VIII Международная студенческая научная конференция Студенческий научный форум - 2016

Actualization of the topic of research is determined by economic and political realities such as necessity of provisioning of sustainable economic growth and welfare of individuals and society. Besides, in order to achieve real progress in the competition not only in the domestic market but also in the world competition with countries of the 1^st world, it is also compulsory to provide significant enlargement and strengthening of Russian macroeconomic policy. Moreover, the conditions of inflation and unemployment in Russian Federation sometimes do not have positive consequences. Due to, there do exist some negative aspects in this process. That is why, this topic became to play more important role.

The main theoretical basis of inflation and unemployment

Inflation and unemployment - it is a very difficult socio-economic phenomena. And therefore it affects the interests of virtually every member of our society. They are present in varying degrees of any modern economy. It is an essential companion of the market economy, together marching in lockstep, like a natural disaster with serious socio - economic consequences for the population directly states in the territory of which these processes occur.

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. As usual, every Central bank tries to make an attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

The essence of inflation is that the national currency devalued in relation to the goods, services and foreign currencies, preserving the stability of its purchasing power. Some Russian scientists have added to this list yet, and gold, giving it still the universal equivalent.

Modern inflation has a number of distinctive features: if earlier, inflation was of local character, now - ubiquitous, all-encompassing; if earlier it covered a longer or shorter period, ie It had periodic nature, but now - chronic. Modern inflation is affected by many factors, both monetary and non-monetary.

Unemployment - a social and economic phenomenon in which part of the workforce is not engaged in the production of goods and services. Unemployed along with employees form the workforce of the country. In real economic life of unemployment acts as an excess of labor supply over demand. Unemployment - an inherent property of a market economic system. The number of unemployed increases significantly during the crisis and decrease in times of boom.

In real life, in a market economy "full employment" is constantly accompanied by unemployment. Unemployment - is part of the working population, either temporarily or permanently lost their jobs.

Demand for labor depends on the amount of capital spent on labor, or variable capital. The relative reduction of capital entails a reduction in the relative demand for labor.

1.2 The main reasons and types of inflation and unemployment

The main causes of inflation are the following factors:

- Reduction of the gross domestic product (GDP) at the constant volume of money in circulation;

- An increase in public spending due to emission;

- Excessive expansion of the volume of lending companies and individuals;

- Monopoly in the economy, when large firms are able to determine the cost of production and costs.

As the pace of price increases inflation can be divided into three types.

• Creeping inflation means that prices are rising slowly, by about 3-5% a year, as is the case in developed countries. Moderate inflation - a positive factor for the economy, it stimulates demand, promotes the expansion of production and investment.

• Galloping inflation is characteristic of developing countries. Price growth is 10-50% per annum.

• Hyperinflation - companion of crises and wars. The price increase exceeds 50% and may reach astronomical values. Most often it occurs when the state "includes" printing money machine for the financing of its exorbitant cost.

Also, we can calculate the inflation rate:

Unemployment

The reason of unemployment is when part of the active population cannot find jobs, become "superfluous" population - a reserve army of labor. Unemployment increases during the economic crisis and the subsequent depression as a result of a sharp reduction in the demand for labor.

The main types of unemployment:

• Frictional unemployment- is unemployment due to the time workers spend in job search. A certain amount of frictional unemployment is inevitable, for two reasons. One is the constant process of job creation and job destruction; the other is the fact that new workers are always entering the labor market;

• Structural unemployment- is unemployment that results when there are more people seeking jobs in the labor market than there are jobs available at the current wage rate.

• Cyclical unemployment- is the deviation of the actual rate of unemployment from the natural rate.

Also, it is necessary to add the natural unemployment, which is determined by the difference between frictional and structural unemployment.

Besides, we have an opportunity to calculate the unemployment rate and labor force participation rate:

1.3 Relationships between inflation and unemployment (Phillips curve)

A related concept is that of the non-accelerating inflation rate of unemployment (NAIRU). This is conceptualized as the lowest rate of unemployment that can be maintained without causing the economy to “overheat.” The concept of the NAIRU can best be understood by looking at the Phillips Curve.

Pic.1 Phillip’s curve

Phillips analyzed annual wage inflation and unemployment rates in the UK for the period 1860 – 1957, and then plotted them on a scatter diagram. The data appeared to demonstrate an inverse and stable relationship between wage inflation and unemployment. Later economists substituted price inflation for wage inflation and the Phillips curve was born. When economists from other countries undertook similar research, they also found very similar curves for their own economies, but recent statistics support the view that the extreme tradeoff between unemployment and inflation that occurred in the past no longer exists.

The “natural rate” and the NAIRU would mean essentially the same thing. Unemployment higher than the NAIRU, like unemployment higher than the “natural rate,” would be associated with low production and a sluggish economy. The Phillip curve represents the relationships between inflation and unemployment rate. Although he had precursors, A. W. H. Phillips’s study of wage inflation and unemployment in the United Kingdom from 1861 to 1957 is a milestone in the development of macroeconomics. Phillips found a consistent inverse relationship: when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly.

Analytical and quantitative part

2.1 Dynamics of inflation in Russian Federation (graphs, tables, conclusions)

Pic.1 Movement of inflation according to ROSSTAT.¹

Let us consider the table of inflation’s rate movement in Russian Federation and describe it

In each country, the inflationary process has specifics related to the set of causes and factors causing it.

Modern inflation Russia cannot be considered without regard to specific planning and management of the distribution system, without taking into account political and economic processes that have occurred in recent years. In this connection it is necessary to identify the causes of inflation in the pre-reform conditions and causes, exacerbating inflation in the transition to a market economy and cause hyperinflation.

An important factor of inflation in the country has performed planning and distribution system management. She gave birth to costly mechanism of management and violation of physical and monetary balance in the national economy, which was explained by imbalances in all spheres of the economy, primarily:

1. From the distribution of the national product in the accumulation fund and the consumption fund and on the basis of this active investment policy;

2. From the production of the means of production and consumer goods;

• In the system of state pricing;

• Income and expenditures of the state budget (the deficit);

• In credit and financial resources.

Consider and analyze the inflation rate for 2012 - 2014 years.

• Inflation in 2012 was 6.6%. This is the lowest level of inflation over the last 20 years.

• The forecast for 2013 from the Government of the Russian Federation amounted to - 6.5%. Just above the predicted Economic Development - 7%. However, the Deputy Minister of Economic Development Andrei Klepach said that inflation may rise more than incorporated in the forecast.

• Inflation in 2014 was - 11.6%. It was again the step back to the increasing of inflation rate.

2.1 Anti-inflation policy of the Russian Federation

The purpose of anti-inflationary policy of the state is to establish control of inflation and achieve acceptable to the national economy growth rates. The main factor in the fight against inflation is to improve the general economic situation in the country, increased investment activity, the formation of a stable market infrastructure. An important trend in the anti-inflationary policy is the further development and state regulation of the foreign exchange and financial markets, as well as improving the formation mechanism of the exchange rate.

Russia is necessary to develop pricing policy based on a number of principles that reduce the price of non-monetary component of inflation.

These principles should include:

· De-monopolization of the economy;

· Control over the established limits the growth of tariffs for services of natural monopolies;

· Promotion of market competition;

· Reduction in the number of resellers;

· Legal regulation of trading margins, taking into account social factors and different price elasticities of demand for goods and services;

· Effective regulation of customs duties on exported and imported goods.

The Russian Government approved a complex of anti-inflation measures leading role is occupied by the mechanisms of influence on pricing. These include:

· Limiting the growth of regulated prices for the products of natural monopolies and the rates for utility services at strengthening control over the costs of monopolies;

· Reduction in the rate of growth of prices for fuel and lubricants through the promotion of competition, development of exchange trade, reducing the tax burden and technological renovation of the oil industry;

· Slower growth in food prices on the background of these products offer incentives and improving the regulation of imports.

An important component of management of non-monetary factors of inflation acts regulating wages and incomes in excess of productivity growth. The trend of increase of wages in Russia was due to global phenomena such as an increase in wages of civil servants and deputies, the shadow wage, salary increases of public sector employees. In order to avoid inflationary effects, it is important to coordinate wage increases, taking into account the dynamics of labor productivity and regulate excessive growth of cash income tax methods.

A significant role in reducing the rate of inflation in Russia plays a recreation of the federal budget on the basis of improving macroeconomic indicators, increase tax revenues, conversion of the budget to the budget development, budget process reform, the implementation in the public sector Performance-based budgeting.

To ensure economic growth without increasing inflation is necessary to modernize the banking system and a reduction in the inflation component of its activities.

The decisive steps in this direction should be:

· An increase in the capitalization of banks, attracting medium and long term resources in their turn;

· Improvement of the system of refinancing of banks to maintain their liquidity and current activities;

· Reduction in the cost of credit services;

· Ensuring the sustainability of the banking operations through the development of instruments of risk reduction;

· Improving the competitiveness of the Russian banking system;

· Improvement of the banking control and supervision.

2.2 Analysis of unemployment rate in Russian Federation, unemployment and anti-crisis policy (tables, Bloomberg statistical data analysis)

According to Bloomberg² statistical analysis, we got the data of unemployment rate in dynamics. It can help us to predict some possible mistakes in unemployment policy. Due to the history of dynamics, we can notice, that from March 2004 to September 2008 was unemployment rate downturn, and then from October 2008 to Jun 2009 there was a high increase of unemployment, finally, from July 2009 to September 2014 it was a long – term decrease.

I took the graph for analysis from 2004 till 2014 year:

I want to consider 2008 year as the most interesting case. As it is known, according to World Bank estimates, the Russian crisis of 2008 "began as a crisis of the private sector provoked by excessive borrowing by the private sector in a deep triple shock: from the terms of trade, capital outflows and the tightening of external borrowings. The most important fact which was provided by Alexei Bayer in "Vedomosti" from October 10, 2008 that the impact of the global crisis on Russia was stronger than on the economies of other countries because of 3 reasons: "US financial catastrophe," a negative impact on all markets and financial systems of developing countries; falling oil prices with a significant dependence of Russia on its exports. The author suggested that if all three factors are comparable, then "mid-year the market has lost about 600 points just because of the deterioration of the investment climate in Russia - because of the conflict with Georgia, and because of a quarrel shareholders of TNK-BP, the attack on" Mechel "".

So, above we can see the first reason our dynamics, as it was considered, the crisis came to Russia on 19 of May, 2008 and the crisis of liquidity and capital outflows in August – September 2008, hence it is clear that in September - October 2008 there was a sharp rise.

Then, specific factor in the development of the crisis in Russia is the presence of a significant foreign debt of Russian companies, which in the aggregate amounted to 527 billion dollars at the beginning of October 2008, which was comparable with the whole volume of the gold reserves of Russia. According to data released by the Central Bank of Russia on October 10 in the IV quarter of 2008, Russian companies had to pay foreign creditors $ 47.5 billion; In 2009, the amount of external payments should reach $ 115.7 billion. Including percent of Russian banks and companies have to pay investors and creditors before the end of 2009 of $ 163.2 billion, accounting for a quarter of all external obligations of the Russian Federation.

Another negative factor for Russia, as a net exporter of hydrocarbons, was a sharp decline from the historical peak in mid-July 2008 oil prices: October 16, 2008 Urals oil dropped below $ 70 a barrel - a level which is based on the 2009 budget is calculated as non-deficit. Consequently, here started a lot of reductions.

Moreover, according to data published January 23, 2009 Rosstat, in December 2008, the decline in industrial production in Russia reached 10.3percent compared to December 2007 (in November - 8.7percent), which was the deepest decline in production over the last decade; in general, in the 4th quarter of 2008 the fall in industrial production was 6.1percent compared with the same period in 2007. A lot of manufactures closed and a huge amount of people were fired.

As we can notice, in comparison with Jun 2008 to December 2008 unemployment rate doubled from 5.2percent to 10.2percent.

Next, I want to consider 2009 year and measures of anti – crisis policy. Over the past ten years the highest unemployment rate in Russia was registered in 2000 - 10.5 percent. In 2001, 2003 and 2009, unemployment exceeded 8 percent (8.9 percent, 8.2 percent and 8.3 percent, respectively). In other years the rate varied from 7.8 percent to 6.5 percent. On the average, young people aged 15-24 the unemployment rate in December 2009. Was about 18.4percent (in November 2009. - 18.2percent), including urban population - 17.5percent of the rural population - 20.5percent. The coefficient of excess levels of youth unemployment on average in the 15-24 age group, compared with an unemployment rate of the adult population aged 30-49 is 2.7 times, including urban population - 3.1 times the rural population - 2 0 times. Duration of job search among the unemployed 29.4percent, are persons whose duration of stay in the state of the job search (unemployment) does not exceed 3 months. One year or more, people looking for work 32.9percent of the unemployed (long-term unemployment). Among rural residents share of stagnant unemployment is significantly higher than among the city, and in December 2009 were respectively 40.3percent and 28.7percent. According to a work experience, in 25.9percent of the unemployed are persons who do not have work experience. In December 2009 it number was 1.6 million people. This group is formed mainly of unemployed among young people (17percent - at the expense of young people up to 20 years, 46percent - from 20 to 24 years, 17percent - 25-29 years old).

In December of 2009 the share of the unemployed persons who have left previous place of work due to the reduction of the number of employees was 25.2percent and the proportion of persons who have left the previous place of work in due to the dismissal of their own volition - 20.7percent.

Also, over Bloomberg³ terminal, I tried to analyze the unemployment rate among districts of Russian Federation.

According to the unemployment in the districts of the Russian Federation, the lowest unemployment rate corresponding to the ILO criteria, according to a survey of employment of population, according to the Central Federal District, the highest – is in the Southern Federal District. As we can notice, unemployment in Russia in May 2014 declined to 4.9 percent from 5.3 percent in April 2014, referring to the data of Bloomberg. Thus, the Russian unemployment reached historic lows. According to preliminary results of a sample survey on Employment, in May 2014 to 3.7 million people, or 4.9 percent of the economically active population, were classified as unemployed (according to the methodology of the International Labor Organization).

The previous Russian record was set in August 2012, when the rate was 5.2 per cent of the economically active population. This was the minimum level of unemployment since 2001.

To sum up, I want to consider main aspects of risk of unemployment rate:

1. Sanctions from the USA and the EU facilitate increase of unemployment rate in Russia;

2. Sanctions from Russia:

   1. The EU and the USA cancel their sanctions: gradual improvement of economy and way out from recession, avoid risks of increasing unemployment rate;

   2. The EU and the USA continue implementing sanctions: harm for all sides of conflict; increasing unemployment rate, inflation;

3. New target markets of Asia and Latin America: mutual investments and burst in production; decline of unemployment rate;

4. In the worst way, government would artificially create works, it might coincide with wage reductions.

For preventing the increase of unemployment rate in Russian Federation, government tried to provide the following anti-crisis policy:

1.  

   1. "The industrial and technological potential for future growth must be saved and strengthened. The government will not invest taxpayers' money in the preservation of inefficient enterprises. At the same time, enterprises which increase its efficiency in recent years, invested in the development of production and the creation of new products, improved productivity, entitled to state assistance in solving the most pressing problems caused by the crisis.

   2. The basis for post-crisis recovery and subsequent progressive development should become domestic demand. Diminution of economic growth from external factors, the most effective use of the internal resources are key objectives of the Government in the coming years. In a crisis, it will be important internal demand from the state (government investment and government purchases), by the measure of stabilizing private demand (demand for housing, consumer goods, services, domestic production) will play an increasing role, and the Government will take all necessary measures to its capacity.

   3. Government and the Central Bank will implement responsible macroeconomic policies. Monetary policy will focus on combating the liquidity crisis in the financial sector, while reducing inflation. Measures should lead to increased confidence in the national currency, increasing the level of monetization of the economy, reducing inflation, thus providing the necessary conditions for the restoration of sustainable economic growth.

Public obligations to the people of the state will be performed in full. Particular attention will be paid to the preservation of the labor potential. The Scope of activities of the state will be expanded in the field of employment, counteraction of unemployment growth, development programs, retraining and retraining of workers at risk of dismissal. It is obvious that anti-crisis program is directed on the stabilization of economy through the development of domestic production, by the creation of domestic demand by the state with the help of public procurement, by regulation of inflation by the Central Bank and the Government of the Russian Federation, and also the direct counteraction of rising unemployment.

Conclusion

The main purpose of this work was to determine the main reasons of inflation’s rate movement, determine the main reasons of increase the inflation. The main reason for inflation in Russia is the unbalanced economic structure, maintaining inefficient production. The Russian economy, inflation has its own characteristics and problems whose solution is a topical issue at the moment. The great importance to the fight against inflation is the removal of inflation expectations, as in economic structures and in the population that may be largely due to economic and political stability in the country.

The successful implementation of anti-inflationary policy is possible only through the development of regulations governing all aspects of market relations and unconditional implementation of existing legislation.

Also, in my work, I determine the level of unemployment in our country, tried to find the main reasons and solutions for this problem. It is almost because of sanctions as from the USA and the EU to Russia and also Russia’s to them. In this situation both sides has harm – increasing unemployment and inflation, moreover, creating of new workplaces it may conclude in wage decreases. The specialists agree with the idea that in the nearest future the unemployment rate will increase, explaining this because of Russian economy enters to the recession. Nevertheless, such rise won’t be a critical one, and shouldn’t lead to serious consequences.

References

1. Monetary policy: http://www.cbr.ru/Eng/publ/ddcp/2014_04_ddcp_e.pdf;

2. Bloomberg analytical and statistical terminal (from Fa.ru);

3. The Law on Employment of the Russian Federation, Ch. I, Art. 3, as amended. Federal Law of 30.04.1999 N 85-FZ of 10.01.2003 N 8-FZ of 27.12.2009 N 367-FZ);

4. Marx, Karl (2009). Capital: An Abridged Edition. Edited by David McLellan, Oxford Paperbacks, Oxford, UK;

5. Federal State Statistics Service www.gks.ru;

6. Library materials on economic issues — http:// www.libertarium.ru/library.

1^ Federal State Statistics Service www.gks.ru;

2^ Bloomberg analytical and statistical terminal (from Fa.ru);

3^ Bloomberg analytical and statistical terminal (from Fa.ru);

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