Essence and reasons of Inflation occurrence, its types

 

Running Inflation:

When the movement of price accelerates rapidly, running inflation emerges. Running inflation may record more than 100 per cent rise in prices over a decade. Thus, when prices rise by more than 10 per cent a year, running inflation occurs. When prices are rising at double or triple digit rates of 20, 100 or 200 per cent a year, the situation may be described as galloping inflation. Galloping inflation is really a serious problem. It causes economic distortions and disturbances.

 

Monetary Inflation:

Monetary inflation is directly related to control of money. It is a direct result of supply of currency, excessive money creation cause monetary inflation. The printing of more currency by the government increases the inflation rate.

 

Built-in inflation:

Built-in inflation induced by adaptive expectations, often linked to the "price/wage spiral" because it involves workers trying to keep their wages up (gross wages have to increase above the CPI rate to net to CPI after-tax) with prices and then employers passing higher costs on to consumers as higher prices as part of a "vicious circle." Built-in inflation reflects events in the past, and so might be seen as hangover inflation.

 

4. Inflation Rate in Kazakhstan

 

Inflation rate in Kazakhstan, source taken from CIA – Central Intelligence Agency, table is accurate as of February 19, 2010

Year	Inflation rate (consumer prices)	Rank	Percent Change	Date of Information
2003	6.00 %	58		2002 est.
2004	6.60 %	59	10.00 %	2003 est.
2005	6.90 %	166	4.55 %	2004 est.
2006	7.60 %	168	10.14 %	2005 est.
2007	8.60 %	175	13.16 %	2006 est.
2008	10.80 %	198	25.58 %	2007 est.
2009	7.53 %	197	57.41 %	2008 est.
2010	7.30 %	169	-57.06 %	2009

Definition: This entry furnishes the annual percent change in consumer prices compared with the previous year's consumer prices.

Equivalent Data From the International Monetary Fund

 

Rate

The two main methods used to calculate the inflation rate are:

Base period: This method is the more common of the two and assigns a relative weight to each element while making calculations.

Chained measurements: In these methods, the contents of the “commodity bundle” are adjusted, along with the prices. Besides, individual time period in which the prices levels fluctuate are also taken into account

Any undesired change in the rate of inflation can affect the economy and national development at large. The appropriate estimation of inflation rates is necessary to get an overview of the national economy. 

 

Inflation Rate: The Formula

 

The equation to calculate the inflation rate is:

 

Inflation Rate = (Po- P-1)* 100 / P-1,

 

Where

Po = the present average price

P-1 = the price that existed last year.

The inflation rate is always stated as a percentage. Another way of calculating the inflation rate is to apply the log rule. The inflation rate is important, since it is subtracted from various economic rates in order to eliminate the impact of inflation. The real increase in wages is also counted by taking into account the prevailing inflation rate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conclusion

As a conclusion to my repor, I would love to point out the main issues described in it. The basic causes of Inflation were covered at AS level. This note considers the demand and supply-side in more details including the impact of changes in the exchange rate and the prices of goods and services in the international economy.

To sum up, any type of inflation could affect the economy of a country badly

Fiscal inflation is a result of excessive government expenditures. When there is fiscal inflation there will be deficit

There are four major types of inflation caused by different economic forces. Two Types of Inflation on the Basis of Cause of Origin: They are Demand Pull Inflation and Cost Push Inflation. Since not all inflation is bad, you don't need to panic every time you hear the mention of inflation on television. You just need to be able to recognize potential signs of inflation so you can be prepared.

Commonly known as administered price inflation, this type of inflation occurs when the industries and professionals decide to increase prices for increasing their profit margins. Oligopolistic appeared when some oligopoly oriented industries have control over demand and supply and they manipulate this to set the price level for increase their profits. A significant point for oligopolistic inflation is it doesn’t exist in financial crises and economic depression.

It is an Increase in the price of such commodity which has its affect on other sectors of economy for instance if price of the crud oil goes up it will directly affect other sectors; its impact on aviation industry can be seen where the fares go up. In recession time it effect adversely and could cause layoffs. When increase of prices in one sector of economy has its effect on other sectors it is known as Sectoral Inflation.

In the case of hyper inflation prices rise is very severe. It is over 1000 per cent per year. There is at least a 50 per cent price rise in a month, so that in a year it rises to about 130 percent times. Hyper inflation is a monetary disease.

The major problem with money is who should issue it. Not only the bank or government, but the buyer, being also the seller of goods and services. Inflation is only causes by the growing cost of raw materials caused by growing interest to borrow money. The increasing amount of money on the market does not cause inflation. 

The inflation rate is the percentage by which prices of goods and services rise beyond their average levels. It is the rate by which the purchasing power of the people in a particular geography has declined in a specified period. The rate of Inflation may be calculated weekly, monthly or annually. However, it is always expressed as an annualized figure.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

List of used literature

 

1) Mises Daily: by Carl Menger Wednesday, January 05, 2005

2) Principles of Economics, Chapter VIII, 1871 by Carl Menger

3) Mises Daily by Robert P. Murphy  Monday, September 29, 2003

4) History of money from Ancient Times to the Present Day by Glyn Davies,

5)  Bolles: Money, Banking and Finance, BiblioBazaar, 2010, Chs. IX, X.

6)  Moxey: Practical Banking, Universal business institute, inc., 1918, Chs. XIII-     XVI.

7) McConnell K.R. “Economics” Infa - M, 1999.

8) Y. S Druzik – “World economy on finish of a century”, 1997.

9) Article by: Denise Woodbury on website: www.answers.com

10)  www.newskaz.ru/economy

11) http://nationalbank.kz/?docid=275

12) www.businessdictionary.com/definition/money.html

13) www.cia.gov

14) www.imf.org

15) www.silkroadintelligencer.com

16) www.answers.com

17) www.afn.kz

18) www.minfin.kz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UNIVERSITY OF INTERNATIONAL BUSINESS

“Finance and Credit” Department

Diary

Of passage of the educational practice

Student of  the II course, group 208

Omargaliyeva Indira

 

The place of the practice: Essence and reasons of Inflation occurrence, its types.

The leader of the practice: Mohammad Amin Sohrabian

 

Date	The name of the Department	Brief description of the executed work	Signature of the practice leader
1 of June	“Finance and Credit” Department of the UIB	Inflation as an Economical Term
2 of June	“Finance and Credit” Department of the UIB	Reasons of Inflation
3 of June	“Finance and Credit” Department of the UIB	Causes of Inflation
4 of June	“Finance and Credit” Department of the UIB	Causes of Rising Inflation in Kazakhstan
5 of June	“Finance and Credit” Department of the UIB	Types of Inflation
6 of June	“Finance and Credit” Department of the UIB	Keynesian Concept and Monetarist view
7 of June	“Finance and Credit” Department of the UIB	Inflation Rate In Kazakhstan

 

Beginning of the practice: 1 of June            The end of the practice: 7 of  June

Signature of the intern:

Confirm the content and volume of the performed work.

The head of the practice: Mohammad Amin Sohrabian

 

Almaty, 2011