Economy Regulating by Using the Credit Multiplier

The author asserts that the credit multiplier of the country’s banking system regulates the growth of the economy and characterizes the level of its development. It is proved that the limiter and the indicator of economic development is the share of value added by production in the aggregate product, which determines the existing technological mode. It is proved that the ratio of the nominal GDP to the monetary base of the Central Bank is identical to the product of the credit multiplier and the velocity of money circulation that is constant for each technological mode. Here, industrial economies, developed economies, and highly developed economies are considered. The marginal zero inflation multiplier is determined, at which the real GDP growth stops and a transition to a deflationary crisis occurs. It is established that the Central Bank’s increase in the interest rate to reduce inflation leads to a sharp decrease in the multiplier and lending to production, while credit regulation allows us to reduce inflation by targeting without changing the interest rate and without reducing lending. A method for regulating the economy with a credit multiplier using an engineering calculator was developed. The economic recovery of Ukraine in 2024–2025 was simulated.