Analysis of the Asymmetric Relationship Between Oil Prices and Real Effective Exchange Rate in Kazakhstan

Abstract

Kazakhstan's export relies heavily on oil and other natural resources. Therefore, fluctuations in world oil prices have important consequences for Kazakhstan's economy. The effect of fluctuations in oil prices on the real exchange rate is very important for economies trying to develop other sectors as well as oil and natural gas sectors such as Kazakhstan. The purpose of this study is to examine the possible asymmetric relationships between oil prices and real effective exchange rate in Kazakhstan for the period January 2010-December 2020. For this purpose, the asymmetric causality analysis method developed by Hatemi-J and Roca (2014) was used in the study. In the study, it was studied with monthly data for the period from January 2010 to December 2020. According to the results of the study, there is a causality relationship from negative oil price shocks to negative real effective exchange rate shocks in Kazakhstan. However, what is interesting is that a causality relationship from positive shocks in oil prices to real effective exchange rate could not be found.

Impact of Oil Factor on Consumer Market: The Case of Azerbaijan

“…The purpose of their research is to study possible asymmetric relationships between oil prices and the real effective exchange rate in Kazakhstan from January 2010 to December 2020 based on the results obtained using the asymmetric causal analysis method developed by Hatemi and Roca (2014). Although there is a causal relationship between negative shocks and negative shocks of the real effective exchange rate in Kazakhstan, no causal relationship was found between positive spikes in oil prices and the real effective exchange rate (Abubakirova et al, 2021). Yuen and Yuen (2022) explored the relationship between geopolitical risk and crude oil prices in major oil producing countries before and after the 2008 financial crisis based on the DOLS model.…”

Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

“…A few other studies have modified this restrictive assumption to include asymmetry. For example, the studies conducted by Nouira et al (2018); Sanusi (2020); Olayeni et al (2020); Onodje et al (2020); Abubakirova et al (2021); Agbo (2021); Fasanya et al (2021); Baek (2021); and Ajala et al (2021) are those that focused on net oil‐exporting economies and found asymmetric relationships between the nexus. As a corollary, the studies on oil‐importing economies that found asymmetric relationships include Churchill et al, 2019; Kumar, 2019; Khraief et al, 2020; Bangura et al, 2021.…”

“…The studies of Chkir et al (2020) and Nandelenga and Simpasa (2020) undertake further empirical extensions on this. Salisu et al (2020) adopt a quasi‐GLS estimator, Abubakirova et al (2021) used the asymmetric non‐causality test of Hatemi‐J and Roca (2014) test while Nouira et al (2018) utilised the non‐causality test of Hatemi‐J (2012). The study of Huang et al (2020) employed the use of pairwise VAR technique while Olayeni et al (2020) and Abubakar (2019) adopt various threshold models.…”

The Impact of Oil Prices on the Macroeconomic Indicators of Kazakhstan and the Consequences for the Formation of Social Policy

“…Due to the specifics of the structure of the economy and the existing export potential, the most important exogenous factor in economic dynamics for Kazakhstan is oil prices on international markets (Abubakirova et al, 2021;Kelesbayev et al, 2022). Despite the presence of an inhibitory effect on economic growth caused by the strengthening of the real exchange rate of the national currency, Kazakh tenge (KZT), the increase in oil prices and the prices of natural gas, metals and mineral fertilizers correlated with them have a positive effect on the dynamics of the current functioning, and by increasing investment activity (Pomfret, 2005;Jumadilova, 2012;Aitzhanova et al, 2015).…”