OTTO-VON-GUERICKE-UNIVERSITY MAGDEBURGFaculty of Economics & ManagementDONETSK NATIONAL TECHNICAL UNIVERSITYFaculty of ManagementDepartment of International Business ActivityDependence Between the Consumer Price Index and Ukrainian Currency Exchange Rate Dynamics Anastasiia Moskovets m-n Centralny 8, 9886132 MakeyevkaInternational Economics specialisation European Studies Semester: 3E-Mail: a.moskovets26gmail.comDate of submission: 17.10.2010Table of contentsList of AbbreviationsIIIList of SymbolsIVAbstract V1. Introduction12. Theoretical Bases of Inflation22.1 Types of inflation. Inflation in Ukraine32.2 Indicators of inflation. CPI42.3 Factors influencing inflation63. The regressive model of CPI and EUR/UAH Exchange Rate Dependence 74. Analysis of the exchange rate and CPI dependence causes12Conclusion15References16Annex19 List of AbbreviationsCPI Consumer Price Index CIS Commonwealth of Independent StatesEU European Union GDP Gross Domestic ProductIMF International Monetary FundNBUNational Bank of UkraineOVDP Obligation of Internal Domestic BorrowingPPIProducer price indicesWPI Wholesale Price IndexList of Symbols% Percenti Number of consumer goods in a market basket1 Cost of i-th goods at current period;0 Cost of i-th goods at base period;Q0 Quantity of i-th goods in a consumers basket in base year. Value of resultant factor, Coefficients of regression equation Selection size Average of all values of xY Average of all values of y, Student t-criteria Amount of independence degrees Intergroup dispersion Standard deviation from values Standard deviation of indicator from general mean Empiric correlation Values of resultant factor, calculated due to regression equation Standard deviation of empiric values of resultant factor AbstractIn present essay the dependence between the consumer price index dynamics and Ukrainian currency exchange rate dynamics is analyzed. The essence and factors of consumer price index as the main indicator of inflation has been considered. The regressive model confirming the dependence of the consumer price index on the EUR/UAH exchange rate has been defined. Main causes of the given dependence have been revealed.Keywords: consumer price index (CPI), inflation, exchange rate.81. IntroductionNowadays inflation is one of the most dangerous processes negatively influencing financial, monetary and economic systems as a whole. According to Colander, David ”Inflation is a continual rise in the price level” See Colander D. (1995), p.149. Among the basic negative consequences of inflation it is possible to name: increase of money supply that leads to money depreciation; price level rises on mass consumption production which leads to the fall of money purchasing value the loss of real value in the internal medium of exchange and unit of account in the economy See Walgenbach P. (1973), p.429.; monetary savings depreciation; redistribution of the national income and national wealth among the population; public reproduction disproportion, delay of the goods retail as a result of population insolvency; monetary, financial and credit, tax systems decay; instability of the economic information; weakening of foreign economic relations; increase in speculation; shadow economy strengthening; foreign currency courses increase; capital outflow from manufacture sphere into trade; state financial resources reduction; infringement of normal distribution incomes between debtors and creditors See . (2009), C. 309310 .In terms of financial crisis, defined by mass inflation and instability of the exchange rate, such problem as inflation is of current importance for Ukraine. Following the results of the first five months of the year 2010, Statistical committee of the Commonwealth of Independent States (CIS) has stated that Ukraine has the highest inflation rate among 12 countries of the CIS. See .Ua (2010). Moreover, according to The World Factbooks top of the countries by the annual percentage change in consumer prices compared to the previous year consumer prices, Ukraine occupies 205 place (12.3%) among 222 positions (the lowest positions are occupied by such countries as Venezuela (220, 27.10%), Afghanistan (221, 30.5%), Seychelles ( 222, 31.8) See Central Intelligence Agency. The World Factbook.Some of the greatest economists such as J. Keynes See Keynes J (1936)., I. Fisher and R. Dornbush See Fisher I., Dornbush R. (1995), H. Hazlitt See Hazlitt H.,(1965), N.G. Mankiw See Mankiw, N. (2002), M. Friedman See Friedman M. (1977) having considered in