Correlation between economic growth, oil prices and the level of monetization of economy in oil and gas exporting countries: challenges for Russia

The low monetization of the Russian economy occasionally provokes serious debates on the necessity of its substantial increase in order to promote economic growth. However, this step will not change the crisis situation due to the counteraction of structural factors and flaws in monetary regulation. The study of the level of monetization in the periods of stagnation and decline in oil prices in the countries that export raw materials shows it is impossible to promote economic growth only at the expense of additional money supply. The policy of inflation targeting in commodity-based developing economies proves efficient only if commodity prices are growing, when monetary policy restrains excessive credit activity. At present, falling oil prices and a liberal foreign exchange regime stimulate high inflation and decline in credit activities. Therefore, during the time of negative commodity market conditions, it is necessary to readjust monetary regulation so that it could counteract deleverage processes in the real sector of economy. The dynamics of credit activities should become the main regulating indicator instead of the consumer price index. The Bank of Russia should start lowering interest rates if credit activities are declining, even if the consumer price index remains high. It will be possible to return to neutral monetary policy only after the falling trend in oil prices is reversed and credit activities increased.