Kazakhstan Institute of Management, Economics and Strategic Research

Department of Economics

Economy of Kazakhstan

UNEMPLOYMENT & INFLATION

Student Seilkhanov Gaziz

Instructor Alma Kudebayeva

Almaty 2009

~ 2 ~

TABLE OF CONTENTS

I. Introduction 3

A. Reasons for undertaking research 3

B. Research methods 4

C. Research structure 5

II. Literature Review 5

A. What determines unemployment? 5

B. Concerns about inflation and price level 7

C. Government policies regarding unemployment and inflation 8

III. Political Directions and Economic Situation in Kazakhstan 10

A. Fiscal policy in detail 10

B. National Bank of Kazakhstan and the Monetary Policy 13

IV. Econometric Regression & Phillips Curve 14

V. Unemployment & Inflation: Correlation Analysis 18

VI. Forecasting the Future 19

VII. General Interpretation of Results 24

VIII. Conclusions 25

IX. References 26

~ 3 ~

I. INTRODUCTION

A. Reasons for undertaking research

Over 18 years passed since the Republic of Kazakhstan obtained its independence.

During this period of time a good deal of history was written according to the way of

development of CIS countries in general and Kazakhstan in particular. Even now, there

keep appearing papers and books on the topic of comparisons in the establishment and

economic growth between countries of post-Soviet expanse.

Kazakhstan is the special case. It is undisputable that this country faced a bit

different conditions than other CIS countries. Even though it was alike the Kyrgyz

Republic in the reform velocity, still it differs from Kyrgyzstan in territories and

resources it has. Kazakhstan runs a different policy, and the vision it has, does not

coincide with the visions of countries, like Turkmenistan, where the president conducts

his own ideas that lead to the presence of presidential cult.

But that is not the point. The main reason, why this topic was chosen, is that the

process of economic development strongly depends on two factors: unemployment and

inflation. Further in this paper, the negative relationship between these indices will be

discussed. Both unemployment and inflation show the level of growth through the

variations in GDP (i.e. total production of goods and services during a period of time,

difference between nominal and real GDP, total income received from the production of

goods and services, etc.). As it is known, true and foreseeing actions can avoid the rise of

cyclical unemployment, significant increase in the inflation level that can be transferred

to hyperinflation. It is clear that the Republic of Kazakhstan crowned with laurels of the

Soviet Union. It inherited the goal of stability and equality as well as fear of change, and

~ 4 ~

rule of economy. Now, the government that established a stability as a goal in its election

campaign, tries its best in recovering from the global financial crisis through the

nationalization of big enterprises, thereby „solving‟ the problems of crisis.

The main goal of this paper is to show, how both unemployment and inflation

affect the economy, and what are the policies to enhance a reasonable recovery from each

kind of fluctuations.

B. Research Methods

As this paper considers a more global approach, first of all, the issue will be faced

through the theory. Various thoughts and models will be discussed, main of them are

Classical Model and Keynesian views on the economics. However, theory does not

always appear as it is in reality, so the examples of real-world events and consequences

will be given. Here some comparisons and analysis are about to be shown in order to

provide some clearance in the relationship between theory and practice. Finally, to

support the idea, somehow to prove the theory, and to forecast some future directions, the

mathematical approach will be conducted. Well known Regression Analysis, Correlation

Analysis and Trend Analysis will be used in determining the factors that influence the

fluctuations, the factors that show the relationship of indices, and future conditions and

possible solutions.

~ 5 ~

C. Research Structure

The structure of this paper is pretty clear. It is organized in a manner that

everything is logical and sequential. Firstly, the review of literature will be of concern.

Theories, thoughts, ideas and proposals of different authors will be mentioned. It is

important to keep them in mind in order to make up a general view on the topic and

construct a new, clear way of understanding and comprehending the case.

After that, according to the recalled information from the sources, a complete

economic situation in Kazakhstan will be described. It is needed to do so in order to

construct a picture of economic development.

Then, the mathematical analysis is in turn. Econometric Regression model is used

here to clarify what concrete factors mostly foster the GDP to change. Correlation

Analysis helps to identify how unemployment and inflation move towards each other.

Use of Descriptive Statistics can help to find necessary variables for analyzing the trend

that can give us information about possible future fluctuations. Help of Moving Averages

and Exponential Smoothing is obvious.

Last, the interpretation of obtained data and conclusions can all in all sum up the

research done and make some suggestions.

II. LITERATURE REVIEW

In the ideal economy, real GDP would rise in the quick and stable manner.

Moreover, the price level that can be measured both by GDP deflator and by Consumer

Price Index, would stay unchanging, at least would grow with a very slow speed. As a

result, unemployment and inflation would not be of a big deal. But in practice, experience

~ 6 ~

shows quiet clear that full employment and stable price level cannot be achieved

automatically. Therefore, both these issues are about to be investigated in the nearest

chapters (McConnell C., Brew S., Economics, 11th

Ed.).

A. What determines unemployment?

Harvard University professor, N.G.Mankiw in his works describes labor force as

the chief resource in the economy, and he claims that keeping workers employed is a

paramount concern of economic policymakers (Mankiw, Macroeconomics, 5 ed.). In fact,

he is right. Labor force plays a significant role in any economy. Still there is an opinion,

which states that the more developed a country is, the more capital-oriented is it.

Actually, in the course of time, labor force gradually had been losing its importance in

the economy. As the production function primarily consists of capital, labor and

technological advance, the last is taking more and more high speed of change that leads

to decrease in the number of labor and in some cases the number of capital.

As it is known, people are afraid of noises (Fischer Black, “Noise”). Any kind of

new information hurt people, pushing them into some movements that they are not

willing to do. It is observed that the majority of people (in some cases even all of them)

are conservatives. With the beginning of industrial era, a so-called group of „luddites‟

appeared, the aim of whom was to defend the rights of labor; and therefore the area of

their activities covered the mass destruction of capital equipment. According to the

consumer theory that is provided by Campbell McConnell and Stanley Brew, people

prefer doing less in order to receive the same output. Here this theory can be supported

by the fact that it takes time, energy and resources to make a research and achieve a

technological advance.

~ 7 ~

To clarify the term “unemployment”, it is suggested to define the opposite side,

the full employment. According to McConnell and Brew, full employment consists of

frictional and structural unemployment that are unavoidable. And that is absolutely right,

because any time there is a certain number of unemployed labor force or other resources.

For instance, every day there are exactly some people who are being sacked from their

jobs or who graduate from colleges, and at the moment looking for a new job. In

addition, technological advance enforces the production manner to change. Demand for

certain kind of occupations decrease or even disappear (e.g. demand for post-officers

with the development of Internet), at the same time creating new types of professions that

are required. When the level of full employment decreases or even drops – the result is

the sharp increase of unemployment rate.

B. Concerns about inflation and price level

What does inflation mean? Actually, inflation is the overall increase in the price

level. However, in reality, not all price increase evenly. Some prices of goods and

services can increase dramatically, some gradually and some even decrease in special

cases.

Economists believe that inflation is caused by two factors, first of which is the

inflation of demand. Traditionally, the price level fluctuations are explained by the excess

demand. In some cases, the economy can buy more stuff than it is able to produce (i.e.

aspiring to a particular point that is not on the production possibilities frontier). The

production sector is not able to overcome the higher demands by the increase of real

production capacity. Consequently, this overvalued demand causes the increase in prices

for temporarily fixed goods and services, thereby causing demand inflation.

~ 8 ~

Second factor is the inflation caused by the increase in the costs of production and

the decrease in the supply. When there a rise in the price of production factors is

observed, it becomes more expensive to purchase required resources for the same

production. At the same time, if there is insufficient supply of goods and services, then of

course prices of the last become to increase, thus provoking an inflation. Here it is clear

that inflation and price level are closely interrelated amongst each other.

C. Government policies regarding unemployment and inflation (Abel &

Bernanke)

There exist two main policies that are devoted to stabilize the deviations caused

by numerous life factors. They are: fiscal and monetary policy.

Fiscal policy makes provision for the control of government budget. To be more

specific, government of a country is privileged to maintain reasonable tax and

government spending policies. The exceed of tax collections compared to government

purchases leads to budget surplus. That is, state has excess money in its treasury to spend

somewhere like on public goods (roads, military services, etc.) or lending (abroad as well

as within its boundaries).

On the contrary, if a government conducts an expansionary policy, it reduces

taxes and widens government expenditures, thereby creating budget deficit.

It is clear that an increase in government expenditures leads to an increase in

output, which in other words is called as a total income or a total expenditure in the

economy (i.e. GDP). So, if output increases, it undoubtedly leads to an increase in

purchasing power parity. Classical economists claim that in long-run perspective,

increase in income leads to an increase in both consumption and savings. Then, if

~ 9 ~

consumption increases, it leads to an increase in the demand for goods and services, and,

as it is discussed above, the situation turns to a demand inflation. BUT, looking at the

other side, savings also increase, indicating that the supply of labor will probably not

increase, even decrease a bit, because it is possible that retirement ages can be lowered.

Still this is theory, but it needs a bit deeper investigation.

If the Ricardian equivalence is taken into account, then in the short-run period of

time, any change in taxes cannot affect the consumption and savings because if there is a

budget deficit, government immediately undertakes actions like issuing bonds. These

bonds are all about to be paid back within the next, say, 20 years, that again lead to a

budget deficit. Population‟s expectation is normal, because then the same government

can easily launch a contractionary fiscal policy. So, in the short-run no inflation can be

expected (at least rise in significance).

What about unemployment and policies about it, here the picture is the same. We

are talking about several markets in one turn. Money market is the market, where mostly

monetary policy is taking part. Goods market deals with the fiscal policy. In the very

short run, according to Keynes theory, each of the policies affect the labor market. More

deeply, we are going to talk about it in the next section.

~ 10 ~

III. POLITICAL DIRECTIONS AND ECONOMIC SITUATION IN

KAZAKHSTAN

A. Fiscal Policy in Detail

Fiscal policy is described by economists as the change in taxes and government

purchases. Usually there are two time periods, long-run and short-run perspectives.

Classical economists believe that market is self-rehabilitating, and therefore there is no

need in intervention of the government. Actually, market is not self-regulating so far, at

least it needs a really long time. But here the sense is being lost. Everyone wants to

maximize their profits in order to buy more goods and services. Nobody is going to wait,

because life is short. So, the theory provided by Keynes looks pretty attractive. In the

short-run he believes that fiscal policy is really time-lack. He says that fiscal policy is

very political; so, in order to change the taxation and government expenditures, state

should thoroughly analyze the benefits and costs, because every increase in spending

leads to a decrease in real wages of workers, so effective labor force becomes worse-off.

First of all, Keynes suggests that real wages a rigid. In other words, more often

government establishes minimum wages, or there are labor unions that foster the

employers to set minimum wages. In addition, employers always try to reduce turnover

costs, that is they always minimize costs of hiring and training their employees. So, real

wages are quiet rigid, and the overall price level is sticky.

Then, there always exists some sort of unemployment. Not always the wages are

paid as the employee works. A clear example is here in Kazakhstan. Most employees in

Almaty receive a significantly higher salary than they really work for. So, this results in

an appearance of efficiency wages, when the real wage is higher than the equilibrium

~ 11 ~

LFE*

W/P*

W/P

Unemployment

L2 L1 L

W/P

wages. It undoubtedly creates an unemployment, because at higher wages there is an

excess supply of labor due to a normal demand for the same labor. Figure 1 illustrates

this model.

Figure 1.

Probably, the most popular model in estimating the consequences of these factors

is the IS-LM model, that helps to define the effects on investments and savings, and

liquidity of money respectively.

So, if we suppose that government spending (further as „G‟) increase or tax rates

(further as „T‟) decrease (i.e. expansionary fiscal policy), then this change immediately

affects IS-curve, because with the increase in G, national savings (further as „S‟) decrease

(i.e. S = Y – C – G , where Y – income, C - consumption).

At the goods market, decrease in national savings immediately leads to an

increase in real interest rate. This rise in real interest rate brings to the shift of IS-curve,

that leads to an increase in output at full employment, by the result of which the

inflationary gap is occurred.

Slabor

Dlabor

W/P* - equilibrium real wage

W/P – actual real wage

LFE – equilibrium quantity of labor

L1 – quantity of labor demanded

L2 – quantity of labor supplied

L2 > L1, so there is an unemployment

~ 12 ~

R2

LM2 FE

LM1

IS1

R1

IS2

YFE

LRAS

AD1

AD2

R

Y Y

PL

PL2

PL1

Obtained inflationary gap influences the aggregate demand (further as „AD‟),

increasing it. Increase in AD is caused by the fact that the increase in production (output

is increased) means that firms want to produce more by hiring more labor (further as „L‟);

as a result quantity of labor demanded increases.

This trick is useful in the short-run if a government wants to minimize the rate of

unemployment, keeping in mind the stickiness of price level. Nonetheless, if such

condition transforms to a long-run, then price level starts to adjust, and short-run

aggregate supply (further as „SRAS‟) begins shifting up, thereby restoring the output

produced. In the long-run, the increased demand for labor leads to an increase in output

produced, so supply of those products increase.

After these turns, the adjustment of price level brings to the increase in money

demand, because goods and services are produced, and more money is needed to

purchase all that stuff. As a result, increase in money demand changes the money market,

so restored real interest rate shifts LM-curve, so that new, even higher real interest rate is

obtained.

SRAS1

SRAS2

~ 13 ~

Y

L DL

YFE

L1

L2

Logic here is in that in short-run fiscal policy increases output produced, demand

for labor and real interest rate. In the long-run it brings to increase in price level and real

interest rate, BUT Y and L are restored.

B. National Bank of Kazakhstan and the Monetary Policy

Monetary policy is the another type of ruling tools that are granted to government.

As usual, monetary policy is performed by the Central Bank of a state. The National

Bank of Kazakhstan plays the analogical role in the Republic of Kazakhstan.

Mainly, monetary policy is all about money market, where the quantity of money

supplied and demanded fluctuate. When there is an intersection of supply and demand

curves, the equilibrium quantity of money is obtained that indicates the real interest rate

in the economy.

With the increase in money supply (i.e. if NBK starts printing money or domestic

currency is being bought from foreign exchange markets) is observed, then there

increases a quantity of money in the economy to a relative money demand. So, according

FE – Full employment

LM – Liquidity Money curve

IS – Investment-Savings curve PL – Price level

SRAS – Short-run Aggregate Supply curve

LRAS – Long-run Aggregate Supply curve AD – Aggregate Demand curve

DL – Demand for Labor

Figure 2.

~ 14 ~

to economic theory, the value of domestic currency falls, thereby depreciating it. As a

result the overall price level is raised.

Assuming that NBK increased nominal money supply (further as „MS‟), the

following analysis can be made.

Increase in MS leads to a decrease in real interest rate (R), that results in a shift of

LM curve, because the situation in money market directly reflects the LM. The output

produced increases in the short-run, because the increased MS means consumers are able

to buy more goods and services, hereby increasing demand for them. Adopting to current

circumstances, firms decide to hire more labor, as a result demand for labor increases.

Again this policy is effective in the short-run, but in the long-run it is useless.

Money are non-neutral only in short-run (i.e. concept of neutrality of money).

Overall, concluding everything said above, both unemployment and inflation are

unavoidable. There certainly exist some sort of unemployment, because of real wages.

And there is certainly some type of inflation, because of depreciation of capital and some

sort of underproduction and increase in the price level.

IV. ECONOMETRIC REGRESSION & PHILLIPS CURVE

So far the theory was a primary approach in this paper. Now, it is better to turn in

some mathematical and empirical facts. According to the Agency of Statistics of the

Republic of Kazakhstan, the general tendency of unemployment rate is downward

sloping, whereas inflation rate is quiet interesting. Although during the last three years it

was increasing, last changes in the monetary policy of the National Bank fully turned the

~ 15 ~

rate backwards. The Phillips curve is the best measurement of the relationship of these

two variables.

Relying on the information, provided by the Agency of Statistics, the following

regression analysis was obtained.

Data range is between January 2006 until June 2009, resulting to 41 observations.

Data provided are on a monthly basis, however the adjustment of unemployment rates

were maintained because rates were supplied on a quarterly basis. Microsoft Excel 2007

was used in the econometric analysis.

The equation ∆𝑖𝑛𝑓𝑡 = 𝛽0 + 𝛽1𝑢𝑛𝑒𝑚𝑝𝑙1 + 𝜀𝑡 represents the Phillips curve. ∆𝑖𝑛𝑓𝑡

stands for change in the inflation rate in the period t; 𝜀𝑡 is the standard error that is

described by the economists as a supply shock; 𝛽0, 𝛽1 are the coefficients that describe

the deviations of variables. In the equation, 𝛽0 is the y-intercept, whereas 𝛽1 is the slope

of the line.

So, the corresponding sample linear regression line is:

𝑦 = 𝑏0 + 𝑏1𝑥1 + 𝑒𝑡 ,

where y is the monthly inflation rate;

x1 is monthly adjusted unemployment rate.

The results of the linear regression model for the periods between January 2006

and June 2009 are:

~ 16 ~

Assuming that there are no supply shocks and other standard errors, the following

Phillips function is obtained:

∆𝑖𝑛𝑓𝑡 = 54.74 + (−5.99)𝑢𝑛𝑒𝑚𝑝𝑙𝑡

𝑅2 = 0.43; 𝑛 = 39

Negative slope of the line shows the appropriate negative relationship between

inflation rate and unemployment rate.

Two-tailed t-test of data with different variances.

1. Assuming that alpha is equal to 0.05, then H0: b1 = 0; H1: b2 is significant

(or useful). t0,025 = 2.024, df = 41-2 = 39. t-statistic is 6.95. 𝑡 > 𝑡0.025 , so b1 is

statistically significant at alpha = 0.05 level of significance.

2. Alpha is the same, then H0: b2 = 0; H1: b2 is significant. t0,025 = 2.024, df =

= 41-2 = 39. t-statistic is -5.47. 𝑡 > 𝑡0.025 , so b2 is statistically significant at alpha =

=0.05 level of significance.

~ 17 ~

Test of usefulness of parameters give us true reasoning that all the parameters

contribute to the model, therefore any of those parameters are non-negligible and non-

excludable.

From the obtained model and the Phillips function, the following graph can be

constructed.

Figure 4.

From the graph provided and according to the slope of the line, it can be

suggested that the slope of the line is at the same time the marginal rate of substitution. In

other words, one percent increase in the inflation rate leads to a 5.99 percent decrease in

the unemployment rate.

-10

0

10

20

30

40

50

60

0 2 4 6 8 10 12

Infl

atio

n R

ate

Unemployment Rate

Phillips Curve

Phillips Curve

~ 18 ~

The natural rate of unemployment is found by the division of b0 by b1, implying

that this ratio represents the portion of unemployment that is unavoidable. So, dividing

54.74 by 5.99 we get 9.14. That is the natural unemployment rate.

V. UNEMPLOYMENT & INFLATION: CORRELATION ANALYSIS

From the previous section, it is clear that these two variables are related to each

other in a negative manner. Phillips curve beautifully shows this interrelationship.

In addition to the previous method, there exist one more way defining that. The

correlation analysis is the another route that helps to understand the issue. This analysis

relies on variances of both variables. This analysis helps in clarifying how the change in

one variable reflects the change in another one.

Defining the mean variance of both inflation and unemployment, we find the

Pearson‟s empirical correlation coefficient. Using the Microsoft Excel 2007, it is quiet

easy and quick procedure, that gives the following report:

Inflation Unemployment

Inflation 1 Unemployment -0,658893546 1

Figure 5.

Figure 5 shows that correlation coefficient is equal to -0.6589 that tells us about

the fact that these two variables, inflation rate and unemployment rate, do not move

together (i.e. negative relationship).

~ 19 ~

VI. FORECASTING THE FUTURE

In order to construct a more or less reasonable forecast, it is better to deal with

such instruments as Moving Averages and Exponential Smoothing.

1. Moving Average. Taking the interval n = 4, the inflation rate obtains a

quiet uncertain trend. However, according to the policy directions established by the

National Bank, it is more possible that in future inflation rate is going to decrease.

Same way is in the unemployment rate. With n = 4, the trend is pretty

predictive, it is obvious that the tendency is downward sloping, so in the future probably

the rate would keep decreasing.

0,0

5,0

10,0

15,0

20,0

25,0

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Inflation Moving Average

Fact

Forecast

~ 20 ~

2. Exponential Smoothing. This approach does not much differ from the

moving averages, but the main difference is that it takes into account the

damping factor. Assuming that the damping factor is 0.5, following picture

is illustrated:

0

1

2

3

4

5

6

7

8

9

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Unemployment Moving Average

Fact

Forecast

~ 21 ~

Here, it is more clearly visible that trend is going down. So, what about

unemployment rate? Provided that w = 0.5, trend is:

0,0

5,0

10,0

15,0

20,0

25,0

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Inflationary Exponential Smoothing

Fact

Forecast

0

1

2

3

4

5

6

7

8

9

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Unemployment Exponential Smoothing

Fact

Forecast

~ 22 ~

Another method used for the forecasting is the Simple Linear Regression method.

This approach is useful in generating an overall view on the situation, however it is not

really sensible in short volatilities, so it is useful in the very long-run. After the

appropriate data is collected, the following analysis is received.

Here, the objective SLR function is 𝑦 = 8.21 + 0.17𝑥1. According to this

function, the following graph is received.

0,0

5,0

10,0

15,0

20,0

25,0

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40

Trend Analysis using Simple Linear Regression

Actual Rates of Inflation

SLR Trend

~ 23 ~

The same is with the unemployment. ANOVA looks like the following.

SLR function is 𝑦 = 7.98 − 0.04𝑥1. Line is downward sloping, indicating that

trend goes down. The graph is given.

0

1

2

3

4

5

6

7

8

9

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40

Trend Analysis using Simple Linear Regression

Actual Rates of Unemployment

SLR Trend

~ 24 ~

VII. GENERAL INTERPRETATION OF RESULTS

The first econometric analysis was about the primary relationship between

inflation and unemployment. Use of regression analysis helped to identify the Phillips

curve, that represents the general overview on the economic situation in Kazakhstan.

From the analysis, the Phillips function was discovered. It helped to build a graphical

representation of fluctuations. Negative relationship between these two variables is

shown by the slope of the curve (which is negative). It means that a percentage change in

inflation leads to an appropriate percentage change in unemployment. Test of hypotheses

about statistics helped to establish that coefficients of independent variables

(unemployment) are not ignorable in the change of inflation. So, this test verifies that

change in inflation immediately causes a change in unemployment.

Correlation analysis was the another measurement of the relationship. It illustrates

the same picture that increase in the inflation causes an inverse effect to the

unemployment (causes decrease). Correlation analysis deals with the relationship of

variances of both variables. Result shows that inflation and unemployment do not move

in the same direction.

Several methods were used in the measurement of future estimates of the

variables. First one was the use of moving averages in the analysis. Although it is easy to

define it, moving average represents quiet the same thing as the actual rates. It is

significant in the very short run. Taking the average of three consequent rates, the

forecast was obtained. Generally speaking, it supports the trend, implying that both

inflation and unemployment rates are going to decrease in the very short run.

~ 25 ~

Exponential smoothing is another tool that more or less clarifies the prediction.

Despite the fact that it still does not generalize the analysis, it is quiet useful in the short

run. From the analysis done with the Microsoft Excel, exponential smoothing shows and

supports the suppositions done by the moving averages.

The most useful way of all the three methods is the use of Simple Linear

Regression in predicting the trend. This approach is useful in the long run, because it

generalizes the data. Taking the data provided by the Agency of Statistics, the run of

regression shows the linear function that represents the trend. This trend is controversial

about inflation, whereas the unemployment predictions are supported by the previous

data. Although inflation rate now is decreasing, the regression predicts the increase in the

future. The policy run by the National Bank can be insignificant in the long run, however

the situation can change if the policy is intensified or the very long period of time with

the same situation is passed.

The unemployment rate in Kazakhstan is decreasing, and the regression also

predicts the support of trend, implying that in the future rate will approach to full

employment.

VIII. CONCLUSIONS

All in all, this work and research made is mainly devoted to establish primary

characteristics of inflation and unemployment, and their interrelationship amongst each

other. Results from the analyses show that there is a negative relationship. Theory

proposed by Phillips was confirmed in practice and the experience of the Republic of

Kazakhstan. Facts and data provided by the Agency of Statistics certify that. Two

~ 26 ~

approaches in forecasting provide sufficient evidence to claim that in short run the

general tendency of changing the rates is going to be supported, while one of the

approaches tell that in long run the inflation rate is going to increase.

IX. REFERENCES

1. Pomfret R. (2006) The Central Asian Economies Since Independence

2. Mankiw N. (2002) Macroeconomics, 5th

Ed.

3. McConnell C., Brew S., (1996) Economics, 11th

Ed.

4. McClave J., Benson P., (2005) Statistics for Business and Economics

5. Wooldridge J., (2007) Introductory Econometrics

6. National Bank of Kazakhstan (NBK), (2009), Main Economic Indicators, (available

online: http://www.nationalbank.kz/?uid=26EB6B15-D89D-F1C2-

9A653B61BBA539DD&docid=178)

7. National Bank of Kazakhstan (NBK), (2009), Price Indices, (available online:

http://www.nationalbank.kz/?uid=26EB6B15-D89D-F1C2-

9A653B61BBA539DD&docid=170)

8. Agency of Statistics of the Republic of Kazakhstan, (2009), Kazakhstan In Figures,

Labour, (available online: http://www.eng.stat.kz/digital/Labour/Pages/default.aspx)

9. Agency of Statistics of the Republic of Kazakhstan, (2009), Kazakhstan In Figures,

Prices and Tariffs, (available online:

http://www.eng.stat.kz/digital/Prices%20and%20tariffs/Pages/default.aspx)

~ 27 ~

10. Black F. (1985) “Noise”, The Journal of Finance, Vol. 41, No.3, Papers Proceedings

of the Forty-Fourth Annual Meeting of the America Finance Association, NY, pp.

529-543. Available online: http://www.jstor.org/stable/2328481

11. Abel & Bernanke (2006), Macroeconomics