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Influence of the price structure
on the economy’s dynamics
5500000
GDP
GDP
2000000
1980
©Institute of Economic Forecasting
1990
1998
2010
2020
Influence of the different factors on economic dynamics of Russia
IoEF RAS
Illarionov A.N.
1999 2000 2001 2002 2003
Total GDP growth
5,4
9
5
4
influence of external factors
0
9
7
9
influence of economic policy
5,4
0
-2
-5
Totаl GDP growth
5,4
9
5
4,3
5
influence of external factors
3,9
6
-3,7
0,6
1
influence of oil prices
3,2
4,9
-1,2
0,3
0,3
influence of the world economy 0,7
1,1
-2,5
0,3
0,3
1,5
3
8,7
3,7
4
influence of the tariffs
1,2
1,5
-4,7
influence of the state’s debt
payments
2,1
-0,9
-2,1 -0,05
Influence of the internal factors
©Institute of Economic Forecasting
-2,3 -0,3
-1,7
The faster relative growth of tariffs (prices) for the products of natural monopolies projected for the
mid-term will inevitably result in 1) a sufficient redistribution of value added in favor of natural
monopolies, and 2) an increase in the share of their costs of the total costs of the economy.
Shares of natural monopolies and other branches in total value added
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2001
2002
Natural monopolies
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2003
2004
2005
Other branches
2006
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Science and scientific services
General government, finance
Communal services
Education, health, culture
Other material production
Agriculture and forestry
Freight transport and
communications
for production purposes.
Passenger transport and
communications
for non-production purposes.
Trade and procurement
Construction
Other branches of industry
Food industry
Light industry
Construction materials
Wood and pulp & paper
Machine-building
Chemistry
Non-ferrous metals
Ferrous metals
Other fuel sectors
Coal
Gas
Oil refining
Oil production
Electric power
Share of the production of the natural monopolies in the branches costs
Years 2001 and 2006 г. (in case of the tariff growth in according to drafts of the MERT
60%
50%
40%
30%
20%
10%
0%
Equation for the price I-O Model
(in matrix form)
p*A*X + va = p*X,
where
А - intermediate coefficient matrix;
X - diagonal matrix of gross output;
p - price vector (unknown),
va - gross value added vector.
Calculation scheme of prices model
Price increase for
Cost increase
energy resources
in the fuel sector
Cost increase in
consuming
industries
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Price increase
in consuming
industries
Adaptation
hypothesis
Xij
If
X
У
А
АХ
АХр
Xij
va
vap
J
Xj
AX
>
X
, then
AXp
AX
>
vap
va
gross output vector;
final demand vector;
intermediate coefficient matrix;
intermediate consumption;
intermediate consumption after price increase for the product of industry i;
flows for industry I to industry J;
value added;
value added after price increase for the products of industry i
AX+Y = X
Industry i
Xij
Yi
Xi
AX
Y
X
I quadrant of IOT
III quadrant of IOT
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va
II quadrant
of IOT
Relative decrease in prices for products of natural monopolies in 1998 was an important factor of the
industrial growth in 1999. Further decrease in these prices in 1999 sufficiently contributed to the
positive economic dynamics in 2000. However, in 2000, average price growth in the natural monopolies
started to exceed that in industry; as a result the relative gap in price levels shrunk, which correlated
with a certain decline in production growth rates in industry in 2001-2002.
Dynamics of the GDP and the integral index of relative prices in the natural monopolies sectors
(one year lag)
1.200
1.100
1.000
0.900
0.800
0.700
0.600
1998
GDP index
© Institute of Economic Forecasting
1999
2000
2001
2002
integral index of relative prices in the natural monopolies sectors (one year lag)