obtaining a higher rate of economic growth in Russia. The result of the study is the constructed stochastic model of the annual balanced increment of the money supply, as well as the discovered non-linear statistical relationship between the dynamics of the increments of the money supply and GDP. Dynamic modeling of the money supply was used as a method of analysis. Dynamic modeling of the money supply was used as a method of analysis.The model constructed by the authors, which includes the Keynesian demand function for the money supply and the neoclassical Cobb-Douglas production function, approximating the dynamics of GDP, helped to calculate the annual volume of money supply growth (M2 aggregate), accelerating the GDP growth rate in modern economic conditions. A non-linear relationship between the dynamics of the money supply and GDP was confirmed in the course of the study, which made it possible to evaluate the most optimal increase in the money supply in the country to accelerate the growth of Russian GDP. The result that was obtained indicates that one should not artificially restrain the growth of the money supply, since the analysis of time series using vector autoregression recorded a positive effect of the growth of the money supply on the dynamics of Russian GDP and the absence of any impact on the dynamics of inflation.