Currency is the most important state and international financial instrument. For its regulation there is such a mechanism as monetary policy.
The concept and composition of monetary policy
Monetary policy is a set of economic, organizational and legal measures to establish monetary relations within one and between several states, banking structures and financial authorities. It acts as one of the key segments of state and international economic policy.
The instruments of the corresponding political direction are:
- foreign exchange intervention;
- currency control;
- foreign exchange reserves;
- currency restrictions;
- exchange rate regime;
- foreign exchange subsidies.
The subjects of monetary policy are international monetary and financial organizations, the government, the central bank, as well as special authorized bodies (currency council and others). The most important role of the corresponding direction in politics is to maintain the stability of the exchange rate adopted in the state of the monetary unit, as well as to ensure effective foreign trade economic relations. Acting as one of the main directions of economic policy, monetary policy is formed on the basis of such components as fiscal, structural investment and monetary systems.
Legislative Framework for Monetary Policy
This type of state policy is enshrined in foreign exchange legislation, which regulates the procedure for carrying out gold and foreign exchange transactions on the territory of the state. It follows from this that monetary policy is aimed not only at regulating exchange rates and convertibility of the national currency, but also at controlling the gold and foreign exchange reserves of the current state.
In order to comply with currency legislation and the legal implementation of currency transactions, the state conducts currency control. This is a complex of special events that are carried out by the Central Bank and the Government of the Russian Federation. The latter establish floating and fixed exchange rates, check and record all financial documents, open and close foreign exchange accounts, and monitor the process of concluding foreign exchange transactions.
Main regimes of monetary policy
Monetary policy is an extremely dynamic instrument, the form and elements of which can be modified under the influence of various factors of the country's development, including its economic situation, production volumes, the state of the financial economy, influence on the world political arena, and others. In accordance with this, the government of the country forms a certain regime of monetary policy, which radically affects the level of prices for products sold in the external and internal markets.
There are many different monetary policy regimes in the world. So individual states in the process of carrying out economic reforms stop at the strategy of a dual currency market, dividing a single financial system into two components: the official sector for commercial transactions, and also the market sector for various exchange and financial transactions. However, the traditional methods of monetary policy include devaluation and revaluation of the exchange rate, that is, a decrease and increase in the exchange rate of the state currency against the dollar.
Another effective method of conducting monetary policy is the establishment of a motto system that provides for the regulation of the national currency rate through the sale and purchase of funds from foreign countries. Such a system can take many forms, including intervention, foreign exchange restrictions and diversification of foreign exchange reserves. Often, the state uses two different systems of regulation of exchange rates at once in order to conduct an effective exchange rate policy.
