Ministry of education tashkent financial institute

1. Theoritical background of inflation

Inflation in the middle of the 18th century was caused by the crisis in the monetary system as a result of the issuance of large amounts of unsecured money. Inflation (derived from the Latin word "inflation" and means swelling, multiplication, rise) in its essence means the process of devaluation of money, a steady increase in prices for goods and services. It should be noted that the experience of developed countries is that inflation can occur even in the case of relatively normal money supply.

Modern inflation is classified not only by a decrease in the purchasing power of money as a result of the steady rise in prices for goods and services, but also by imbalances in the production process, negative factors in the circulation of money, finance and credit. The main causes of inflation are the sectors of the economy, savings and consumption, supply and demand, government revenues and expenditures, the balance between the money supply and demand of households, and the expansion of the central bank's credit. These factors, depending on their nature, can have different effects on inflation and its level.

In international practice, economists divide the factors that cause inflation into two main groups: internal and external factors. We will try to shed light on the nature of these factors.

1. Internal factors can be divided into paid (monetary) and non-paid factors. Paid factors include the crisis of public finances, the existence of a budget deficit, an increase in public debt, the issuance of money, an increase in the turnover of credit support, the speed of money circulation, and more. Non-monetary factors include imbalances between sectors of the national economy, an unstable level of economic development, the presence of monopolies (oligopolies) in production and services, the state monopoly on price formation, credit expansion of the central bank and other factors.

2. External factors, by their nature, reflect the processes taking place in the world that affect the development of a particular state. These factors include raw materials, energy, oil, and currency crises, which are industry crises that occur in countries around the world. In addition to these factors, it is possible to include the state-wide monetary policy of any country in relation to other countries, the implementation of the secret, the export of currency, gold.

We analyze the patterns of inflation in the following diagram.

The analysis of this graph shows that inflation occurs mainly in three directions. In the first direction, money begins to depreciate due to unreasonable increases in prices for goods, works and services. As a result, the purchasing power of the national currency will decline. In the second direction, the exchange rate of the national currency against foreign currencies will decrease.