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- Convenors:
-
Raziia Arabidinova
(Unaffiliated)
Zhibek Abdikaiymova (University of Cassino)
Alina Kuandyk (University of Cassino)
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- Chair:
-
Duishon Shamatov
(Nazarbayev University)
- Discussant:
-
Ulrich Klüh
- Format:
- Panel
- Theme:
- Economics
Abstract
The macroeconomic environment in many emerging and developing economies has experienced a surge in inflation following the global economic disruptions of 2022. Rising prices for food and energy commodities, as well as exchange rate volatilities in the international supply chain, have complicated the inflationary process in many small economies. Central Asia is an important region for consideration in the context of inflationary dynamics. The region’s economies are highly vulnerable to international price shocks given their dependence on commodity exports and imported goods. Although increasing inflationary pressures across Central Asia, relatively little research has examined how these macroeconomic shocks translate into broader economic and distributional effects within the region’s economies. Understanding these relationships is particularly important in the context of rising global uncertainty and increasing vulnerability among households and economic sectors.
The main objective of this research project is to examine the inflation dynamics in Central Asia and how these dynamics affect the region’s economies. The region comprises Kazakhstan, Kyrgyzstan, and Uzbekistan. The study will cover the period from 2014 to 2024. The paper will be structured in a three-paper format.
The first paper focuses on regional heterogeneity in inflation vulnerability by considering the impact of various structural economic factors on inflation responses. In this regard, econometric models, including panel fixed effects, structural dependence indicators, and machine learning robustness tests, are employed to evaluate the impact of inflation, real wages, dependence on imports, dependence on commodities, and exchange rate changes on inflation responses in Central Asia.
The second paper focuses on the transmission channels of external price shocks on domestic inflation responses. Using time-series regression analysis, correlation analysis, and cross-country analysis are employed to evaluate the impact of changes in global food prices, changes in oil prices, and changes in exchange rates on domestic inflation responses.
The third paper investigates the distributional consequences of inflation at the household level. Using expenditure share regressions, real income erosion analysis, and inequality comparisons, it shows that inflation has a stronger impact on lower-income and rural households due to higher food expenditure shares and weaker income dynamics.
The overall contribution of these three studies is an integrated perspective linking global macroeconomic shocks, structural economic dependence, and household-level vulnerability in Central Asia. This study contributes to the macro-economic and distributional analysis literature in the area of inflation dynamics in emerging economies and offers policy relevance for building up economic resilience in Central Asia.
Accepted papers
Abstract
The global disruptions of 2022, inflation risks have become more pronounced in various emerging and developing economies. These risks have become more intense in small open economies. Central Asian countries have faced higher food and energy price pressures and exchange rate volatility, making them more vulnerable to external risks and emphasizing differences in structures.
This paper aims to investigate regional heterogeneity in inflation risks in Kazakhstan, Kyrgyzstan, and Uzbekistan from 2014 to 2024. The analysis will particularly concentrate on how various economic structures, such as import dependency, commodity export vulnerability, exchange rate risks, and wage pressures, impact inflation risks in each of the countries. By relating economic structures to inflation risks, this paper will attempt to explain differences in country-specific risks in responding to external shocks.
The empirical analysis uses a panel dataset for various key macroeconomic indicators, which include the Consumer Price Index (CPI), broken down into the food and energy components, imports of goods and services as a percentage of GDP, fuel exports as a percentage of merchandise exports, exchange rates expressed in terms of the national currency per USD, and the average monthly nominal wages. These indicators cover various facets of structural dependence.
To identify the determinants of inflation vulnerability, the study employs panel fixed effects models with interaction terms between inflation and country-specific characteristics. A structural dependence index is constructed to measure the level of exposure to shocks. In addition, machine learning methods are used to evaluate robustness as well as to measure the relative importance of the various explanatory variables.
The paper contributes to the literature on inflation dynamics in emerging economies in that it highlights the role of structural heterogeneity and external dependence in the inflation response. In addition, it provides a framework for studying inflation vulnerability in small open economies and contributes to a better understanding of macroeconomic stability in Central Asia.
Abstract
Since 2022, the food and energy prices globally have significantly increased. This is causing major problems with inflation globally. The countries within Central Asia are highly affected because they have to import a lot of food and energy, so they show higher sensitivity to the changes within the prices. It is crucial to understand the effect of the price changes within the countries on the inflation within these countries so that we can understand whether the economy is stable or not.
This study focuses on the effect of the price changes globally on the inflation within Kazakhstan, Kyrgyzstan, and Uzbekistan from 2014 to 2024.
The analysis is carried out on the basis of the following four important variables: global food price index, global oil price index, exchange rate to the US dollar, and the domestic inflation rate measured by the Consumer Price Index (CPI). The global price indices are the external shocks to the economies, while the exchange rate and the CPI are the domestic economic response. The data is collected on an annual basis from 2014 to 2024 using international statistical databases such as the World Bank, the International Monetary Fund, etc.
The empirical method employs a combination of time series regression, correlation analysis, and cross-country analysis in assessing the impact of external price shocks on domestic inflation. The CPI is taken as the dependent variable. The main independent variables that affect the CPI through different channels include global food prices, oil prices, and exchange rates. The correlation and time series graphs help in establishing the relationship between global prices and domestic inflation.
The results suggest that the increase in inflation observed after 2022 is closely related to the increase in global food and oil prices, but this relationship is country-specific in terms of transmission strength. Kyrgyzstan appears to be particularly sensitive to exchange rate depreciation, implying that this country is more dependent on imported goods. Kazakhstan appears to be less responsive in terms of transmission effects, which could be related to domestic energy production, whereas Uzbekistan appears to be moderately sensitive, where exchange rate changes are important contributors to inflation changes.
The results imply that external price shocks are a relevant factor in explaining inflation in Central Asia, but their effects depend on specific structural factors related to exchange rate stability, dependence on imports, and domestic markets. The results emphasize the role in explaining inflation.
Abstract
In recent years, food and energy prices worldwide have risen significantly. As domestic prices are closely connected to international commodity markets, small open economies are especially exposed to external shocks, making them highly sensitive to global price changes. Due to those inflationary pressures, households face erosion of real purchasing power and rising non-discretionary spending. This study compares how inflation affects people with different incomes in three different countries. Examination of this provides insight into how large economic changes, like inflation, actually affect people’s lives and how they spend their money. This helps us see the real changes in how well people are doing and how they are spending their money. The analysis uses four key variables. Real income is measured by household final consumption expenditure per capita.
Wage trends are reflected in GDP per person employed. Income inequality is measured by the Gini index, and household vulnerability is indicated by the percentage of spending on food. Data for countries covers the past 10 years. The dataset includes information from international sources, such as the World Bank, and from the national statistical agencies of the three countries mentioned. Consistent indicators across countries enable comparisons of inflation-related household vulnerability in Central Asia.
The empirical analysis uses three complementary approaches. First is the expenditure share regression, which examines how changes in real income and wage trends affect the portion of household spending on food. Second, the study uses a real income erosion model to show how inflation gradually erodes households' purchasing power. To see whether these effects are evenly shared, a comparison of inequality looks at how inflation interacts with income inequality across the three countries. Together, these methods show how macroeconomic inflation shocks lead to real changes in household welfare and spending habits.