The price-cap tariffs for some goods or services, such as energy and electricity, are a common social support measure in many countries. Kazakhstan also has fixed tariffs for fuel and housing-and-communal services. However, being socially significant, price-fixing creates problems for investments in the regulated spheres. Therefore, a systematic change of price-cap tariffs is always necessary.
In Kazakhstan the need to revise price-cap on fuel and housing-and-communal services occurred in 2023, during a period of already high inflation.
This led to social unrest and debate over whether price-cap tariff increases are timely. As a result. a request arises to assess the extent to which changes in tariffs for fuel and housing-and-communal services affect consumer inflation. Thus, the current study assesses the indirect effect of changes in prices for fuel and for housing-and-communal services on inflation in Kazakhstan. For this purpose, the authors compute impulse responses using local projections. The data used has a monthly frequency for the period January 2011-June 2023.
The authors showed the presence of a significant indirect effect of changes in tariffs for fuel on inflation in Kazakhstan. However, changes in tariffs for housing-and-communal services, according to the model, are statistically insignificant. This is due to the low standard deviation of time-series, that describe the dynamics of the price-cap tariffs for housing-and-communal services in Kazakhstan. Even so the authors remind that housing-and-communal services are in the structure of the CPI, and, therefore, a direct impact of changes in tariffs of these services on inflation exists.
Read more in the file attached or follow the link http://dx.doi.org/10.2139/ssrn.4599180
