2022 (19), №1

Modeling Credit Emission in a Growing Economy: Long-Term Effects and Excesses

For citation: 

Malkov, S. Y. & Rubinstein, A. A. (2022). Modeling Credit Emission in a Growing Economy: Long-Term Effects and Excesses. AlterEconomics, 19(1), 185-200.  https://doi.org/10.31063/AlterEconomics/2022.19-1.11.


According to experts, the factor of monetary emission has not been studied enough among the factors which influence the emergence of long-period economic cycles. The neutrality of money is one of the reasons of long-period cycles. The authors of the article disagree with this opinion, since they support the concept of the non-neutrality of money in the long run. Accordingly, the purpose of the article is to investigate the features of this non-neutrality. Methodologically, the study relies on the mathematical modeling. The study has been conducted using the model of switching reproduction mode (SMR) created at the Institute of Economics of the Russian Academy of Sciences — as a mesoeconomic mathematical model that calculates macro- and mesoeconomic changes based on the calculation of circulation of money, giving due regard the inflation with periodic renewal of fixed capital. The resulting lag effects of this update bring dynamics to the model and determine its most significant advantage. The main attention is given to credit emission. The nonlinear (threshold) effects accompanying credit issue make the analysis of its consequences more complicated. Numerical experiments are used to examine the influence of the debt load of the production subsystems s and the interest rate r on changes in the dynamics of the economic system. These effects in combination with other factors can lead to long-term dynamics in macroeconomic processes. The study includes a preliminary analysis of the ways to overcome the negative effects accompanying credit emission. It is justified that credit emission alone is not sufficient and additional emission by the Central Bank is necessary. Although additional emission may have a more serious inflationary impact, it can to a certain extent reduce the negative impact of credit emission. The results of the study can be used to substantiate recommendations for optimizing monetary policy.

PDF full
Downloaded: 48

Sergey Y. MALKOV, Dr. Sci. (Tech.), Professor, Institute of Economics of the RAS, 32, Nakhimovskiy prospect, Moscow, 117218, Russian Federation.  https://orcid.org/0000-0002-9654-1439

Aleksandr A. RUBINSTEIN, Cand. Sci. (Econ.), Institute of Economics of the RAS, 32, Nakhimovskiy prospect, Moscow, 117218, Russian Federation,  e-mail: rubinstein.alexander@gmail.com.   http://orcid.org/0000-0002-4693-4277

Bae, S. K., Jensen, M. J. & Murdock, S. G. (2005). Long run neutrality in a fractionally integrated model.  Journal of Macroeconomics, 27(2),  257–274.

Barr, K. (1979). Long Waves: A Selective Annotated Bibliography.  Review, 2(4),  675–718.

Chernavsky, D. S., Starkov, N. I., Malkov, S. Yu. & Kosse, Yu. V. (2013). Model’ tsiklov Kondrat’eva [The Kondratiev cycle model].  Finansy i real’nyy sektor: vzaimodeystvie i konkurentsiya [ Finance and the real sector: interaction and competition].  St. Petersburg, Russia: Nestor-Istoriya, 166–173. (In Russ.)

Glazyev, S. Yu. (1993).  Teoriya dolgosrochnogo tekhniko-ekonomicheskogo razvitiya [The theory of long-term technical and economic development].  Moscow, Russia: VlaDar, 310. (In Russ.)

Glazyev, S. Yu., Mikerin, G. I., Teslya, P. N. et al. (1991).  Dlinnye volny: Nauchno-tekhnicheskiy progress i sotsial’no-ekonomicheskoe razvitie [Long Waves: Scientific and Technological Progress and Socio-Economic Development].  In S. V. Kazantsev, P. N. Teslya (Eds.). Novosibirsk, Russia: Nauka, 223. (In Russ.)

Gordon, D. M. (1978). Up and Down the Long Roller Coaster.  U. S. Capitalism in Crisis.  In B. Steinberg (Eds.). New York: Economics Education Project of the Union for Radical Political Economics, 22–34.

Habibullah, M. S., Puah, C. H. & Azali, M. (2002). Testing long-run neutrality of money in a developing economy.  Savings and Development, 26(2),  165–181.

Kondratiev, N. D. (1922).  Mirovoe khozyaystvo i ego kon’’yunktura vo vremya i posle voyny [The World Economy and Its Conditions During and After the War].  Vologda, Russia: Kondratiev, 40–341. (In Russ.)

Kondratiev, N. D. (1925). Bol’shie tsikly kon”yunktury [Big cycle of economic situation].  Voprosy kon”yunktury” [Economic matter], 1(1),  28–79. (In Russ.)

Kondratiev, N. D. (1989).  Problemy ekonomicheskoy dinamiki [Problems of economic dynamics].  In L. I. Abalkin (Eds.) Moscow, Russia: Ekonomika, 526. (In Russ.)

Mandel, E. (1980).  Long Waves of Capitalist Development.  Cambridge, UK: Cambridge University Press, 151.

Mayevsky, V. I., Malkov, S. Yu. & Rubinstein, A. A. (2018). Analiz ekonomicheskoy dinamiki SShA, SSSR i Rossii s pomoshch’yu modeli PRV [Analysis of the economic dynamics of the US, the USSR and Russia with the help of the SMR-model].  Voprosy ekonomiki [Voprosy Ekonomiki], 7,  82–95. DOI: https://doi.org/10.32609/0042-8736-2018-7-82-95. (In Russ.)

Mayevsky, V. I., Malkov, S. Yu. & Rubinstein, A. A. (2019). Analiz svyazi mezhdu emissiey, inflyatsiey i ekonomicheskim rostom s pomoshch’yu modeli pereklyuchayushchegosya rezhima vosproizvodstva [Analysis of the relationship between issuing money, inflation and economic growth with the help of the SMR-model].  Voprosy ekonomiki [Voprosy Ekonomiki], 8,  45–66. DOI: https://doi.org/10.32609/0042-8736-2019-8-45-66. (In Russ.)

Mayevsky, V. I., Malkov, S. Yu., Rubinshtein, A. A. & Krasil’nikova, E. V. (2020).  Teoriya vosproizvodstva kapitala i ne-neytral’nost’ deneg [The theory of capital reproduction and the non-neutrality of money].  In V. I. Maevsky (Eds.). Moscow; St. Petersburg, Russia: Nestor-Istoriya, 160. (In Russ.)

Mayevsky, V. I., Malkov, S. Yu. & Rubinshtein, A. A. (2016).  Novaya teoriya vosproizvodstva kapitala: razvitie i prakticheskoe primenenie: Monografiya [New theory of capital reproduction: development and practical application: monograph].  Moscow; St. Petersburg, Russia: Nestor-Istoriya, 260. (In Russ.)

Menshikov, S. M. & Klimenko, L. A. (1989).  Dlinnye volny v ekonomike. Kogda obshchestvo menyaet kozhu [Long-waves in the economy: when society changes its skin].  Moscow, Russia: Mezhdunarodnye otnosheniya, 272. (In Russ.)

Perez, C. (2011).  Tekhnologicheskie revolyutsii i finansovyy kapital [Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages].  Moscow, Russia: Publishing house “Delo” ANKh, 232. (In Russ.)

Puah, C. H., Tang, M. M. J., Shazali, A. M. & Brahmana, R. (2015). Does money matter in Indonesia? Revisiting Divisia money.  Journal of International Finance and Economics, 15(2),  7–12.

Tang, M. M. J. (2016). A review of the literature on monetary neutrality.  MPRA Paper, 70113.  Retrieved from: https://mpra.ub.uni-muenchen.de/70113/ (Date of access: 26.11.2021).

van Duijn, J. J. (1983).  The Long Wave in Economic Life.  Boston: George Allen and Unwin, 239.

Wallerstein, I. (1984). Economic Cycles and Socialist Policies.  Futures: the journal of policy, planning and futures studies, 16(6),  579–585.