THE ROLE OF THE STATE IN REGULATING INFLATION PROCESS - MONETARIST CONTEXT

The article has been dedicated to one of the actual problems in Georgia – inflation. There is given research of the main reasons of enormously increasing prices on local Products as well as on imported products and services. Among the existing reasons the main reasons are of local originality. For example: overloaded monetary circulation caused by the National Bank’s incorrect monetary and credit politics, monopoly-oligopoly in bank sphere, falling of local production rate caused by pandemic, etc. Some of the reasons are imported, such as increased prices on fuel and on imported products from partner countries, etc. In the article it has been introduced those main branches of national economy, where prices have been tremendously increased. Besides, it should be mentioned imported fuel and food products, transport expenses, medical service, etc. The main aim of the research is to find the ways and methods to overcome inflation crisis. To our knowledge, in order to overcome this problem is development of monetary and credit according to monetarists’ theory which is approved in many countries such as Poland, Estonia, etc. in order to regulate inflation the state should carry out the following measures: growth of local production rate, growth of local products, discharging of monetary circulation from extra money and strict control over these processes, creating competitive environment in bank sector, etc. The mechanism of state intervention in the economy consists of a whole chain of causes and effects. It is headed by the money supply, hence the increase in the money supply, and at the bottom - the state of the economic situation. The monetarist concept of the transmission mechanism is based on the principle that the economic object must act in such a way as to bring as much profit as possible. To do this, it must try to perfect the structure of the asset portfolio and make it one in which it will generate more revenue. The concept of an asset portfolio includes not only cash and securities, but also fixed assets presented in various forms. Portfolios are balanced when the profitability of the marginal units of each type of asset is equal / balanced. The result is that there is no need to redistribute interchangeable assets. This balance is broken by the supply of extra money. The source of its growth may be open market operations, ie the purchase of government bonds by the central bank, for example. After selling the securities, the farms own much more money than they had before.