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Money supply formation in the global economy and financial sanctions, or a Story about how the American dollar turned to non-American

Vol. 25, Iss. 1, JANUARY 2019

Received: 23 October 2018

Received in revised form: 6 November 2018

Accepted: 20 November 2018

Available online: 29 January 2019

Subject Heading: MONETARY ACCOMMODATION

JEL Classification: E51, E52, E58

Pages: 130–143

https://doi.org/10.24891/fc.25.1.130

Burlachkov V.K. Moscow State Institute of International Relations of the Ministry of Foreign Affairs of the Russian Federation, Moscow, Russian Federation
vkburl@gmail.com

ORCID id: not available

Subject Money supply in global economy is a total of world currencies circulating outside the boundaries of their official jurisdictions. The balance of money demand and money supply is the main condition for sustainable global pricing process. The development of the global financial market predetermines the complication of money supply formation in the global economy.
Objectives The study aims to examine the modern specifics of money supply formation in the global economy, define reasons for changes in the process of money supply formation, elaborate a methodological framework for increasing the efficiency of regulatory measures under financial sanctions.
Methods The research involves methods of scientific abstraction, induction and deduction, synthesis, and comparative analysis.
Results The paper describes the specifics of money supply formation in the global economy. I analyzed the aspects of modern mechanism of global money creation, defined the importance of monetary and macroprudencial policies and their roles in the global money supply, examined the function of the money mechanism of global economy under financial sanctions.
Conclusions In the modern global economy, the money supply formation is a result of credit operations of commercial banks. These banks are able to undertake liabilities in any global currency through creating a deposit in this currency. The main volume of money supply in USD is created nowadays by other than U.S. commercial banks. However, this practice has not led to inflationary tendencies. Such a situation is predetermined by the effect of Basel standards that limit the credit activities of commercial banks.

Keywords: money supply, global economy, demand for money, inflation, deflation

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