Kazakhstan's Economy Vulnerable to Oil Price Shocks, Monetary Policy Impact Limited.
A model was created to study Kazakhstan's economy using Bayesian methods. It shows that the economy heavily relies on commodity exports and is affected by foreign exchange market shocks. The model reveals that during the Great Recession and oil price drop, the output gap in Kazakhstan became significantly negative. Tightening monetary policy reduces the output gap but has little impact on inflation. Risk premium shocks play a major role in the fluctuations of the exchange rate of tenge.