Monetary mechanisms of an economy stimulation in developed countries: an analytical review

Valentin P. Vishnevsky, Aleksy Kwilinski

Abstract


The paper considers the monetary policy of leading Central Banks of the world that have been successfully used to overcome the global financial and economic crisis of 2008-2009 and now is also an important determinant of the modern development trends in the global economy.The last decade (the last ten years of the XXI century) is the period of the Fourth industrial revolution. But at the same time, this is a period of global spread of financial instability, including overcoming the consequences of the global financial and economic crisis of 2008-2009. Advanced developed countries, which today are the world's technological leaders in Industry 4.0, managed to overcome this crisis, primarily through monetary mechanisms. For this purpose, a non-traditional monetary policy was invented and applied for the first time, which included: quantitative easing with a corresponding rapid growth of Central banks' liabilities; de facto proactive maintaining a plurality of their goals, including ensuring financial stability and reducing unemployment; expanded participation of Central banks in financing government budget deficits with blurring the difference between monetary and fiscal policies.The measures taken helped to overcome the recession in the developed world and the transition to the trajectory of an economic growth. Current measures to normalize monetary policy, which the United States began, provide for a gradual increasing in the key interest rates and shrinking balance sheets of central banks. However, de facto , in much of the developed world (EU, Japan) the era of unconventional monetary policy is still going on.In general, the impact of these policies can be assessed in different ways. But it is difficult to deny two main conclusions. First, when it is necessary to overcome obstacles to the economic development, specialists and politicians of advanced countries do not hesitate to abandon market dogmas and apply new, non-traditional regulatory instruments, which were previously considered unacceptable. And the second conclusion is that, as a result, among other things, of these non-traditional instruments’ implementation, the U.S. Dollar and the Euro have retained their leadership among the world currencies. This, in turn, means that the United States, as well as other advanced countries, that are a part of a narrow group of global monetary centres, despite the negative consequences of industrial offshoring, retains the chances of holding a leading position in the field of advanced industrial technologies, since these technologies are no longer just cyber-physical, but cyber-financial-physical.

Keywords


monetary policy; central bank; financial instability; monetary policy normalization; industrial revolution

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References


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DOI: https://doi.org/10.15407/econindustry2019.01.030

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