Analysis of Factors Influencing Inflation in Russia

Inflation is one of the basic elements of any direction in macroeconomic theory. The key task of most central banks, including the Bank of Russia, is to keep inflation at a given level, and for ordinary people, inflation is one of the most understandable and significant elements of economic life. Everyone is always interested (albeit for different reasons) in what causes inflation. Obviously, there is no simple answer to this question, although a huge amount of work has been done to identify connections and analyze the impact of various indicators on inflation. In this work, based on Rosstat monthly prices for almost 700 goods and services for the period from 2004 to 2022, inflation in Russia was decomposed into 11 components (for example, products, housing and communal services, etc.) and using a vector error correction model (VECM ) an attempt was made to understand the reasons for the influence of various factors on the selected components of inflation. As a result, it was found that the main factor influencing almost all components, both in the short and long term, is the dynamics of the dollar exchange rate. In addition, in the short term, inflation is influenced by the food price index, and in the long term, also by the index of industrial production and the first main component of the panel of main macroeconomic variables of Russia's main trading partners (both present and past). An additional result of this work is the developed methodology for preparing the “gluing” of Rosstat time series to enable analysis in the long term.