The effects of monetary policy on Inflation in Kazakhstan

Abstract

This study examines the impact of monetary policy on inflation in Kazakhstan. To evaluate the model, annual data for 2013-2022 were used. The study was limited to these variables, the interest rate, the exchange rate, and the money supply versus inflation. In the research, we used the FDL multiple linear regression model with time series data. Main variables of the model, which used by the national bank to control inflation, are the discount rate, money supply, and exchange rate. Also, to achieve correct results, the model has been improved by “lag”, i.e. to determine which subsequent periods are affected by the discount rate increase. The results of our study showed that in order to reduce the growth of inflation, an increase in the interest rate and a decrease in the money supply is followed by a decline in the inflation rate in the next quarter, but the exchange rate does not have a significant impact on the inflation rate. Economic and geopolitical shocks also have a substantial impact on inflation. Therefore, in our study, it is recommended to use not only monetary policy to control inflation but it is also required to use fiscal and other non-monetary measures.