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Foreign Economic Inflation in Russia’s Economy

Author: Vladimir V. Ilyashenko

Abstract. The paper examines the essence, causes and consequences of foreign economic inflation for Russia’s economy. The distinction between imported inflation and foreign economic inflation is shown. Foreign economic inflation is implemented through influencing either an increase in aggregate demand or a growth of average and marginal production costs and a reduction in aggregate supply that lead to an increase in prices. The correlation between the dynamics of global oil price, devaluation of the rouble and inflation is analysed. The author highlights the negative impact of foreign economic inflation on the development of Russia’s economy primarily due to its dependence on world prices for raw materials. Contradictory influence of net exports and capital inflow on inflation is revealed.

Keywords: Inflation factors, foreign economic inflation, imported inflation, exchange rate, devaluation, net exports, world market price, net capital inflow (outflow), the Reserve Fund, foreign debt, credit, key rate, economic growth