Non-Monetary Factors in the Monetary Policy Transmission Mechanism: Revision of the Inflation Management Strategy

Abstract

The article studies of the role of non-monetary factors in the formation of inflationary processes and their place in the monetary policy transmission mechanism in Russia. The authors analyse the evolution of the theory of inflationary processes within the framework of the public administration system: from the classical ideas of inflation as an exclusively monetary phenomenon to the study of inflationary waves in conjunction with the system cycles of Arrighi’s capital accumulation. The steady increase in the importance of nonmonetary inflation factors requires a revision of the applied analytical tools for modelling inflation. For these purposes, we suggest forming a group of marker non-monetary factors with predictive properties in relation to the consumer price index (CPI), and, accordingly, the prices of consumer goods basket. The article presents the procedure for selecting such factors. It determines the place of non-monetary inflation factors in the monetary policy transmission mechanism and possible channels of their impact on the final rate of inflation. We conclude that it is impossible to build a universal model of inflation due to the constantly changing composition of non-monetary factors and their contribution to the development of inflationary processes. The authors substantiate the thesis about the need to apply the principle of “sliding modeling” to assess the impact of monetary and nonmonetary factors on the rate of inflation by constantly updating the analytical structure describing the dynamics of the CPI.

Keywords

• NON-MONETARY FACTOR
• PUBLIC ADMINISTRATION
• INFLATION
• TRANSMISSION MECHANISM
• MONETARY POLICY