Financial sector – source of stable financing of the economy

Abstract

Introduction. The world economy has been experiencing a systemic financial crisis since 2008, as a result of which highly developed countries have been in a state of depression and teetering on the brink of deflation. This crisis coincided in 2020 with the global crisis of a sharp decline in real GDP caused by the COVID-19 pandemic. The conditions for a possible entry of the country's economy into stable growth are ambiguous. Problem Statement. Highly developed countries have taken steps to regulate the sharp decline in real GDP due to the pandemic, leaving financial markets overflowing with cheap liquidity. This threatens to increase inflation, the collapse of stock markets and the continuation of the global financial crisis if cheap liquidity does not become an investment resource for sustainable financing. Purpose. Study of the interaction of the real and financial sectors in the country's economy through changes in the amount of cash in circulation and with the help of the state's investment policy on sustainable financing and determining the consequences of the collapse of the value of financial securities. Materials and Methods. The data of the International Finance Corporation was used, according to which, in particular, in emerging markets, there are opportunities for climate investment worth about 23 trillion dollars. US by 2030, while in Ukraine they are estimated at 73 billion dollars. USA. Results. A study of the interaction of real and financial sectors in the economy through the state's investment policy for sustainable financing and identified the consequences of the collapse of the value of financial securities. It has been determined that an increase in cash from the financial sector proportionally reduces inflation and a decrease increases it. Therefore, when targeting inflation within specified limits, the banking system must change the amount of cash in the economy in proportion to its change in the financial sector. With a constant amount of cash in the economy, inflation decreases proportionally if the cash of the financial sector and the currency balance increase. Conclusions. Government regulation of investment in the real sector and investment by the financial sector in stable financing may be another impetus for economic growth and overcoming the systemic financial crisis.