Ph.D student Uskenbayeva Assiya
L.
Gumilyov Eurasian National University, Kazakhstan
The transmission mechanism of the Monetary Policy in
Kazakhstan
In this article is considered the interaction between financial and
real sector through influence of the transmission mechanism of the monetary
policy to dynamics of fixed investments. The redistribution of investment funds
from financial to real sector lies in the base of balance economic development.
As a rule, the financial institutes redistribute the finance, and the
effectiveness of these institutes depends from the transmission mechanism of
the Central Bank monetary policy.
One of the main Kazakhstani
Government Policy’s priorities is to increase the level of fixed investments in
the real sector. The most attractive branch for fixed investments in Kazakhstan
remain the mining industry, accordance to the official data investment ratio to
the mining industry makes up 31.1% (1).
Theoretical basis of the research
totaled Keynes, John Maynard, F. Mishkin, J. Tobin. The empirical bases of
research totaled data were published in the information materials of the Agency
of the Republic of Kazakhstan on Statistics. National Bank of Kazakhstan and
the Agency of the Republic of Kazakhstan on regulation and supervision of
financial market and financial organizations.
Practical contribution of
research. The results can be used in the teaching of subjects «Economic
Policy», «State Investment Strategy», by state authorities in the formation of
the priority areas of the monetary and investment policy.
The role of monetary policy in
the process of interaction of financial and real sectors of economy, first of
all, is shown in support of optimum value of money
supply that is in conformity of the money offer from financial sector to
effective demand from economic agents of real
sector. In this case costs from storage of money are minimum, and, with other
things being equal, in economy the maximum effect is reached, that is the offer
of money provides manufacture and realization of gross
domestic product and, accordingly, its growth.
Excess of money offer over effective demand can make active inflationary
processes and lead to demand inflation. In situation when the offer of money
below real effective demand, in the conditions
of unfavorable conjuncture can lead to decrease in level of financing of
long-term industrial investments, and in conditions of high expected
profitableness from capital investments usually leads to progressive
development of monetary sector.
As it is known, industrial
investments play the leading part in economy development. The low offer of
monetary resources, even in case when investors have desire to invest, can
break investment process. The role of financial sector as source of long-term
investments becomes stronger in this case. Readiness of investors to incur the
high expenditures connected with reception of
tools of financing, induces financial
institutions to expand the list of financial services, including directed on
accumulation the free money resources. «Offer growth «long» money forms
foundation for financing of those investment projects which otherwise would not
be implemented» (3)
Summarizing the aforesaid, it
is possible to draw the conclusion that monetary and credit regulation,
providing the optimum monetary offer should be directed on creation of
favorable conditions for increase in profitableness of industrial investments
The concept of transmission mechanism is not new in the economic theory; initially it was
presented in Keynes analysis. According to the scientist, the transfer
mechanism is the system of variables through which the offer of money
influences to economic activity, by influence towards investment demand, under
condition of change of psychological situation in the monetary market, directed
for decrease of percent norm.
Financial structure of economy makes the great influence the mechanism of transmission of monetary and credit policy, and also macroeconomic conditions. Along with it, efficiency of transmission of monetary
policy also is defined by degree of intervention of a state into processes of
functioning of the financial markets.
The world practice uses some
channels of transmission of monetary policy, the cores among them are:
interest rate
channel of which leads to change of investments’ level, savings and cumulative
demand, through change of limiting costs of loan;
exchange rate
channel, influences through cumulative demand (changing pure export) and the
cumulative offer (changing internal cost of import);
asset price
channel, influences financial assets, real estate;
credit
channel, «operates through non-price rationing of credit, caused by the
dissymmetric information and (or) target crediting».
Let us consider the mechanism of action for the percentage channel of transmission of monetary policy.
According to the economic theory, usually the percentage channel of
transmission means «the set of economic variables reflecting interrelation
between the correcting impulse (change of the interest rate, one or several), generated
by the central bank and transferred to real sector of economy with the help of
tools of monetary policy» (4). As a rule, interest rate change involves change
of preferences of economic agents concerning time structure of savings and
consumption that finally influences to level of investments into the fixed
capital. This principle was presented in due time to IS-LM curve of Keynes
model.
Essence of the transmission mechanism consists in average interest rate defined by the central
bank which plays an essential role in establishment of equality of supply and
demand on the monetary market. Change
of volumes of consumption and investments is caused by change of costs for
using debt financing resources in which basis growth or decrease in the real
rate of percent lies.
The channel for assets’ prices. According to the monetarists, traditional Keynes model
IS-LM does not consider influence on investments the changes on prices of other
assets, such as real estate.
The expansion monetary policy
leads to growth of the monetary offer, economic agents have possibility surplus
of money to direct to the security market that causes growth of demand for
stocks and their prices. According to the theory of choice of by J.Tobin,
investors aspire to make capital investments as high risky, and less risky
financial tools. The problem of provision on diversification of portfolio is
more priority problem for the investor, rather than reception of high profit.
The coefficient q by Tobin is parity
of market capitalization of the companies to regenerative cost of the capital.
At high value of this factor, the companies perform additional issue of stocks
and involve with that the capital for financing of investments (6).
Real estate costs also influence dynamics of
investments. Expansion leads
to growth of demand and, accordingly, increases in prices for habitation. The
increase in costs of habitation rises its cost in comparison with regenerative
cost that positively influences growth of volumes of building.
The channel on crediting. Fluctuations of investment expenses is impossible to explain only by
change of level of interest rates owing to what there was theory which suggests
to consider asymmetry of the information in financial markets (7). The given
theory considers availability of the bank credit to the companies which are
incapable to involve resources from the financial markets.
The credit channel can operate
through potential volume of credits of banks which depends upon the monetary
policy of the Central bank, and the credit policy of banks which in turn,
varies under the influence of the offer of money.
Change of bank
crediting volume depending on kind of monetary policy. At expansion monetary policy of the Central
bank, it occurs growth of monetary base, volumes of bank deposits that allows
banks to increase crediting volumes grow. Thus, investment expenses of
companies in parallel grow. However, this channel is not characteristic for the
countries with the developed financial market as banks, for example, can invest
funds, at increase of monetary base, not in deposits but also in other
financial resources.
Credit policy of banks in
connection with change of monetary policy of the Central bank. This approach is
actual for developed financial markets where the risk of “unfavorable"
(false) choice increases. The monetary policy influences for investment policy
of banks in several ways.
1.
At expansion monetary and credit policy, market
evaluation of actions go up, capitalization of companies increases, risk of
false choice decreases, volume of crediting by banks increases that leads to
growth of investments, monetary and credit restriction leads to opposite
results.
2.
Change of
volume of monetary offer leads to change of nominal interest rates that is
reflected in investment activity of the companies. At monetary expansion
nominal interest rates under credits decrease, expenses of the companies on
debt service decrease that leads to growth of well-being of the companies.
Improvement of the financial status of companies reduces credit risks
(asymmetry of information decreases), in this connection, banks increase
volumes of crediting which goes for financing of investments. And, on the
contrary, at restriction politician, there is return situation.
The channel of the
exchange rate. Countries with
undeveloped financial market and high level dollarization of economy this
channel is the basic channel of transmission. As a rule, monetary and credit
restriction leads to growth of the exchange rate, to decreasing of import and net
export cost, and as consequence, output volume.
At
expansion monetary policy
decrease in interest rates conducts to reduction in demand of investors for
assets in national currency and to decrease of real exchange rate, increase in
net export and cumulative demand.
In
order to make econometrical model of the
transmission mechanism of monetary policy we were based on the following
factors:
fixed investments per capita (thousand tenge) – Invfpc (th. TGZ);
the nominal rate of interest on credits in national currency (%) –
RNATCUR (%);
interest rate on credits in USA dollars(%)
– RDOL (%);
interest rate on credits in EURO (%)
– REURO (%);
credit volume on economy per capita (thousand tenge) – Creditspc (th. TGZ);
real estate cost (cost for new buildings) in dollars – AssCost (USD);
net export per capita per capita (thousand dollars) – Netexportpc (th. USD);
official
exchange rate (1 tenge/ USA dollars) - exchrate (1KZT/USD).
official
exchange rate (1 tenge/ USA dollars) - exchrate (1KZT/USD).
We research how the transmission mechanism works on the Kazakhstani market. Information about used indicators was
obtained from the statistical yearbooks of the Kazakhstan Statistics Agency
National Bank of Kazakhstan.
With
the view to expose the degree connectivity (closeness) make up the correlated
matrix between: fixed investments per capita and the
nominal rate of interest on credits in national currency and the interest
rate on credits in USA dollars and the interest rate on credits in EURO.
In this connection, in our
further analysis we shall evaluate only the value of the nominal rate of
percent on credits in the national currency. The based Method of Least Squares
we estimate the model’s coefficients:
The results presented in the table1:
|
Dependent Variable: INVFPC |
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|
Method: Least Squares |
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Date: 02/04/10 Time: 22:36 |
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|
Sample: 2000:1 2007:4 |
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Included observations: 32 |
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|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
C |
226.4024 |
37.15085 |
6.094137 |
0.0000 |
|
RNATCUR |
-16.57626 |
5.987967 |
-2.768261 |
0.0096 |
|
R-squared |
0.203468 |
Mean dependent var |
127.4076 |
|
|
Adjusted R-squared |
0.176917 |
S.D. dependent var |
62.77585 |
|
|
S.E. of regression |
56.95272 |
Akaike info criterion |
10.98278 |
|
|
Sum squared resid |
97308.35 |
Schwarz criterion |
11.07439 |
|
|
Log likelihood |
-173.7245 |
F-statistic |
7.663270 |
|
|
Durbin-Watson stat |
0.186652 |
Prob(F-statistic) |
0.009566 |
|
Small
value R-squared=0.203468 shows that basically, the achieved model in an investigated time interval in
Kazakhstan does not work. It is caused,
according to the implementer, that investments into the fixed capital in Kazakhstan
are formed in a greater degree at the expense of own funds of the enterprises
(31 %) and foreign investments (25%). Thus, the rate of market percent does not
stimulate growth in real sector of economy and crediting crushing terms
(average 20 % annual) do not allow economic agents to develop business at the
expense of extra funds of the bank system of Kazakhstan.
The Factor of pair
correlation between investments into the fixed capital per capita and credits
per capita shows close connection between them:
Estimate the model’s
coefficients:
The results presented in the table 2:
|
Dependent Variable: INVFPC |
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|
Method: Least Squares |
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|
Date: 02/04/10 Time: 23:04 |
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|
Sample: 2000:1 2007:4 |
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|
Included observations: 32 |
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|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
C |
78.91876 |
6.907321 |
11.42538 |
0.0000 |
|
CREDITSPC |
0.415442 |
0.039178 |
10.60392 |
0.0000 |
|
R-squared |
0.789390 |
Mean dependent var |
127.4076 |
|
|
Adjusted R-squared |
0.782369 |
S.D. dependent var |
62.77585 |
|
|
S.E. of regression |
29.28549 |
Akaike info criterion |
9.652523 |
|
|
Sum squared resid |
25729.21 |
Schwarz criterion |
9.744132 |
|
|
Log likelihood |
-152.4404 |
F-statistic |
112.4432 |
|
|
Durbin-Watson stat |
0.121689 |
Prob(F-statistic) |
0.000000 |
|
Thus, increase in credits
volumes per capita do not lead to increase of investments into the fixed
capital per capita. In fact, average 55% goes for replenishment of circulating
assets.
As the market of corporate
securities in Kazakhstan is not developed, the transmission channel through the
prices practically does not operate. 95,98 % of performed transactions on KASE
are for non-government securities admitted to the auctions on KASE under the
official list of the category “A”. This fact grows out of that assets of the
basic investors of securities market – Cumulative pension funds, banks and
insurance (re-insurance) organizations are subject to placing of the emitters
in securities, included in KASE official lists on category “A” (8). Demand in
the country on the action depends not only the monetary offer, it also depend
upon demand from institutional investors and foreign investors.
In
this connection, implementers in order to make model referred to the prices for real estate
(AssCost). In comparison
with the above-stated channels, the closest linear communication with
investments factor into the fixed capital per capita is observed at factor of
the prices for real estate. Cost increase for real estate in Kazakhstan
stimulated investments into habitation building. Besides, cost increase for
habitation was supported by additional investments from bank sector side.
During the investigated period the volume of such kinds of bank products, as
mortgage and consumer crediting has been increased. So, within 2007 consumer
credits were grown up by 55,5 % up to 1208,1 billion tenge, mortgages credits
were increased by 72,6 % to 683,6 billion tenge (9).
The based Method of Least
Squares we estimate the model’s coefficients:
The results presented in the table 3:
|
Dependent Variable: INVFPC |
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|
Method: Least Squares |
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|
Date: 02/04/10 Time: 23:07 |
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|
Sample: 2000:1 2007:4 |
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|
Included observations: 32 |
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|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
C |
27.36119 |
4.271715 |
6.405200 |
0.0000 |
|
ASSCOST |
1.268267 |
0.046320 |
27.38052 |
0.0000 |
|
R-squared |
0.961523 |
Mean dependent var |
127.4076 |
|
|
Adjusted R-squared |
0.960241 |
S.D. dependent var |
62.77585 |
|
|
S.E. of regression |
12.51733 |
Akaike info criterion |
7.952567 |
|
|
Sum squared resid |
4700.506 |
Schwarz criterion |
8.044175 |
|
|
Log likelihood |
-125.2411 |
F-statistic |
749.6929 |
|
|
Durbin-Watson stat |
0.393104 |
Prob(F-statistic) |
0.000000 |
|
Thus
we get next equation:
Let us go for consideration the model of dependence
the volume of net export from exchange rate. The dependence of volume of net
export per capita from exchange rate are presented on the Figure 1:
Figure 1.
Let us go to estimate statical model using the MLS:
The simulation results presented in the table 4:
|
Dependent Variable:
NETEXPORTPC |
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|
Method: Least Squares |
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|
Date: 02/02/10 Time: 21:33 |
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|
Sample: 2000:1 2007:4 |
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|
Included observations:
32 |
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|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
C |
1.283811 |
0.101125 |
12.69526 |
0.0000 |
|
EXCHRATE |
-0.008384 |
0.000723 |
-11.59348 |
0.0000 |
|
R-squared |
0.817528 |
Mean dependent var |
0.114281 |
|
|
Adjusted R-squared |
0.811446 |
S.D. dependent var |
0.092019 |
|
|
S.E. of regression |
0.039957 |
Akaike info criterion |
-3.541554 |
|
|
Sum squared resid |
0.047897 |
Schwarz criterion |
-3.449945 |
|
|
Log likelihood |
58.66486 |
F-statistic |
134.4088 |
|
|
Durbin-Watson stat |
1.226980 |
Prob(F-statistic) |
0.000000 |
|
The figure of residual
values is presented on the Figure 2:
It
is found out here obvious autocorrelation of some of the rests which proves to be true by
statistics of Durbin-Watson about presence of positive correlation (0
<1,2270 <dl=1,3734). Thus, we do not deal with statistic model but we
consider dynamic model.
Let
us go for consideration of the dynamic model ADL (1,1,1) – models with
autoregressive distributed delays:
|
Dependent Variable:
NETEXPORTPC |
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|
Method: Least Squares |
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|
Date: 02/02/10 Time: 22:06 |
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|
Sample: 2000:1 2007:4 |
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|
Included observations:
32 |
||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
C |
0.661163 |
0.272827 |
2.423378 |
0.0221 |
|
NETEXPORTPC1 |
0.515195 |
0.205146 |
2.511356 |
0.0181 |
|
EXCHRATE |
-0.005290 |
0.001771 |
-2.987363 |
0.0058 |
|
EXCHRATE1 |
0.000995 |
0.001608 |
0.618987 |
0.5409 |
|
R-squared |
0.851418 |
Mean dependent var |
0.114281 |
|
|
Adjusted R-squared |
0.835498 |
S.D. dependent var |
0.092019 |
|
|
S.E. of regression |
0.037322 |
Akaike info criterion |
-3.622011 |
|
|
Sum squared resid |
0.039002 |
Schwarz criterion |
-3.438794 |
|
|
Log likelihood |
61.95218 |
F-statistic |
53.48253 |
|
|
Durbin-Watson stat |
1.640041 |
Prob(F-statistic) |
0.000000 |
|
The analysis of residual values:
- is not find out here autocorrelation (Ð-criteria Breush-Godfrey
ÀR(1) alternative 0,69)
|
Breusch-Godfrey Serial Correlation LM
Test: |
|||
|
F-statistic |
0.162881 |
Probability |
0.689697 |
|
Obs*R-squared |
0.191886 |
Probability |
0.661351 |
- is not find out here departure from the
normality of distribution et (P-criteria
Jarque-Bera=0,247)
-
is not find
out here the
heteroscedasticity (Ð-criteria White = 0,09):
|
White
Heteroskedasticity Test: |
|||
|
F-statistic |
2.059493 |
Probability |
0.094834 |
|
Obs*R-squared |
10.58498 |
Probability |
0.102082 |
Summarizing,
it is possible, based on the above-stated data, to use the theory of
statistical conclusions and on its basis to use the results obtained at
application of t and F-criteria. Factor at exchrate1
statistically is not sufficient. Thus, have received model of dependence of
volume of net export from the exchange rate:
The
given equation shows inverse relationship between the exchange rate and volume
of net export, thereby theoretical conditions are observed.
So, the given work investigated influence of the
transmission
mechanism of monetary policy on
dynamics of investments into the
fixed capital. Interaction of financial and real sectors
of economy is shown through the transmission mechanism allowing the central bank to
influence to the level of demand and offer in the country through interest
rates.
As a result theoretical preconditions about influence
of analyzed factors have been confirmed by empirical calculations and presented
as econometrical models which can be used by researchers for performing of
economical analysis.
At the same time, the prices for the real estate and
access to crediting make the greatest influence dynamics of investments among
the considered four channels of the transmission mechanism of the monetary and
credit policy.
Structure and functions of process of the monetary
transmission on the percentage channel are presented by stage transfer of
regulating impulses through the chain of interest rates by the principle from
short-term to the long-term rate.
For achievement of final goals of monetary and credit
regulation of the central bank activity should be directed for dynamical
process of price adaptation of banks in the market of interbank credits.
List of sources
1.
Statistical yearbooks of the Kazakhstan Statistics
Agency// http://www.stat.kz;
2.
Bank for
international Settlements (2001b) Modeling aspects of the inflation process and
the monetary transmission mechanism in emerging market countries, BIS Papers,
No8, November
3.
Rumyanceva O.
Monetary regulation and the questions of money supply optimization // Bank
bulletin, 2006, Feb, p. 104-108, P. 105
4.
Brishtilev A.
Interest rate channel of transmission mechanism of monetary policy// Bank
bulletin, Jan., 2007, p. 35-41, P. 36.
5.
Tobin J.
Monetary policies and the economy: the transmission mechanism // Southern
Economic Journal, 44, 1978, pp. 421-431.
6.
Bernanke, Ben
S., Mark Gertler Inside the Black Box: The Credit Channel of Monetary Policy
Transmission // Journal of Economic Perspectives, Fall 1995, 9, p. 27-48.
7.
Agency of the Republic of Kazakhstan on regulation and supervision
of financial market and financial organizations// http://www.afn.kz
8.
Annual
Report of National Bank of Kazakhstan, 2007, http://www.nationalbank.kz