MODEL FOR ASSESSING THE IMPACT OF THE PRODUCTION FACTORS RENEWAL RATE ON MONEY SUPPLY GROWTH

The aim of the work is to derive a differential equation that determines the growth of the monetary aggregate M2 depending on renewable factors of production and GDP. Physical and human capital, as well as labor resources, is considered among renewable factors. The basic equation in the study is the equation of exchange of the quantitative theory of money. The equation of the rate of change of the monetary aggregate M2 is obtained, based on the apparatus of vector analysis. It is assumed that the rate of circulation of money is constant at given time intervals, but the presence of vortex components in the change in factors of production is not excluded. Such imbalances can arise, for example, with imbalances in investment in renewable factors. It is shown that the growth of the monetary aggregate depends on the marginal values of labor productivity, marginal capital return, marginal productivity of human capital, GDP growth and growth of the main renewable factors of production. Numerical modeling of the change in the monetary aggregate M2 in conventional units from 2003 to 2018 was carried out. Analytical calculations reflect the general trends of change, but at present, a real comparison is out of the question. This is due to the need to more accurately determine the contribution of human capital to GDP, but there are no such data. The finite-difference analogue of the equation can be one of the tools in forecasting the monetary aggregate in the short term. A differential equation is obtained, which gives a general analytical idea of all possible variants of inflation behavior. Conditions are found in the form of inequalities that allow us to find a limit on the supply of money that is critical for the hyperinflation occurrence.

monetary aggregate M2, renewable production factors, circulation of money, mathematical modeling, labor productivity, marginal capital productivity, marginal productivity of human capital, GDP growth, the equation of exchange of the quantitative theory of money, price index.

Kuznetsov S. B. Model for assessing the impact of the production factors renewal rate on money supply growth. Business. Education. Law, 2021, no. 1, pp. 158—164. DOI: 10.25683/VOLBI.2021.54.157.