The relationship between unemployment and inflation. Phillips curve Relationship between the dynamics of unemployment and inflation

There is an inverse relationship between inflation and unemployment in the short term, which is known as Philips curve.

It shows that there is a stable and predictable inverse relationship between unemployment and inflation. This is confirmed by the Keynesian theory, which states that inflation can be high only if the level of unemployment is low, and vice versa. There is a level of employment in the economy at which prices hardly rise. There are various explanations for the existence of a feedback between inflation and unemployment.

It is easier for producers and workers to push for higher prices and wages during periods of economic growth. Poor economic conditions prevent producers from raising prices. In the opposite situation, as full employment approaches, there is an increase in demand for additional production factors. The consequence of this is an increase in wages, outpacing the growth in labor productivity.

However, later monetarists led by Friedman came to the conclusion that the Phillips curve reliably describes the relationship between inflation and unemployment only in the short term, where a reduction in unemployment is impossible without an increase in inflation. In the long term, the Phillips curve transforms into stagflation curve, showing a simultaneous increase in inflation and unemployment.

Stagflation- This is a long-term process when a high rate of inflation is accompanied by a high level of unemployment.

22. Phases of the economic cycle and dynamics of key macroeconomic indicators.

Economic cycle– periodic fluctuations in the levels of production, employment and income relative to the long-term trend. Reasons: periodic depletion of autonomous investments; weakening of the multiplier effect; fluctuations in the volume of money supply; renewal of fixed capital. Economic development is always associated with an imbalance, with a deviation from average economic indicators. speakers. The most striking manifestations of instability are inflation and unemployment. These phenomena can be depicted graphically using the AD-AS model.

If total expenditure decreases, the AD curve shifts to the left, output volume and prices decrease. At the same time, the reduction in output is accompanied by rising unemployment and underutilization of production capacities. Cycles can also be caused by shifts in aggregate supply. shift of the AS curve to the left. causing a shift in the short-term equilibrium from point E to point F. This led to a reduction in production, unemployment and an increase in the price level (inflation). Economy cycles are represented in the form of a wavy curve that represents the dynamics of production volume with peaks A, E and the lowest point of decline C. The period of time between two points that are at the same stages of cyclical fluctuations is called the cycle period (from A to E, from B to F) . The cycle can be divided into two periods: downward (fall in production); upward (production growth). Peaks and troughs characterize the turning points of cycles. Rising (expansion) phase begins with the active commissioning of new plants and the modernization of old ones, growth in production volumes, employment, investment, personal income, increased demand and prices and ends with a boom - a period of high employment and full utilization of production capacity. During a boom, the price level, wage rate and interest rate are very high. The consequence of a boom is a turn in the development of the cycle, when production growth is replaced by its decline. This indicates the onset phases of decline (crisis). An increase in unsalable inventories leads to a decrease in production volumes. Produc- tive investments are reduced and the demand for labor falls. This means an increase in unemployment and a reduction in the length of the working week. The demand for raw materials falls, and then the supply of raw materials. There is a sharp decrease in profits, the demand for credit weakens, and the interest rate decreases. Finally, if the recession is deep and prolonged, there is a decline or slowdown in the growth of commodity prices. In phase depression the fall in income and the increase in unemployment are slowing down significantly, the volume of investment is close to zero. Therefore, during this period the economy is characterized by stagnation in production, sluggish trade, and the presence of a large mass of free money capital. After a certain time, the economic system overcomes the lowest point of the cycle, called the trough, and begins revitalization phase. With it, the movement of all economic indicators changes direction, income and employment begin to grow again. When enterprises bring their production volume to the highest point reached in the previous cycle, then from that moment the economic climb.

Inflation and unemployment are integral companions of a market economy, moving hand in hand, like a natural disaster with severe socio-economic consequences directly for the population of the states in whose territory these processes take place.

Rising inflation is almost always combined with high, albeit underemployment, and a large volume of national output. Conversely, a decrease in inflation coincides with a decline in production and an increase in unemployment.

“Many modern economists believe that there is a certain minimum sustainable level of unemployment, the reduction of which is fraught with a spiral of inflation. Moreover, it is widely believed that this level is extremely high. Critics of the capitalist system tend to believe that high unemployment in North America and Europe is the main flaw of modern capitalism. Finding a solution to this dilemma of some desperation over the need for high unemployment to curb inflation remains one of the pressing challenges of modern economics.”

Paul E. Samuelson, William D. Nordhaus "Economics."

Phillips curve

The relationship between inflationary price increases and a reduction in unemployment was derived in 1958 by the English economist A. Phillips. Using UK statistics data for 1861-1956. he constructed a curve showing the inverse relationship between changes in wage rates and the unemployment rate. The theoretical basis for A. Phillips’ calculations was provided by economist R. Lipsey. Subsequently, American economists P. Samuelson and R. Solow modified the Phillips curve, replacing wage rates with the growth rate of commodity prices.

The dependence initially showed the connection between unemployment and changes in wages: the higher the unemployment, the lower the increase in money wages, the lower the price growth, and vice versa, the lower the unemployment and the higher the employment, the greater the increase in money wages, the higher the rate of price growth. Subsequently it was transformed into a relationship between prices and unemployment.

In the long run, according to Friedman, it is a vertical straight line, in other words, it shows the absence of dependence between the inflation rate and the unemployment rate.

r - inflation rate,

expected inflation rate,

() - deviation of unemployment from the natural level - cyclical unemployment,

b>0 -- coefficient,

u -- supply shocks.

The Phillips curve is used to construct the aggregate supply curve. Aggregate supply expresses the dependence of real output on the price level. And the volume of production directly depends on the number of people employed in the economy. The greater the number of people employed in the economy, the greater the volume of production and, accordingly, the supply.

The Phillips curve shows that there is a stable and predictable inverse relationship between unemployment and inflation. This also confirms the Keynesian thesis that inflation can be high only if the level of unemployment is low and vice versa. There is a level of employment in the economy at which prices hardly rise.

There are various explanations for the existence of a feedback between inflation and unemployment. It is partly explained by the inflexibility of the labor market, which is a multitude of individualized markets that are segmented by employment structure, qualifications, location, etc. This circumstance leads to the fact that as the economy moves toward full employment, unemployment will remain virtually unchanged in some segments of the labor market, while in others there will be unsatisfied demand. There will be an increase in wages, leading to increased costs and higher prices. The macroeconomic result of this process will be an acceleration of inflation.

Another explanation for the Phillips curve is that producers and workers (especially monopolies) have an easier time pushing for higher prices and wages during periods of economic growth. High unemployment forces wage earners to accept lower wages, which breaks the wage-price inflation spiral. In addition, poor economic conditions are preventing producers from raising prices. In the opposite situation, as full employment approaches, the demand for additional factors of production increases. The consequence of this is that wages rise, outpacing the growth of labor productivity. The wage-price inflation spiral is unfolding. During times of economic expansion, it is also easier for monopolies to raise product prices. The result of these processes will be an acceleration of inflation rates.

The essence of the Phillips curve is clearly presented through the analysis of aggregate demand and supply curves. The growth of aggregate demand in the economy deepens existing and creates new imbalances in the economy, and psychologically increases the limited resources. As a result, as supply increases, insolation increases. The greater the increase in aggregate demand and the closer the economy is to full employment, the more prices will rise.

The Phillips curve was consistent with empirical evidence until the mid-1970s. She could not explain the period of stagflation (rising inflation and unemployment at the same time). It has been suggested that in this case the Phillips curve shifts to the right, i.e. to a less desirable position, where each given level of unemployment is accompanied by a higher rate of inflation.

One of the most important uses of the Phillips curve, besides setting economic policy objectives, is to construct the aggregate supply curve. As mentioned earlier, aggregate supply expresses the dependence of real output on the price level. The volume of production directly depends on the number of people employed in the economy and, accordingly, inversely on the number of unemployed. If instead of absolute values we take relative ones, then the volume of production, which inversely depends on the level of unemployment, directly depends on the level of inflation.

The expansion of aggregate demand can be used to maintain real production above its natural level, and unemployment below its natural rate, only through the growth of inflationary processes.

Professor of the London School of Economics A. W. Phillips in 1958 published the results of his studies of the relationship between the unemployment rate (U) and the change in the nominal wage rate (∆W/W) in Great Britain in the period from 1861 to 1957. (work “Who said? Who did?”).

Phillips derived a pattern characterizing a close inverse relationship between the annual percentage change in nominal wages and the share of unemployed. Formally, the Phillips curve can be expressed as follows:

Wt =Wt-1 (1 – α(U –U*)),

where Wt is the wage rate in period t;

U – level of actual unemployment;

U* – natural unemployment rate;

α is a parameter characterizing the rate of change in wages depending on the unemployment level.

The main advantage of A. Phillips's work lies in his conclusion that growth in nominal wages can coexist with a noticeable amount of unemployment. Wages showed an upward trend long before full employment was reached, with an unemployment rate of approximately 5.5%. Further research not only confirmed this conclusion, but also showed that the level of unemployment at which the nominal wage rate becomes flexible could be even higher.

In the 60s XX century The Phillips curve was viewed as a set of alternative economic policy options. Supporters of the liberal direction advised choosing point L, at which full employment and economic prosperity are achieved at the cost of moderate inflation.

Conservative supporters chose point C, where price stability is ensured by reducing the number of jobs.

Fig.4.5. Phillips curve

The Phillips curve actually reflects the relationship between the unemployment rate and cost-push inflation inspired by wage growth. More recent studies have shown that there is an equally strong relationship between the rate of inflation in the economy and the level of unemployment.

In its modern interpretation, the Phillips curve shows the dependence of the inflation rate on three factors:

1) expected inflation;

2) deviations of the unemployment rate from the natural level;

3) shock changes in supply.

In the 1960s, the Phillips curve was not questioned. It was believed that economic policy should be aimed at finding a certain “golden mean” between acceptable levels of inflation and unemployment. However, in the 1970s supply shocks caused stagflation in the 1980s. There was a simultaneous decrease in inflation and unemployment.

In the long run, the Phillips curve is a vertical line, and it is clearly fixed at the level of natural unemployment. The fact is that over a long-term time interval there is no difference between actual and expected inflation, and this is only possible when the natural level of unemployment is reached.

Fig.4.6. Phillips curve in the long run

Inflation has a strong impact on employment. Empirical studies have shown that there is a certain relationship between employment levels and inflation. Inflation is kept low while unemployment is high, and vice versa. In 1958, the English economist A. Phillips proposed a graphical model of demand inflation, expressing the relationship between the unemployment rate and the growth rate of average wages. Using English statistics data for 1850-1860 in his work, he constructed a curve that clearly shows the inverse relationship between changes in wage rates and the unemployment rate (Fig. 5.2).

(unemployment rate)

Rice. 5.2. Phillips curve

Later, from this relationship, American economists P. Samuelson and R. Solow concluded that the Phillips curve describes the choice between inflation and unemployment, when one can be reduced only by increasing the other. The reason for this dependence is that when unemployment is high, wages are kept low, which causes a slowdown in price growth. Using the curve, A. Phillips found that an increase in unemployment in England above 2.5-3% led to a sharp slowdown in the growth of prices and wages. Thus, the government can use the increase in inflation to combat unemployment. Later, this conclusion was theoretically argued by the economist R. Lipsey.

Also created by R. Solow and P. Samuelson Phillips curve modification for economic policy developments. They replaced wage rates in this curve with the rate of growth of commodity prices, or inflation. Using this curve, it became possible to calculate the equilibrium between sufficiently high levels of employment and production and a certain price stability.

If the government considers the unemployment rate U 1 (corresponding to the price growth rate P1) in the country to be too high, then to reduce it, budgetary and monetary measures are taken to stimulate demand (see Fig. 5.2).

Thus, by increasing the flow of investment, the state can encourage enterprises to expand production and sales, and therefore increase jobs. The unemployment rate decreases to the level of U 2, but at the same time the inflation rate increases to P 2. Such manipulations can cause “overheating” of the economy and, as a result, crisis phenomena. This situation forces the government to introduce credit restrictions, reduce expenditures from the state budget, etc. As a result of these reciprocal actions of the government, the price level will decrease to the level of R3, and unemployment will increase and its rate will be U 3.

Repeated practice of economic regulation has shown that this method can only be applied for short periods, since in the long term (5-10 years), despite the high level of unemployment, inflation continues to increase, which is explained by a number of circumstances. Among these circumstances, it is necessary to highlight the policy of stimulating aggregate demand. The government’s desire to “buy” a lower unemployment rate at the cost of inflation is successful only when it manages to create so-called “false expectations” among business agents, or simply deceive them. Until potential workers realize that the terms they agreed to are no better than those they previously rejected, employment will continue to rise. But it will immediately fall to its original level as soon as the employed discover that the increased attractiveness of jobs is an illusion generated by inflation. Thus, there will be no long-term reduction in unemployment, and inflation will remain. He paid special attention to these relationships back in the 60s. American economist M. Friedman, who emphasized the ineffectiveness of the fight against unemployment by “pumping up” aggregate demand with inflationary measures. Indeed, at the moment when the population overcomes its false expectations and soberly assesses that the increase in nominal rates is not adequate to the increase in the purchasing power of their wages, inflation will not be accompanied by an increase in the supply of labor, but, on the contrary, by its reduction, i.e. growing unemployment.

It was M. Friedman who came up with the idea of building "vertical Phillips curve". If the government tries to maintain the unemployment rate at a high level, inflation expectations and wage requirements increase - the Phillips curve shifts upward. Inflation is rising again, workers' inflation expectations are rising again and their wage demands are increasing.

The Phillips curve continues to move upward. Now, at any level of unemployment, the Phillips curve will be higher and higher, which is graphically displayed by the “vertical Phillips curve” (Fig. 5.3).

(unemployment rate)

Rice. 5.3. Vertical Phillips curve

It has been established that the Phillips curve can be used to combat unemployment only in conditions of moderate inflation at a constant rate. The curve does not work with unexpected shocks - the inflation rate increases just as unexpectedly and may be accompanied by an increase in unemployment. In other words, the relationship established by the Phillips curve is not valid over long periods of time.

So, the relationship between unemployment and inflation, which the Phillips curve illustrates, turned out to be extremely unstable; for example, in the 60s and 70s, both unemployment and inflation (stagflation) simultaneously grew in many countries around the world. The spillover of unemployment into inflation is dangerous for the economy due to unpredictable consequences. As a result of this negative feature - the "trade-off between inflation and unemployment", - the governments of most Western countries switched to the theory of the natural rate of unemployment, which is used to this day.

The essence of the theory is that in the long term, an acceptable level of inflation is possible only with a natural rate of unemployment. The natural rate of unemployment should be determined by the structure of the labor market, taking into account information about the needs in various industries. It should be noted that this policy, i.e. ensuring a natural level of unemployment and reducing inflation to moderate and stable levels does not always achieve its goals. Despite all the positive factors of this method, it has a rather important drawback: when the natural level of unemployment is reached, inflation continues to increase for some time, as if by inertia - its rate cannot quickly decrease.

BRANCH "PROTVINO"

Coursework in the discipline "Macroeconomics"

On the topic: The relationship between inflation and unemployment

Completed by: 2nd year student

No. PI 073____group

Zhuravleva Evgeniya Valerievna

Checked by: Aleksikova.E.V.

Grade: __________________

Date of: _____________________

Protvino 2008

Introduction. 3

I. Theoretical foundations of the relationship between inflation and unemployment.. 5

1.1 Inflation: concept, essence, causes and consequences. 5

1.2 Types of inflation. 6

1.3 Unemployment: concept, types, causes and consequences. 9

II. Forms of interaction between inflation and unemployment... 16

2.1 Phillips curve. 16

2.2 Monetarist interpretation of the Phillips curve (Friedman-Phelps model) 20

2.3 Phillips curve from the perspective of the theory of rational expectations (R. Lucas, T. Sargent) 26

III. Inflation and unemployment in modern Russia: problems and methods of regulation. 31

3.1 Current state and problems of the Russian economy. 31

3.2 Measures taken by the Government of the Russian Federation to combat inflation and unemployment. 37

3.2.1 Measures to combat inflation. 37

3.2.2 Measures taken to regulate the unemployment rate.. 42

Conclusion. 46

List of used literature... 48

Introduction

Economic science, on the one hand, represents economic activity, the purpose of which is to obtain economic knowledge, and on the other, a system of economic knowledge, which acts as a result of scientific production. And it is this system that includes the labor market and the money market.

At one time, the problems of inflation and unemployment were considered by D. Ricardo, D. Keynes, M. Friedman, Locke and others. But everywhere these problems were seen as something to be avoided at all costs. Thus, one of the most difficult problems of macroeconomic policy is the need to simultaneously regulate inflation and unemployment. This course work is devoted to the analysis of the relationship between unemployment and inflation.

The relevance of this topic is that inflation and unemployment are pressing issues of our time that concern and affect each of us.

The purpose of the study is to study the relationship between inflation and unemployment, as well as the current impact of this aspect on the Russian economy.

The object of the study is inflation and unemployment and the forms of their relationship.

Structure of the work: the work consists of an introduction, three chapters, a conclusion and a list of references.

The first part of the work examines the general theoretical foundations: the concepts of inflation and unemployment, their types, causes and possible consequences.

Part two analyzes the forms of the relationship between inflation and unemployment using the Phillips curve as an example. Here is an overview of the mechanism for forming expectations, the theory of adaptive and rational expectations, short-term and long-term Phillips curves, and the problem of stagflation.

The third part examines in detail, taking into account recent changes, the origins of inflation and unemployment in Russia, the current state and difficulties of the country, and also lists the measures implemented by the Government of the Russian Federation to regulate the problems covered.

The proposed work is a specially revised article from Russian economic journals, textbooks and Internet sites.

I. Theoretical foundations of the relationship between inflation and unemployment

1.1 Inflation: concept, essence, causes and consequences

The term inflation first began to be used in North America during the Civil War of 1861-1865. and denoted the process of swelling of paper money circulation. In the 19th century, this term was also used in England and France. The concept of inflation became widespread in economic literature in the 20th century immediately after the First World War. The concept appeared in Soviet economic literature only in the mid-20s.

Inflation is the depreciation of money, a decrease in its purchasing power, an imbalance of supply and demand. Literally translated, the term “inflation” (from the Latin inflatio) means “bloating”, i.e. overflow of circulation channels with excess paper money, not backed by a corresponding increase in the commodity supply. Typically, inflation is based on not one, but several interrelated reasons, and it manifests itself not only in rising prices - along with open, price inflation, there is hidden, or suppressed, inflation, which manifests itself primarily in shortages and deterioration in the quality of goods.

But not every price increase is an indicator of inflation. Prices may rise due to improved product quality, worsening conditions for the extraction of fuel and raw materials, and changes in social needs. But this will, as a rule, not be inflationary, but rather a logical, justified increase in prices for individual goods.

The most laconic definition of inflation is an increase in the general price level, the most general is an overflow of the channels of circulation of the money supply in excess of the needs of trade turnover, which causes depreciation of the monetary unit and, accordingly, an increase in commodity prices. Inflation is a subtle socio-economic phenomenon generated by imbalances in reproduction in various spheres of the market economy. At the same time, inflation is one of the most acute problems of modern economic development in almost all countries of the world.

The essence of inflation is that the national currency depreciates in relation to goods, services and foreign currencies that maintain the stability of their purchasing power.

1.2 Types of inflation

There are several types of inflation. From the point of view of the rate of price growth, the following are distinguished:

1. Creeping (moderate) inflation, which is characterized by relatively low rates of price growth, up to approximately 10% or slightly more percent per year. This kind of inflation is common in most countries with developed market economies, and it does not seem to be something unusual.

2. Galloping inflation (price increases by 20-2000% per year).

3. Hyperinflation - prices grow astronomically, the discrepancy between prices and wages becomes catastrophic, the welfare of even the most affluent sections of society is destroyed, the largest enterprises become unprofitable and unprofitable (a 50% increase in prices per month is considered hyperinflation). Running a successful business in hyperinflation is almost impossible. It can only be a survival strategy. The recipe for survival is this: autonomy and self-sufficiency, simplification of production, reduction of external relations, naturalization of the basic elements of intra-company management. Increasingly, industrial enterprises have to start their own greenhouses, pig farms and even mini-power plants, and increase the emphasis on barter and clearing operations.

From the point of view of balancing the rise in prices for various product groups, a distinction is made between balanced and unbalanced inflation. With balanced inflation, the prices of various goods remain constant relative to each other, and with unbalanced inflation, the prices of various goods constantly change in relation to each other, and in different proportions. Balanced inflation is not scary for business. We only have to periodically increase the prices of goods: raw materials have risen in price 10 times, and the price of the final product increases accordingly. The risk of loss of profitability is inherent only to those entrepreneurs who are the last in the chain of price increases. These are, as a rule, manufacturers of complex products based on intensive external cooperation ties. The price of their products reflects the entire amount of the increase in prices of external cooperation, and it is they who risk delaying the sale of extremely expensive products to the end consumer. It is dangerous to engage in this business; it is better not to purchase shares of the relevant companies. Unbalanced inflation prevails in Russia and the CIS. The rise in prices for raw materials outpaces the rise in prices for final products, the cost of a component exceeds the price of the entire complex device, etc.

According to the parameter expectation or predictability of inflation, expected and unexpected are distinguished. Expected inflation can be forecast over a period of time and is often a direct result of government actions. Unexpected inflation is characterized by a sudden jump in prices, which negatively affects the tax system and monetary circulation. If the population has inflation expectations, such a situation will cause a sharp increase in demand, which in itself creates difficulties in the economy and distorts the real picture of public demand, which leads to a failure in forecasting trends in the economy and, with some indecisiveness of the government, further increases inflation expectations, which will push up prices. However, in the case when a sudden jump in prices occurs in an economy not affected by inflationary expectations, the so-called “Pigou effect” occurs, a sharp drop in demand among the population in the hope of a quick decline in prices. Due to a decrease in demand, the manufacturer is forced to reduce the price, and everything returns to a state of equilibrium.

Causes of inflation:

The most important inflationary reasons for rising prices include the following:

1. Disproportionality - imbalance of government expenditures and revenues, the so-called state budget deficit. Often this deficit is covered by the use of the “printing press”, which leads to an increase in the money supply and, as a result, to inflation.

2. Inflationary dangerous investments - mainly militarization of the economy. Military appropriations lead to the creation of additional effective demand and, consequently, to an increase in the money supply. Excessive military appropriations are usually the main cause of chronic government budget deficits, as well as an increase in government debt, to cover which additional paper money is issued.

3. The absence of a pure free market and perfect competition as part of it. The modern market is largely oligopolistic. The oligopolist, trying to maintain a high price level, is interested in creating a shortage (reducing production and supply of goods).

4. “Imported” inflation, the role of which increases with the growing openness of the economy and its involvement in the world economic relations of a particular country. The state's ability to fight is quite limited. The method of revaluing one's own currency, sometimes used in such cases, makes imports cheaper. But revaluation also makes the export of domestic goods more expensive.

5. Inflation expectations - the emergence of self-sustaining inflation. The population and economic entities are getting used to a constant increase in the price level. The population demands higher wages and is stocking up on goods for future use, expecting their prices to rise soon. Manufacturers are afraid of price increases from their suppliers, while at the same time factoring into the price of their goods the increase in prices they predict for components, thereby rocking the inflation flywheel.

Consequences of inflation:

redistribution of income and wealth;

prices of state-owned enterprises lagging behind market prices;

hidden government confiscation of funds through taxes;

accelerated materialization of funds;

instability of economic information;

fall in real interest;

inverse proportionality between the inflation rate and the unemployment rate.

1.3 Unemployment: concept, types, causes and consequences

Unemployment is a socio-economic phenomenon in which part of the labor force (economically active population) is not engaged in the production of goods and services. The unemployed, along with the employed, form the country's labor force. Employed in the economy - persons who, during the period under review: a) performed paid work for hire, as well as income-generating self-employment work, both with and without the involvement of hired workers; b) were temporarily absent from work due to illness or injury, caring for the sick; annual leave or days off; learning outside the workplace; leave without pay or with pay at the initiative of the administration (lasting less than 6 months); strikes; other similar reasons; c) worked as helpers in the family business. Persons engaged in the production of household products intended for sale (in whole or in part) are also considered employed.

Unemployed (in relation to the standards of the International Labor Organization) - persons at the age established for measuring the economic activity of the population, who during the period under review simultaneously satisfied the following criteria:

did not have a job (gainful occupation);

were looking for work, i.e. contacted a government or commercial employment service, used or placed advertisements in the press, directly contacted the organization’s administration or employer, used personal connections, etc., or took steps to organize their own business;

were ready to start work during the survey week.

Pupils, students, pensioners and disabled people are counted as unemployed if they are looking for work and are ready to start work.

To characterize unemployment, 2 main indicators are used: the unemployment rate and its duration. The unemployment rate is the ratio of the number of unemployed (officially registered) to the number of economically active population in the period under review, as a percentage. The unemployment rate is used to measure the extent of unemployment.

Duration of unemployment (duration of job search) is the period of time during which a person, being unemployed, looks for work, using any means. The duration of unemployment characterizes the average time of interruption from work.

Types of unemployment:

From point of view		Explanation
...the nature of ousting a worker from production	Voluntary	when an employee resigns of his own free will for one reason or another
...the nature of ousting a worker from production	Forced	when management itself offers to resign an employee, citing various circumstances
…generating conditions and causes	frictional	associated with the search or expectation of better work in better conditions, involves the movement of labor across industries, regions, due to age, change of profession, etc. A certain level of frictional unemployment is inevitable in a constantly changing market economy.
	structural	the result of a mismatch between demand and supply for labor in various organizations, industries, and different professions; This is a temporary loss of work by part of the working population, but due to changes in the structure of production (associated with changes in technology). These changes make it necessary to retrain personnel to acquire new professions. The death of old industries due to structural changes in the economy causes the layoff of part of the workforce.
	technological	the result of the influence of scientific and technical progress, when certain professions are no longer needed, because they are automated
	cyclical	generated by the cyclical nature of the development of a market economy, that is, the alternation of periods of rise and decline in production. The general economic downturn causes job loss and the inability to find one in any specialty.
		The workforce is not fully utilized, but is not fired either.
	seasonal	caused by fluctuations in labor demand over different periods of time.
	partial	arises as a result of a decrease in demand for the company's products. In this case, two options for the entrepreneur’s behavior are possible: either he retains the opportunity for part of the staff to work full time and fires the other part, or without dismissal he gives everyone the opportunity to work part-time, which leads to partial unemployment.

The question of what exactly is considered full employment is of important theoretical and practical importance. After all, full employment does not mean the absolute absence of unemployment. It is defined as employment that constitutes less than 100% of the labor force (or self-employed population), and the proportion of frictional and structural unemployment that exists corresponds to the appropriate level of full employment. Modern economists consider the presence of these two types of unemployment with full employment as an inevitable companion to an economy in which there is a free choice of place, time and conditions of work. Thus, full employment is achieved when cyclical unemployment is zero.

Under conditions of full employment, there is natural unemployment, which is a combination of frictional and structural unemployment. The unemployment rate at full employment is called the natural unemployment rate or natural unemployment rate. Currently, it is generally accepted that at full employment the level of natural unemployment is 5-6%.

The term “natural unemployment” was first coined by the American scientist M. Friedman. Natural unemployment implies the presence of people either preparing for employment or looking for a better job based on their qualifications. Moreover, the higher the degree of freedom to choose the place, time and conditions of work, the more stable the category of natural unemployment.

From this formula it follows that natural unemployment grows with an increase in the share of people losing their jobs, and falls with an increase in the share of those employed.

In a real economy, the actual level of unemployment, as a rule, is not equal to the level of natural unemployment, exceeding it during a recession and being lower during an economic recovery. The actual unemployment rate is subject to fluctuations, which determine the magnitude of cyclical unemployment. Thus, the level of cyclical unemployment is equal to the difference between the levels of actual and natural unemployment.

With cyclical unemployment, production capacity is not fully used and the GDP value is less than what it would be under conditions of full employment. The difference between the potential GDP at full employment and the GDP actually achieved at cyclical unemployment constitutes the GDP gap.

There is a stable direct relationship between cyclical unemployment and the GDP gap, discovered empirically by A. Okun. Okun's law expresses the relationship between the unemployment rate and lost GDP. If the actual unemployment rate exceeds its natural rate by 1%, then the lag in GDP will be approximately 2.5%. This ratio (1:2.5) allows one to calculate the absolute losses associated with any level of unemployment.

Causes of unemployment:

Many economic schools analyze the causes of unemployment. One of the earliest explanations was given in the work of the English priestly economist T. Malthus, “An Essay on the Law of Population.” Malthus noted that unemployment is caused by demographic reasons, as a result of which the rate of population growth exceeds the rate of production growth. Disadvantage: cannot explain the occurrence of unemployment in highly developed countries with low fertility.

K. Marx studied unemployment quite thoroughly in Capital. He noted that with technological progress, the mass and cost of means of production per worker is growing. This leads to a relative lag in the demand for labor from the rate of capital accumulation, and this is the cause of unemployment. This interpretation is mathematically not entirely correct, because if the demand for labor grows, then unemployment disappears, or at least resolves, despite the fact that capital growth occurs at an even higher rate. Marx also admitted other reasons, in particular, the cyclical development of a market economy, which makes it a constant companion to the development of a market economy. The removal of unemployment from the cyclical development of the economy has become a stable tradition in economic theory after Marx. If the economy develops cyclically, when booms and busts replace each other, the consequence of this is the release of labor and the curtailment of production, an increase in the army of the unemployed.

Keynes's merit in developing the theory of unemployment is that he presented a logical model of the mechanism that promotes economic instability and its integral component - unemployment. Keynes noted that as the national economy grows in a developed market economy, the majority of the population does not consume all of its income, but a certain part of it turns into savings. In order for them to turn into investments, it is necessary to have a certain level of so-called effective demand, consumer and investment. The fall in consumer demand dampens the interest in investing capital, and, as a result, the demand for investment falls. When investment incentives fall, production does not grow and may even decline, which leads to unemployment.

The English economist A. Pigou, in his famous book “The Theory of Unemployment,” substantiated the thesis that imperfect competition operates in the labor market. It leads to higher labor prices. Therefore, many economists pointed out that it is more profitable for an entrepreneur to pay high wages to a qualified specialist who can increase the cost of production. Due to highly productive labor, an entrepreneur has the opportunity to reduce his workforce (the principle applies: it is better to hire one person and pay him well than to keep 5-6 people with a lower salary). In his book, Pigou detailed and comprehensively substantiated the opinion that a general reduction in money wages can stimulate employment. But still, this theory cannot provide a complete explanation of the sources of unemployment. And statistics do not confirm the position that the army of unemployed is always replenished by workers with relatively low wages.

Consequences of unemployment:

1. Production reduction

2. Increase in expenses (benefits for the unemployed)

3. lowering the skill level of the unemployed population

4. decline in living standards, increase in poverty in the country.

5. underproduction of national income

5. Decrease in tax revenues

6. Declining birth rate

7. reduction in average life expectancy.

II. Forms of interaction between inflation and unemployment

2.1 Phillips curve

This curve was empirically discovered in the late 1950s, when the English economist A. Phillips (1914 - 1974), studying economic statistics of prices and employment in Great Britain, proposed a model of the relationship between these indicators in the form of a descending curve (see Fig. a).

Based on the analysis, Phillips concluded that there is an inverse relationship between the growth rate of nominal wages and the unemployment rate. This relationship, known as the Phillips curve, has played a huge role in macroeconomics. Using the Phillips curve, firstly, the mechanism of inflation development was investigated, and secondly, the optimal combination of such contradictory goals of stabilization policy as inflation and unemployment was assessed. The Phillips curve made it possible to link the growth rate of nominal wages and changes in employment (unemployment level).

Analyzing data for more than 100 years, Phillips came to the conclusion that there is a certain level of unemployment (6-7%) at which the level of wages is constant and its increase is zero. When unemployment falls below this natural level, wages rise faster and vice versa. Subsequently, using the thesis of a strong correlation between wage growth and prices, this dependence was transformed into a relationship between unemployment and the rate of price growth (insolation).

Analytically, the Phillips curve has the following form

, (1)

where is the growth rate of nominal wages,

u is the real unemployment rate,

W - nominal wage.

Phillips and his followers explained the existence of the relationship they discovered on the basis of changes in the labor market. Nominal wages rise (gw>0), when in the economy the demand for labor exceeds supply (excess demand), nominal wages fall (gw<0), когда существует избыток рабочей силы (т.е. избыток предложения) на рынке труда. Когда рынок труда находится в равновесии, то gw=0, следовательно, изменение номинальной заработной платы не происходит (нет инфляции заработной платы).

There is a dual relationship with the Phillips curve. In the first approach, the Phillips curve is considered as an economic law. This means that a country cannot have strong inflation and high unemployment at the same time. Using various combinations of government regulation tools, any combination of inflation and unemployment levels corresponding to different points on the curve can be achieved. This means that free movement up and down the curve is possible. The choice of point is determined by the existing economic situation, as well as the socio-political guidelines of the government.

The second approach to the Phillips curve denies the persistence and stability of the relationship between inflation and unemployment. The economy can achieve the highest level of employment at a given rate of moderate inflation. The conflict of goals - to contain inflation or unemployment - can be overcome if it is possible to shift the Phillips curve to the left and down.

Problems with the Phillips curve arose among economists when empirical studies in the 70s and 80s did not confirm the negative relationship between the unemployment rate and the growth rate of nominal wages, previously observed for almost a hundred years. A phenomenon such as stagflation also appeared in the economy: rising prices along with rising unemployment. It became obvious that if we plot the trajectory of economic development over long periods of time in the coordinates of the Phillips curve, then this trajectory looks like a zigzag spiral that does not reduce to the original Phillips curve (see Fig. b).

In an effort to explain these zigzags, researchers began to propose new models of the relationship between inflation and unemployment. Keynesian economists suggested that there is not just one Phillips curve, but a whole “family” of them (see Fig. c): in its development, the national economy can “jump” from one Phillips curve to another.

2.2 Monetarist interpretation of the Phillips curve (Friedman-Phelps model)

Edmund Phelps (b. 1933), a Keynesian, and Milton Friedman (1912 - 2006), often called the founder of the monetary school, predicted in their works (Phelps back in 1967, and Friedman in 1968) that the pattern described by a simple curve Phillips will disappear, which actually happened in the 70-80s. They showed that the simple Phillips curve is unable to describe the actual relationship between wage inflation and the unemployment rate, since it only takes into account the effect of the level of employment on the level of wages, and nominal wages at that. Phelps and Friedman in their works proposed modifying the simple Phillips curve into the following form

(2)

based:

natural rate of unemployment hypothesis;

the existence of inflation expectations among individuals;

orientation of economic agents towards real rather than nominal wages.

where u is the actual unemployment rate;

uf - natural unemployment rate;

a is the sensitivity coefficient of the inflation rate (growth rate of the general price level) to changes in the unemployment rate.

The natural rate of unemployment corresponds to the long-term equilibrium of the economy. In the short term, the unemployment rate may differ from the natural unemployment rate, which affects changes in wages. When u > u* the wage level decreases, when u< u* уровень реальной зарплаты увеличивается.

Adaptive expectations are retrospective expectations; Business entities make their forecasts based solely on past experience.

The assumption that economic agents are guided by the real level, and not the nominal level of wages, as Phillips believed, leads to the fact that inflation becomes the most important factor influencing the growth rate of nominal wages, since .

Changes in prices in the future, which affect the growth rate of nominal wages, cannot be determined by economic agents operating at the present time. Economic agents can only build expectations about changes that will occur in the future.

Friedman developed a mechanism that describes how inflation expectations are formed, which are called adaptive inflation expectations. Adaptive inflation expectations are expectations of future inflation formed by business entities based on previous inflation levels; changing these expectations is slow. Adaptive expectations are expectations that are constructed as follows in a discrete case

rating error

past past

assessment period

in the continuous case ,

where n is the adaptation coefficient (adjustment speed) of inflation expectations,

Inflation expectations of the t-th period,

Inflation expectations (t-1) - th period,

Actual inflation (t-1) - th period.

This mechanism takes into account past mistakes. If we overestimated inflation, then if we underestimated it, then

If the adaptation coefficient is small (n close to 0), then adaptation to reality is slow; if the adaptation coefficient is large (n close to 1), then adaptation to reality is fast. If the adaptation coefficient n = 1, then our inflation expectations are completely based on the previous inflation level (forecast inflation is equal to the current one) (naive inflation expectations). If the adaptation coefficient n = 0, then our inflation expectations are completely based on previous inflation expectations (static inflation expectations).

According to the theory of adaptive expectations, business entities form their ideas about expected inflation based on previous rates of price growth. These expectations are quite stable. In the short term, an increase in demand, provided that the actual rate of price growth is greater than expected, will lead to movement along the Phillips curve and a decrease in unemployment. This is possible because wages are set at expected levels and higher-than-expected commodity prices increase producers' profits. The business response will be to increase output and hire additional workers.

∙∙∙∙∙∙∙∙∙>

long-run Phillips curve

Fig. 2 Reaction of an economy with adaptive expectations to an unexpected increase in the money supply.

Following an unexpected increase in the money supply, the economy shifts to the left along the short-run Phillips curve PC1 from the point corresponding to zero inflation and the natural rate of unemployment uf to the point where unemployment falls to ut and inflation rises to p1. Further developments depend on whether there will be a new cash injection and in what volume (see Fig. 2).

After the expected increase in the money supply, there is not even a short-term increase in employment. The economy immediately shifts upward along the long-term Philips curve PCLR to the point where unemployment remains at the natural level uf and inflation reaches p3 (see Fig. 3).

Fig. 3 Reaction of an economy with adaptive expectations to an expected increase in the money supply.

However, the achieved equilibrium is not stable. Over time, employees will begin to realize that their real wages have decreased. Workers will demand a restoration of the status quo. The result will be an increase in nominal wages and a decrease in profits. The incentives to expand production will disappear, the real volume of which will return to the level of the natural rate of unemployment. Inflation generated by increased demand will continue. Its actual and expected level will increase. The short-term Phillips curve rises.

With a new increase in demand in the economy, the action of the mechanism described above will repeat.

This dynamics of the unemployment rate also means that in the long run the unemployment rate does not depend on the level

wage changes. That is, in the long term, the Phillips curve is a vertical line at the level of the natural rate of unemployment (see Fig. 4).

Fig.4

In other words, any given rate of inflation over the long run is correlated with the natural rate of unemployment. Over long-term time intervals, the aggregate supply curve is a vertical line of natural output. The absolute price level changes in proportion to the growth of the money supply (aggregate demand). The property of money in the long term to influence only the general price level is called the “neutrality” of money. The above considerations apply to both inflation and disinflation.

For explaining the relationship between inflation and unemployment, M. Friedman in 1976 and E. Phelps in 2006 received the Nobel Prize in Economics.

Adaptive inflation expectations have the following significant disadvantages. Firstly, expectations constructed in this way imply the presence of systematic errors, and secondly, this mechanism for constructing inflation expectations means the presence of a time period during which inflation expectations adjust to the actual level of inflation.

The inverse relationship between inflation and unemployment exists only in the short term; in the long term, the Phillips curve degenerates into a vertical straight line.

It is possible to keep the economy at an unemployment rate below the natural one only through constant unexpected cash injections, leading to an upward shift in the short-term Phillips curve and, consequently, to acceleration (acceleration) of inflation. When the injections stop, the economy returns to the natural rate of unemployment. Therefore, in the long term, the economy is stable at the level of the natural rate of unemployment, which can be combined with any rate of inflation.

Government policies aimed at reducing unemployment in the short run do help reduce unemployment when inflation rises, but only when they are implemented in unexpected ways. However, the expansion of production and employment achieved in this way will be temporary and in the long run will inevitably result only in higher prices. The expected stimulus policy measures do not even have a short-term impact on production and employment.

To reduce inflation, a restrictive economic policy is necessary. The inevitable consequence of such a policy is an increase in the unemployment rate in the short term.

2.3 Phillips curve from the perspective of the theory of rational expectations (R. Lucas, T. Sargent)

The synthesis of Keynesian and neoclassical approaches to the Phillips curve model was carried out by the American economist Robert Lucas (b. 1937), who drew attention to the role of inflation expectations (Fig. 5).

According to Lucas, when a constant rise in prices seems something new to business entities, their reactions are described by the original Phillips curve. If the government and the Central Bank, in an effort to increase employment, stimulate aggregate demand (government spending and the supply of money in banks increase, taxes decrease), then firms expand production and increase the hiring of workers. But soon workers notice that their real wages have decreased due to inflation, trade unions seek wage increases, which reduces employment almost to the original level. Repeated actions by the government and the Central Bank to stimulate demand will again and again trigger this entire cycle of changes. At this stage, the economy develops in a "herringbone" pattern - there is a transition to higher and higher Phillips curves.

Fig 5.

However, gradually, as Lucas points out, people are getting used to rising prices and are beginning to take expected inflation into account in advance. When wages are strictly “tied” to rising prices, there will be no expansion of production at all; stimulating actions of the government and the Central Bank will only lead to rising prices without reducing unemployment. As a result, at high rates of price growth, the Phillips curve approaches a vertical straight line.

Rational expectations are a way of predicting future economic conditions, in which economic entities make their forecasts based on all the information available to them. The expected value of inflation is the value that seems most likely based on all the information available to the economic entity. It is assumed that economic entities are fully informed about all events in the economy and fully foresee their consequences, as well as the consequences of their own actions, therefore their behavior is rational.

Phillips curve equation under rational expectations:

where ε is the random forecast error.

From Lucas' model it follows that using inflation to combat unemployment can only be used as a short-term tactic, but not as a permanent strategy. The same model allows you to choose the most effective method of combating inflation (see Fig. 6):

To dampen price increases, one must come to terms with a temporary increase in unemployment - there is a movement along a downward “Christmas tree” trajectory. If the government is trusted, then even the initial measures to combat inflation will change the inflation expectations of citizens, who will no longer include price increases in their long-term plans. As a result, inflation will be reduced with almost no reduction in employment.

The response of an economy with rational expectations to an unpredictable increase in the money supply:

The economy's response to an increase in the money supply will be similar to that outlined in the concept of adaptive expectations. The difference is that in order to reduce unemployment below the natural value and continue to maintain it at this level, all cash injections must not be unexpected, but unpredictable, even taking into account all the available information (see Fig. 7). For comparison, Figure 8 shows the response of an economy with rational expectations to a predictable increase in the money supply.

the trajectory of the economic situation in the absence of a further increase in the money supply;

the trajectory of the economic situation in the event of a repeated unexpected increase in the supply of money in the volume of the previous one;

∙∙∙∙∙∙∙∙∙>

the trajectory of the economic situation in the event of a repeated unexpected increase in the supply of money in a volume exceeding the previous one;

Fig.7. The response of an economy with rational expectations to an unpredictable increase in the money supply

Fig.8. The response of an economy with rational expectations to a predictable increase in the money supply.

American economist R. Lucas received the Nobel Memorial Prize in 1995 for the development and application of the rational expectations hypothesis, as well as for his contribution to macroeconomic analysis and deepening the understanding of economic policy.

Changes in the price level, fully consistent with those expected, do not change the value of total output, and it remains equal to potential.

Actual inflation may deviate from expected inflation as a result of unpredictable events only by a random amount e. Due to unforeseen fluctuations in supply and demand, unanticipated “price level surprises” cause short-term fluctuations in real output, but in the long run the economy returns to its potential.

Any predictable economic policy is ineffective in terms of its impact on employment and output, since its effect is solely on changes in the general price level.

Pre-announced and, therefore, predictable measures of restrictive economic policy make it possible to reduce inflation without reducing production and employment.

5. An important conclusion of the theory of rational expectations is the position that monetary policy will be effective only if it is unpredictable.

To summarize, it can be noted that at present, most economists recognize the traditional shape of the Phillips curve in the short term and the almost complete absence of relationship in the long term.

III. Inflation and unemployment in modern Russia: problems and methods of regulation

3.1 Current state and problems of the Russian economy

Inflation. The nature of Russian inflation, as well as the content of economic policies capable of suppressing it, has been a heated scientific and political debate for many years. The whole variety of points of view can be reduced to two: according to one, inflation has a non-monetary (non-monetary) or not only monetary nature, according to the other, it is a purely monetary phenomenon.

According to the monetary approach, inflation is a monetary phenomenon, and its dynamics are determined by the amount of money in the economy. The rate of inflation is directly proportional to the growth rate of the money supply, the rate of increase in the velocity of money circulation, and inversely proportional to the growth rate of the real product. With stable values of the velocity of money circulation and the growth of the real product, inflation is determined by the growth rate of the money supply. A decrease in real product with a stable level of money supply leads to an increase in the rate of inflation, since a smaller volume of product is opposed by the same amount of money. An increase in the volume of real product with the same volume of money supply contributes to deflation - a decrease in the price level. The most important factor determining the rate of inflation is the speed of money circulation.

The main provisions of the non-monetarist approach reject a purely monetary interpretation of inflation. It combines the effects of both demand inflation and cost inflation factors, and the influence of demand inflation factors does not play a dominant role. This is clearly manifested in the lag between the increase in the money supply and the rise in prices.

In accordance with the realities of the Russian economy, there are the following main causes of inflation.

1. Monopolization of the economy, or rather the rise in prices for the products of natural monopolies.

This is, first of all, the price of oil and gas and, naturally, their processed products, such as gasoline and other types of motor fuel, as well as heating oil that heats our homes. This is an increase in prices for electricity, this is an increase in prices for other natural monopolies.

2. Growth in the money supply.

Using the example of statistical data from the Central Bank of the Russian Federation, we will trace the increase in the money supply in 2008.

Money supply M2 (national definition) in 2008 (billion rubles)

M21 money supply			Money supply growth rate,%
	including		to the previous month
	cash (M0)	non-cash funds	to the previous month

The monetary aggregate M2 represents the volume of cash in circulation (outside banks) and balances in national currency in the accounts of non-financial organizations and individuals who are residents of the Russian Federation.

The methodology for calculating indicators is given in the methodological comments (section 1) of the Bulletin of Banking Statistics.

We observe an increase in M from 13272.1 to 14530.1. The largest increase occurred on 01.09. 2008

3. Increase in non-interest budget expenses.

It is worth noting that the beginning of this year differs significantly from previous years and, especially, from 2007. Typically, at the beginning of the year the level of expenses was extremely low; in 2007, January expenses amounted to only 3.3%, and February - 4.9% of the annual volume of non-interest expenses. This year, January expenses amount to 5.6%, and February expenses - 7.8% of the planned volume of non-interest expenses. Expenses in March and April were also higher compared to 2007, although they practically coincided with the 2006 level.

This increase at the beginning of the year is partly due to an increase in social spending, adjusted for high inflation, and the fact that January and February were pre-election months. However, we can make a preliminary conclusion that the efforts of the Ministry of Finance to equalize cash expenses during the year have had positive results this year. It is possible that part of the high level of spending at the beginning of the year is due to the fact that expenses carried over from 2007 were spent.

In functional classification 5, the largest volume of non-interest expenses in January-March 6 2008 fell on interbudgetary transfers (6.1% of GDP), expenses on national defense, national security and law enforcement (total 2.3% of GDP), expenses on national issues (1.5%) and national economy (1.0%). Expenditures in other areas amounted to less than 1% of GDP.

Due to the fact that some of the expenses are closed (in March, the amount of closed expenses amounted to 159.5 billion rubles), a full comparison with the previous year is difficult. However, it can be noted that, compared with the same period last year, expenditures on national issues (mainly due to the holding of presidential elections at the beginning of the year) and on interbudgetary transfers have increased significantly. Also, spending on social policy has increased noticeably. In general, such changes are consistent with the budget law for 2008-2010, taking into account the adopted amendments, in particular, amendments that adjust the volume of expenditures in connection with a higher than previously expected inflation rate at the end of 2007.

Unemployment.

Economically active population

Economically active population	Including				Unemployed people registered with state employment service institutions
Economically active population			unemployed
		in% to the corresponding period of the previous year		in% to the corresponding period of the previous year
		in% to the corresponding period of the previous year		in% to the corresponding period of the previous year		in% to the corresponding period of the previous year











September




IV quarter (monthly average)
Year (average per month)




I quarter (monthly average)



II quarter (monthly average)


September
III quarter (monthly average)

1) Data from June 2008 updated based on the results of a population survey on employment problems for August 2008; since September 2008 - are preliminary.

Pivot table.

3.2 Measures taken by the Government of the Russian Federation to combat inflation and unemployment

3.2.1 Measures to combat inflation

It should be noted that methods of regulating inflation will be effective only if they adequately correspond to its essential causes. Since inflation in our country is, firstly, structural and systemic in nature, that is, generated by the existing structure of the economy and the economic management system that has been in place for a long time, and only secondly, by traditional monetary factors, the levers for regulating this process should be based on the removal of all barriers in the way of the operation of market mechanisms, ensuring the conditions for structural restructuring of the economy and include a wide range of monetary and fiscal regulators.

To effectively regulate inflation it is necessary:

formation of civilized market relations and implementation of a strategy for sustainable socio-economic development of Russia. The primary measure in this direction is to intensify investments in fixed capital.

A key place in regulating inflation is the strengthening of budgets at all levels and effective control over their implementation.

Taxes, which make up the bulk of budget expenditures, should also be more actively used as a tool for regulating inflation. An important aspect of inflation management is the regulation of government internal and external debt, which poses a threat to price stability, creating a budgetary burden in connection with its servicing and absorbing a significant part of federal budget expenditures. -A specific direction for regulating inflation for Russia is overcoming non-payments.

Regulation of monetary factors of inflation - the issue of money and the speed of their circulation - directly affects the rate of price growth, unless other factors counteract it.

One of the directions for regulating inflation is the restructuring and modernization of the banking system, its real recapitalization, and increasing lending to the production sector of the economy. Price regulation is the most difficult area of curbing the rate of inflation.

Regulating external factors of inflation requires the development of a strategy for international monetary and credit relations in Russia, not limited to current policy measures in this area.

Finally, to effectively manage the inflation process, it is necessary to confront the “shadow” economy, which controls, according to estimates, up to 40% of Russia’s GDP. Thus, inflation in Russia should become a regulated process. This is one of the factors in the socio-economic stabilization of the country.

Effective regulation of inflation requires coordinated actions of the Bank of Russia and the Government, taking into account all factors affecting the process of money depreciation.

Antitrust regulation is no less important.

Main instruments of inflation policy

Key areas of action to curb inflation:

Containing the growth of regulated prices for products of natural monopolies and tariffs for housing and communal services. Strengthening cost control in this area.

Measures to curb the rise in prices for fuel and lubricants, providing for increased competition, including through the organization of exchange trading and increasing supply in the domestic market by reducing the fiscal burden and stimulating the development of the oil sector.

Increased supply of food products, increased level of competition.

Measures to increase the population's propensity to save and increase confidence in investing in financial market assets.

Carrying out conservative monetary and budget policies.

Inflation today is an interweaving of three processes, which are represented in different proportions in different markets for goods and services: the manifestation of the effects of local monopolies; rising costs ("cost inflation"); the effect of the monetary factor and the factor of increasing household incomes.

Ultimately, inflation is caused by excess growth in money supply and household income compared to the needs of the economy. But this is exactly what it is in the end. Additional anti-inflationary measures should be based not only on the continuation of conservative monetary and fiscal policies, but also offer a solution to the structural problems of the economy, which will reduce inflation compared to the inertial level by about 1 percentage point.

Let’s move on to consider individual “problem” markets and proposed anti-inflationary measures:

1. Housing and communal services. The main task is to develop the practice of tariff regulation, i.e. development of rules for regulating tariffs for utility services, creation of a mechanism for control and monitoring of changes in prices for utility services. At the same time, it is necessary that the containment of tariff growth be supported by measures to stimulate cost reduction and reform the housing and communal services sector.

2. Services of natural monopolies for the population. To weaken cost inflation and limit the growth of housing and communal services and transport tariffs, in 2005 the Government changed the approaches to the formation of tariffs for natural monopolies. Tariff policy has become even more restrained - I focus on achieving target inflation rates and economic growth rates.

3. Petroleum product markets.

It is necessary to create mechanisms for exchange trading of petroleum products and introduce differentiation of the mineral extraction tax for oil.

4. Fruit and vegetable markets. This is the most problematic area. The intensive increase in prices for fruits and vegetables over the past two years was largely the result of significant costs for the production and sale of vegetables.

The fight against monetary inflation. In order to reduce the contribution of monetary factors to inflation, it is necessary:

keep the growth of social budget expenditures per year within the parameters established by the Budget Law;

The Bank of Russia needs to achieve the implementation of monetary policy parameters (expansion of the money supply, exchange rate), ensuring access to core inflation that meets the established target for the consumer price index. In the future, it is advisable, along with the consumer price index, to fix the target value of core inflation;

The Bank of Russia should also develop a concept for the transition to an inflation targeting policy, taking into account the need to curb the strengthening of the ruble and develop instruments for refinancing banks;

Together with the Federal Financial Markets Service, it is advisable for the Bank of Russia to develop a set of measures to stimulate the savings activity of citizens, including intensifying the population’s investment in government and corporate securities.

In accordance with the “Main Directions of Monetary Policy for 2007,” the Central Bank was faced with two problems: inflation and the strengthening of the ruble, and the fight against inflation was named as the main task. The discount rate became the main anti-inflationary weapon.

For 2008, the forecast for inflation growth from the Ministry of Economic Development is 10%, but most likely it will be adjusted upward and will fluctuate around 12 - 13%. To maintain inflation at this level, the Ministry of Finance made several proposals (with the participation of the Ministry of Economic Development of Russia, the Ministry of Industry and Energy, the Federal Financial Markets Service and the Bank of Russia on behalf of the Government dated December 1, 2006):

1. limiting federal budget expenditures to those parameters determined by the 2008 budget;

2. the direction of Gazprom’s income not for the purchase of non-core assets in the Russian Federation, but for the early repayment of external debt;

3.2.2 Measures taken to regulate the unemployment rate

The consequences of unemployment are negative for the development of the economy of any country and directly for the person himself. Therefore, a number of legislative and

economic measures to reduce unemployment. The main goal of unemployment reduction and employment management systems is to stimulate demand for labor and to bring the structure of labor supply closer to the structure of labor demand. In practice, this means developing and implementing a set of measures to ensure that the structure of the workforce matches the changing structure of jobs.

Employment management is a critical part of the country's economic and social policy. This policy is carried out by the Ministry of Economic Development and Trade, the Federal Service for Labor and Employment (which is subordinate to the Ministry of Health and Social Development), the Federal Migration Service, and other ministries and departments.

Regarding unemployment, the state has three types of policies: social, macroeconomic and employment. The function of social policy is to provide assistance to the unemployed in order to maintain their standard of living. Macroeconomic policy involves the use of monetary and fiscal measures to reduce unemployment. Employment policy is aimed at creating new jobs, personnel retraining systems, employment centers, etc.

It is customary to distinguish two types of employment policies: passive and active. In a passive state, the function of the state is reduced to registering the unemployed and providing them with comprehensive social support. An active policy involves maintaining and increasing employment through stimulating the creation of new jobs, supporting self-employment, and stimulating labor supply. An active employment policy is manifested in the following main areas:

assistance in employment;

assistance in professional training and retraining;

promoting self-employment and entrepreneurship;

organization of public works;

assistance to people experiencing special objective difficulties in finding employment: disabled people, young people, the elderly, etc.

Assistance in finding employment in Russia is provided on the basis of the Law on Employment of the Population of the Russian Federation. According to Article 12 (clause 1) “the state guarantees citizens... free assistance in selecting a suitable job and finding employment.”

Currently, Rostrud (Federal Service for Employment and Placement), through its branches throughout Russia, is implementing the following measures to promote employment:

Organization of temporary employment of unemployed citizens aged 18 to 20 from among graduates of primary and secondary vocational education institutions looking for work for the first time.

Organization of professional orientation of citizens in order to choose a field of activity (profession)

Organization of vocational training

Providing assistance to self-employment of unemployed citizens

Social adaptation of unemployed citizens in the labor market

Organization of temporary employment for unemployed citizens in particular need of social protection

Organization of public works

Informing the population and employers about the situation on the labor market

Organization of job fairs and training jobs

Organization of temporary employment of minor citizens aged 14 to 18 years

The considered areas of active policy in the labor market are carried out through federal, regional and local divisions of the employment service. There are about 2.5 thousand employment centers in Russia, employing over 40 thousand full-time employees.

The following measures can also help in the fight against unemployment: the creation of new jobs, namely decent and productive ones, and the implementation of a social insurance mechanism, including, among other things, unemployment insurance;

And in the fight against labor migration, Decree of the Government of the Russian Federation of November 15, 2006 No. 683 was adopted “On establishing for 2007 the permissible share of foreign workers employed by business entities operating in the field of retail trade on the territory of the Russian Federation,” according to which from 15 January 2007, the number of foreign workers in retail markets can be no more than 40 percent, and from April 1 they will be prohibited from working there. In addition, from January 15, foreigners cannot work in the trade of alcoholic beverages and pharmaceutical products. For this purpose, the Labor Code provides for a new basis for dismissal - clause 12 of part 1 of Article 83. However, payment of severance pay upon dismissal is not provided.

Conclusion

In this course work, I examined one of the most difficult problems of macroeconomic policy - the simultaneous regulation of inflation and unemployment.

Inflation is one of the most painful and dangerous processes that negatively affects finance, the monetary and economic system as a whole, and also undermines the possibilities of economic regulation. Inflation in its nature, intensity, and manifestations can be very different and is associated with supply shocks. Typically, inflation is based on not one, but several interrelated reasons, and it manifests itself not only in rising prices - along with open, price inflation, there is hidden, or suppressed, inflation, which manifests itself primarily in shortages and deterioration in the quality of goods.

Inflation management is the most important problem of monetary and economic policy in general. Inflation in Russia is based not only on monetary, but also on non-monetary factors. It is necessary to take into account the complex, multifactorial, structural nature of inflation.

The labor market, generally subject to the laws of supply and demand, is a special kind of market, which has a number of significant differences from other commodity markets. The regulators here are not only macro- and microeconomic factors, but also many factors of a social and socio-psychological nature. Unemployment appears in the labor market as an excess of labor supply over demand for it. Among the main areas of labor force regulation are:

1) programs to stimulate employment growth and increase the number of jobs in the public sector;

2) programs for training and retraining of personnel;

3) labor recruitment assistance programs;

4) programs for social insurance of unemployment. A special place in the system of labor market regulation is occupied by labor exchanges, which are special institutions that perform intermediary functions in the labor market.

The relationship between unemployment and inflation rates is represented by the Phillips curve. Inflation here acts as a price for low unemployment and high employment. The state, using budgets and economic policy instruments, moves the economy to the optimal rate of inflation and unemployment rate. It is also necessary to note the monetarist and neoclassical methods of regulating inflation and unemployment. Currently, most economists recognize the traditional shape of the Phillips curve in the short term and the almost complete absence of relationship in the long term.

Among the problems of the Russian economy, one should highlight the country’s dependence on oil prices, the growth of foreign illegal labor and the excessive strengthening of the Russian ruble, which directly affects both inflation and unemployment rates and which complicates the process of regulating the mutual influence of inflation and unemployment.

Bibliography

1. Labor Code of the Russian Federation (as amended on May 9, 2005) - M.: TK Velby, Prospekt Publishing House, 2007

2. Federal Law dated April 19. 1991 No. 1032-1 “On employment in the Russian Federation” (as amended on August 22, 2004)

3. Federal Law dated December 19. 2006 No. 238-FZ "On the Federal Budget for 2007"

4. Federal Law dated December 30. 2004 No. 210-FZ "On the basis for regulating tariffs of public utility organizations"

5. Arkhipov A. Protracted fight // Smart Money. - 2006. - No. 38(38). - WITH .2 1.

6. Brown D. Non-standard employment in the Russian economy / D. Brown, I. Vantoux, R. Visan et al.; edited by V.E. Gimpelson, R.I. Kapelyushnikov. - M.: State University Higher School of Economics, 2006

7. Brodskaya T.G. Macroeconomics: textbook. manual for universities / T.G. Brodskaya, V.I. Vidyapin, A.I. Dobrynin and others - M.: RIOR, 2007

8. Gryaznova A.G. Macroeconomics. Theory and Russian practice / edited by A.G. Gryaznova, N.N. Dumnoy. - M.: KnoRus, 2006

9. Zhegulev I. The Motherland will hire: who is expected in Russia instead of migrants // Smart Money. - 2006. - No. 39(39). - WITH .1 8.

10. Internet sites used:

11. www. cbr. ru - website of the Central Bank of Russia

12. www. economics. info

13. www. economy. gov. ru - website of the Ministry of Economic Development and Trade

14. www. finam. ru

15. www. gks. ru - website of the Federal State Statistics Service

16. www. ilo. ru - website of the International Labor Organization

17. www. rbc. ru

18. www. rostrud. info - website of the Federal Service for Labor and Employment

19. www. smoney. ru