The actions of the National Bank in 2014

In January–June 2014, the official refinancing rate remained unchanged. Since August 2012, it remains at 5.5% per annum. In order to implement the monetary policy of the national Bank in 2014 continued provision of second-tier banks loan refinancing, the issuance of short-term notes, attraction of deposits from banks. Along with this, banks fulfill the minimum requirements set by the regulator. According to the plan, the refinancing rate by 2018 can be changed similar to the projected inflation rate. However there is a steady growth of income of population of Kazakhstan.
"Per capita income for June 2014 compared to the same month of 2013 increased by 11.0% in nominal terms and by 3.7% in real terms. Average monthly salary in June 2014 in annual terms increased by 13.5% in nominal terms and by 6.0% in real," reads the document. In addition, the national Bank takes measures aimed at implementation of tasks to ensure stability of the national currency and promote the stability of the financial sector of the country. [22]

 

The monetary anti-inflationary policy

In monetary policy to limit the money supply in order to reduce costs and curb inflationary pressures, using dear money policy. Its meaning is to reduce the reserves of commercial banks. This is done as follows: - the central banks need to sell government bonds on the open market, in order to cut back on the reserves of commercial banks;

 

Among the three kinds of monetary control (open market operations, reserve ratio change, a change in the discount rate) the most important regulatory mechanism is open market operations. Three main tool of monetary policy periodically supplemented by some less important means of control in the form of selective regulation, which concerns the stock exchange purchases [23]

4.2 The nature of anti-inflationary policy

Assessing the nature of anti-inflation policy, it is possible to distinguish the two approaches. In the first approach (developed by the representatives of modern Keynesianism) provides for active fiscal policy maneuvering in public expenditure and taxes in order to impact on effective demand. During inflation, the excess demand, the state limits its spending and increases taxes. The result is reduced demand and lower inflation. However, at the same time limited by the growth of production, which can lead to stagnation and even crisis phenomena in the economy, increasing unemployment. Budgetary policy is conducted and to enhance the demand in a recession. If demand is insufficient, a programme of public investment and other spending, decrease taxes. Low taxes are established primarily in relation to recipients of average and low incomes, which usually immediately realize the benefits. It is believed that thus expanding the demand for consumer goods and services. However, the stimulation of demand by budgetary funds, as shown by the experience of many countries in the 60s and 70s, it may exacerbate inflation. Besides large fiscal deficits limit the government's ability to maneuver taxes or expenditures. The second approach recommended by economists of neoclassical trend, highlighting monetary management, flexibility and indirectly influencing the economic situation. This kind of regulation is carried out formally outside the government's control of the Central Bank changes the quantity of money in circulation and the rate of interest on loans, thereby affecting the economy. In other words, these economists believe that the state should pursue deflationary measures to restrict demand, because stimulating economic growth and sustaining employment by lowering natural rate of unemployment leads to a loss of control over inflation. Modern market economy is inflationary in nature, since it is impossible to eliminate all inflation factors (budget deficit, monopoly, distortions in the economy, the inflationary expectations of the population and entrepreneurs, the transfer of inflation on foreign channels, etc.). It is therefore clear that the task to eliminate the unrealistic inflation. Apparently, so many States are aiming to make it reasonable, controlled, to prevent destructive scale. [24]

Analysis of anti-inflationary policy conducted by the National Bank of the Republic of Kazakhstan

Support the monetary policy of the National Bank the actions of the Government of the Republic of Kazakhstan in the field of budgetary, tax, tariff, structural and social policies is an important part of anti-inflation policy of Kazakhstan.
In order to ensure price stability in the country, the national Bank shall take the necessary measures of monetary regulation using statutory instruments and operations. It should be noted that the national Bank can influence only on monetary factors: money supply, monetary base, domestic credit. Adjusting the amount of money in the economy, the national Bank indirectly influences the formation of consumer prices in the country.

Due to the continued instability of the situation on external markets, and also taking into account the short term nature of monetary policy, it was decided to develop the monetary policy of the Republic of Kazakhstan only for 2013.
In 2013, the national Bank of the Republic of Kazakhstan continued implementing its monetary policy, which main objective is ensuring price stability, which suggested the retention of annual inflation in the corridor of 6.0-8.0 percent.
Solving the issues of ensuring price stability, monetary policy both contributed to the stability of the financial sector. In the framework of the implementation of this task, the national Bank of the Republic of Kazakhstan on a regular basis analyze the operations conducted by banks in different segments of the money and foreign exchange markets to analyze and minimize risks, systemic, as well as reduce the possibility of arbitration.
Using various measures of monetary policy implemented by the National Bank of the Republic of Kazakhstan taking into account the integration processes in the framework of a Single economic space.

 

Anti-inflationary policy includes various techniques for controlling the money supply:
1. Decrease the money supply in circulation through reduction of cash emission by the National Bank;
2. Increase in interest rates for centralized credits in order to rise in price of credit resources and reduce their availability;
3. Increase in reserve requirement of the Central Bank to commercial banks to achieve the compression of the credit multiplier and the restriction of credit expansion of commercial banks;
4. Direct reduction loans from the Central Bank for the same purpose.

 

 

It must be mentioned that the National Bank should continue to hold the exchange rate policy aimed at ensuring a balance between internal and external competitiveness of Kazakhstan's economy. Among the priorities of the National Bank monetary policy may still notice the liquidity support of banks of the second level with the help of the refinancing rate, as well as the reorientation of domestic sources of financing. [25]

 

Conclusion

 

In this study we tried to examine Kazakhstan’s inflation and unemployment by using time series analysis. At the beginning of report, we have explained the brief theory of inflation and the relationship between inflation rate and unemployment rate. At the end of this study, we forecasted inflation and unemployment through Regressive Time Series model separately. We found that this model fits to forecast inflation and unemployment.

An effort was made to find the relationship between unemployment and inflation to confirm the reality of Phillips curve in Kazakhstan by the help of time series data for phase of 2000-2015. Unemployment rate is taken as dependent variable whereas inflation rate and GDP growth rate are taken as independent (explanatory) variables.

Moreover, R- square is 0.59685, it must be conclude, that the explanatory variables “explains” 59.68 % of the variance of unemployment rate. A more exact measure of goodness of fit, which takes into account the number of explanatory variables, is the adjusted R – square. Adjusted R square shows an adequacy of model with 0.53483 that shows independent variables (Inflation and GDP growth rates) can predict 53.48% of variance in dependent variable (Unemployment).

The F statistic shows overall effects of independent variable on our target variable. The F – statistic, which tests the overall significance of the sample regression, is 9.62304.

Regression model is significant because, because P = 0.00273<0.05.The outcome of simple linear regression verifies the reality of positive relationship between unemployment and inflation. It can be saying easily that Phillips curve does not exist in Kazakhstan.

Findings show that inflation and unemployment were much related variables. But there is a positive relationship between them. As we know from the literature of Economics, higher inflation causes lower unemployment and lower inflation causes higher inflation. Thus, findings of this research do not support the same relation.

Likewise, in this report we have covered such popular topic as Anti-inflationary policy of the Republic of Kazakhstan. We have looked at the Action of National Bank, which was taken in 2014, the nature of anti-inflationary policy.