Economy monetization
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The Economy monetization is a metric of the national economy, reflecting its saturation with liquid assets.
The reverse concept is called economy demonetization.
Monetization coefficient
The monetization coefficient (or ratio) of the economy is an indicator that is equal to the ratio of the
Formula
The ratio is, in fact, based on the
This coefficient gives an idea of the degree of financial security of the economy. Many scientific publications calculate not only the indicator of M2/GDP but also M3/GDP and M1/GDP.[12] The higher the M3/GDP compared to M1/GDP, the more developed and elaborated the system of non-cash payments and the financial potential of the economy.[13] A small difference indicates that in this country a significant proportion of monetary transactions are carried out in cash, and the banking system is poorly developed. It is impossible to artificially increase the monetization coefficient; its growth is based on the high level of savings within the national financial system and on the strengthened confidence in the national economic policy and economic growth. The ability of the state to borrow money in the domestic market and implement social programs depends on the value of the coefficient.
The monetization ratio is positively related to the expected wealth and negatively related to the opportunity costs of holding money.
Criticism
- There is a certain paradox associated with the difference between the nominal and real money supply. The uncontrolled monetary emission does not lead to an increase in the economy monetization—but to its decrease. The rapid increase of the nominal money supply during the period of high inflation leads to an increase in prices and, accordingly, in the nominal GDP, which outstrips the increase in the amount of money, which accordingly leads to a decrease in the monetization coefficient. In contrast, a decrease in the growth rate of the nominal money supply coupled with a growing GDP increases confidence in the national currency, leading to an increase in the economy monetization.[14]
- The GDP tends to change in a linear manner whereas the money supply may change exponentially. This fact may distort the real situation.[2]
- For developed countries the relationship between growth in the money supply and the economic performance may become weak.[15]
- Methods to calculate both GDP and M2 may vary from country to country, sometimes making a direct comparison between ratios troublesome.
- The money supply is measured on a specific date whereas the GDP is calculated for a specific period of time (year).
Economy demonetization
There are two primary nonmonetized sectors in the economy:
The
Monetization coefficients for countries (2015–2018, %)
The table includes data for both developed and emerging economies.[19]
Country | 2015 | 2016 | 2017 | 2018 |
---|---|---|---|---|
US | 68.52 | 71.37 | 71.88 | 70.77 |
UK | 48.36 | 63.83 | 69.40 | 64.31 |
Germany | 85.69 | 87.96 | 88.51 | 89.06 |
Japan | 173.04 | 177.77 | 181.29 | 184.87 |
Brazil | 33.17 | 41.84 | 37.97 | 39.35 |
India | 18.04 | 13.51 | 17.89 | 18.00 |
China | 194.18 | 199.30 | 212.16 | 198.04 |
Russia | 39.41 | 42.36 | 43.55 | 43.22 |
See also
References
- S2CID 226764772.
- ^ a b Blinov, Sergey (27 October 2015). "Real Money and Economic Growth" (PDF). Munich Personal RePEc Archive. Retrieved 24 May 2021.
- ^ Kinoshita, Noriaki; McLoughlin, Cameron (1 June 2012). "Monetization in Low- and Middle-Income Countries". International Monetary Fund. Retrieved 26 May 2021.
- ^ Ghosh, Santikumar (1964). Monetization of an Economy. World Press. p. 34. Retrieved 4 May 2022.
- ^ Khmurych, Volodymyr (May 1998). "Explaining Monetization with Reference to Transitional Economies" (PDF). Kyiv School of Economics. p. 3. Retrieved 24 May 2021.
- S2CID 208868678. Retrieved 24 May 2021.
- ^ doi:10.5089/9781451969450.024 (inactive 31 January 2024). Retrieved 24 May 2021.)
{{cite web}}
: CS1 maint: DOI inactive as of January 2024 (link - ISBN 978-0-387-24935-3. Retrieved 16 May 2022.
- ISBN 978-1-134-05695-8. Retrieved 16 May 2022.
- ISBN 978-3-319-01282-7. Retrieved 16 May 2022.
- ^ S2CID 158867722. Retrieved 24 May 2021.
- ISBN 978-0-429-72143-4. Retrieved 4 May 2022.
- doi:10.1515/cfer-2015-040208 (inactive 31 January 2024). Retrieved 24 May 2021.)
{{cite journal}}
: CS1 maint: DOI inactive as of January 2024 (link - ^ "МОНЕТИЗАЦИЯ ЭКОНОМИКИ" (in Russian). abc.informbureau.com.
- ^ Ross, Sean (May 3, 2020). "What Is the Relationship Between Money Supply and GDP?". Investopedia. Retrieved 24 May 2021.
- ISBN 978-0-262-07219-9. Retrieved 4 May 2022.
- ^ Гуриев, Сергей; Попов, Владимир (2001). "Трехглавая гидра безденежья" (PDF) (9). Эксперт. Retrieved 25 May 2021.
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(help) - ^ Зоидов, К. Х. "Кризисная цикличность и методология антикризисного регулирования переходной экономики России" (PDF) (in Russian). Higher School of Economics. Retrieved 25 May 2021.
- ^ "Коэффициент монетизации экономики в России и разных странах" (in Russian). prognostica.info. 2019-06-05. Retrieved 26 May 2021.
- ^ Ponciano, Jonathan. "Is The Stock Market About To Crash?". Forbes. Retrieved 24 May 2021.