Inflation and Monetary Policy: Analysis of the Impact of Inflation and Central Bank Policy on the National Economy

The subject of the study is the inflationary processes and monetary policy of the Bank of Russia. The purpose is to analyze the impact of these factors on the state of the Russian economy. To achieve this goal, the following tasks have been set: to consider the theoretical aspects of the relationship between inflation, PREP and economic growth; to analyze the dynamics of inflation and the key tools of the PREP of the Bank of Russia for the period from 2010 to 2024; to conduct an econometric analysis of the impact of inflation and the key rate on GDP growth. The relevance of the topic arises from the importance of finding a balance between ensuring price stability and supporting economic growth within the framework of the policy of the Bank of Russia. The methods of comparative and statistical analysis and econometric modeling are used in this work. The dynamics of inflation, key rates, GDP growth rates and lending to the economy are analyzed from 2010 to August 2024. A regression model of the impact of inflation and the key rate on GDP growth was built. The results of the analysis showed that periods of accelerated inflation and a tightening of the monetary policy were accompanied by a slowdown in economic activity. An increase in annual inflation by 1 percentage point on average slows quarterly GDP growth by 0.096 percentage points, and an increase in the key rate by 1 percentage point reduces the GDP growth rate by 0.137 percentage points (other things being equal). The model explains 58% of the variation in the dependent variable. The coefficients are statistically significant. The conclusion is made regarding the need for the Bank of Russia to pursue a balanced PREP aimed at ensuring price stability without compromising economic growth. The scientific novelty of this study lies in the quantitative assessment of the effects of inflation and the key rate on economic dynamics in Russia based on current data. The prospects for further analysis are related to the use of alternative econometric methods and the study of monetary transmission channels of PREP.

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