Monetary and Institutional Policy in the Context of Intensive Structural Transformations

Abstract— The article examines the possibilities of monetary and institutional policy in an economy undergoing intensive structural restructuring. Based on a formalized macroeconomic model, it is shown that, given the appropriate dynamics of growth in the money supply, the regulator is able to ensure that output is maintained at the potential level without the occurrence of accelerating inflation. It has been established that, depending on the price formation mechanism, inflation either gradually fades or stabilizes at a constant level. The role of institutional mechanisms for indexing the money supply is analyzed and the concept of a “two-headed monetary system” is substantiated, which provides for the division of money into a means of payment and an inflation-protected monetary asset. A condition for the stability of such a system is derived, linking the share of indexed assets with the elasticity of prices for the money supply. It has been established that when this condition is met, indexation does not change the limiting quasi-stationary state of the economy, but affects the shape of the transition trajectory, including the possibility of loop-like dynamics and temporary overheating. It has been shown that the introduction of a “two-headed system” helps to reduce transaction costs and increase the sustainability of the economy in conditions of high inflation.