IDEAS home Printed from
   My bibliography  Save this article

Essay on Monetary Policy and Economic Growth


  • Bojan Dimitrijević

    () (Faculty for business in services, dean)

  • Ivan Lovre

    () (Faculty of business economy, teaching assistant)


The global economic crisis has led to the global reduction in credit activity, a fall of domestic product as well as the level of foreign direct investments, and has imposed the sources of economic growth as one of the key problems. Therefore, the objective of this paper is the monetary policy review and the task is to research the circumstances when it is possible for the money supply to become the source of economic growth without inflationary consequences. The paper analyzes the demand and supply functions for money, the quantity theory of money, velocity of circulation and instruments of monetary policy and strives to propose such a combination of measures of a new economic policy based on theoretical arguments that will stimulate economic growth. This aim requires a completely new approach to the mechanism of money creation and selection of monetary instruments, proposing the money supply connection to the growth of real GDP, the money supply control as the key instrument, and a low and stable long-term interest rate as the factor for maintaining stability of velocity. In such case, monetary policy will have a real impact on economic growth, even in the long run.

Suggested Citation

  • Bojan Dimitrijević & Ivan Lovre, 2013. "Essay on Monetary Policy and Economic Growth," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 2(1), pages 111-138.
  • Handle: RePEc:cbk:journl:v:2:y:2013:i:1:p:111-138

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    More about this item


    quantity theory of money; velocity of money; deposit multiplication; interest rate; new monetary policy;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbk:journl:v:2:y:2013:i:1:p:111-138. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.