NBU monetary policy and its impact on business investment activity

Abstract

Abstract: The paper's aim is to study the specifics of the application of the main monetary policy instruments and to assess their impact on lending to business entities in the context of stimulating economic growth. In the research process, methods of logical generalization and synthesis, comparative analysis, statistical methods, and graphical visualization methods were used. The article describes the essence and visualizes the action of the interest rate channel of monetary transmission as a mechanism of influence of monetary instruments on the investment activity of the business sector. The dynamics of GDP as a resulting indicator of economic development is analyzed. The structure and dynamics of monetary aggregates are studied, the indicators of the velocity of money circulation and the monetary multiplier are calculated; their assessment is carried out from the perspective of the intensification of business activity in the country. The fact of the outstripping growth of all monetary aggregates and the monetary base compared to GDP growth is proven. It is substantiated that monetary factors prevail in GDP growth, not production factors, that is, the potential of economic growth is not fully realized. The dynamics of the NBU key rates, credit rates and lending volumes in the national currency are studied. The ratio of lending volumes to GDP is calculated, which illustrates the level of business access to credit financing. It is proven that in conditions of large-scale shocks, monetary instruments demonstrate low efficiency in stimulating business activity, the multiple increase in monetary resources is accompanied by credit stagnation. It was concluded about the necessity to supplement market monetary mechanisms with active state intervention and the development of specific mechanisms for state support for business.