For citation:
Maevsky, V. I. (2024). The Possibility of Targeting Economic Growth: Theoretical Aspect. AlterEconomics, 21(2), 159–178. https://doi.org/10.31063/AlterEconomics/2024.21-2.1
Abstract:
The article proposes an original target indicator for macroeconomic monetary policy, namely the s indicator (corresponding to the word “scope”), calculated as the ratio of average annual inflation to the average annual growth rate of real GDP over a certain period. This indicator essentially reflects the degree of non-neutrality of money in the long term. While orthodox macroeconomic theory denies the non-neutrality of money, the switching regime reproduction theory (SRRT) acknowledges it (Maevsky et al., 2020). If the s indicator is less than 1, there is strong non-neutrality of money in the country; if it is greater than 1, then non-neutrality is weak. Both weak and strong non-neutralities of money are accompanied by negative social effects, which intensify as the s indicator moves further from 1. Therefore, monetary authorities, striving for compromise, aim to make decisions that bring the s indicator close to or equal to 1. Statistical calculations for 49 countries support this conclusion: in developed and most developing countries, the s indicator is close to 1. However, Russia does not fall into this majority, which points to the need for substantial institutional changes in its monetary policy system. One possible change considered is the partial replacement of currency-backed primary money issuance with debt-backed issuance, i. e., issuance against the purchase of government securities. The study discusses the controversial issue of using monetary policy to stimulate economic growth by normalizing the s indicator. It also examines the statement made by German Gref, the head of Sberbank of Russia, to the Federation Council on June 4, 2024, about the Russian economy overheating due to high capacity utilization. It is shown that instead of restricting growth, the capacity deficit should be overcome through a policy of monetary stimulation of investments in fixed capital. These findings are consistent with those of the team from the Central Economics and Mathematics Institute of the Russian Academy of Sciences, who used a modified equilibrium model that includes the endogenous factor of scientific and technological progress.
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