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Estimation of a Small Open Economy DSGE Model for Kazakhstan

Author

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  • Erlan Konebayev

    (NAC Analytica, Nazarbayev University)

Abstract

This paper adapts the DSGE (dynamic stochastic general equilibrium) model of Medina and Soto (2007) in the context of Kazakhstani economy, and fully estimates it using Bayesian methods. The main goal of the paper is to contribute to the scarce macroeconomic modeling literature on Kazakhstan. Overall, we find that the oil price shock is key in explaining the variance of virtually all the variables of interest - in particular, it accounts for more than 40% of variance in real exchange rate over the long-term horizon. Furthermore, while the oil price and commodity (oil) production shocks contributed positively to the country's GDP growth in real terms before the Great Recession, their effects have been primarily negative during the two major economic crises of 2007 and 2015, and the fiscal policy has had mixed success in counteracting them.

Suggested Citation

  • Erlan Konebayev, 2020. "Estimation of a Small Open Economy DSGE Model for Kazakhstan," NAC Analytica Working Paper 6, NAC Analytica, Nazarbayev University, revised Dec 2020.
  • Handle: RePEc:ajx:wpaper:6
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    More about this item

    Keywords

    DSGE; Bayesian analysis; small open economy;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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