The above facts prove the fact that there is a link between the fiscal and monetary
policies introduced by the government and condition of the country’s financial market,
possibility to involve its infrastructure to finance the needs of the state, the business
and the citizens, who wish to realize their financial interests.
The role financial markets play in shaping the national fiscal and monetary policy
is shown in Fig.1.
Figure 1. The role of financial markets in shaping the national fiscal
and monetary policy
Source: compiled by the author
The banking sector in the financial market has the greatest influence on the
formation of fiscal and monetary policy. Within it there is a movement of financial
assets, including from the budget sphere, the exchange of money resources, which is
directed from business entities to fiscal authorities, is realized. The banking system is
the first link in the implementation of monetary policy.
Trends in the insurance sector should also be taken into account when fiscal and
monetary policy vectors are formed. Insurance companies that provide life insurance
services, the so-called life insurance segment, have the right to tax on profits at special
reduced rates, and the price of insurance services depends on the level of these rates
set by tax authorities. At the same time, life insurance is considered an alternative to
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Financial
market
Banking sector
Insurance sector
Credit co-
operation sector
Investment sectorр
Financial and
leasing companies
sector
Formation of the
state budget
Minimizing
budget deficit
Support for
macroeconomic
equilibrium
Coordination of
public
procurement
Setting the
optimal taxation
Stimulating the
economy through
the transfer system
Issuing national
currency
Stabilizing prices
for goods and
services
Inflation control
Setting interest
rates
Stabilization of
economic growth
Supporting
payments balance
Control of money
supply in
circulation
Transactions with
government
securities in
circulation
Forms the infrastructure
for conducting financial
transactions
Accumulates financial
assets; provides for their
preservation and growth
Creates conditions for
cooperation between
financial donors and
financial recipients
Serves as a source of
financing the needs of
actors at micro, meso
and macro levels
Role in fulfilling the tasks set by the policy
Forms the basis for
taxation by organizing
the activities of financial
institutions
Mediates capital
circulation in the
financial system
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