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A Two-Country Macroeconometric Model

Author

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  • Aizhan Bolatbayeva

    (NAC Analytica, Nazarbayev University)

Abstract

This paper presents a two-country macroeconometric model for the economies of Kazakhstan and Russia. The model can be used for interpreting the structural relationship between the two economies, determining the degree of trade integration and implementing scenario analyses with various shocks. Single-country models are linked through bilateral trade and exchange rate equations. The baseline simulation of the two-country model demonstrates a good accuracy in tracking the actual dynamics of macroeconomic indicators in both countries. Scenario analyses are conducted with a risk premium shock in the bilateral exchange rate and a monetary policy shock in Russia to analyze the transmission mechanism of the shocks, and clarify on the kind of interdependency of the economies. The model shows a larger influence of the risk premium shock on economic activity in Kazakhstan than in Russia. A two percentage point decline in the key rate does not impose significant inflationary pressure while imports and the real exchange rate are the most affected variables in both countries.

Suggested Citation

  • Aizhan Bolatbayeva, 2019. "A Two-Country Macroeconometric Model," NAC Analytica Working Paper 5, NAC Analytica, Nazarbayev University, revised Aug 2020.
    • Handle: RePEc:ajx:wpaper:5
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    Cited by:

    1. Aizhan Bolatbayeva, 2021. "A multicountry macroeconometric model for the Eurasian Economic Union," Russian Journal of Economics, ARPHA Platform, vol. 7(4), pages 354-370, December.

    More about this item

    Keywords

    Two-country macroeconometric model; Cowles Commission approach; Structural macroeconomic model; Scenario analysis;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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