Financial frictions in a commodity exporting small open economy: the Case of Kazakhstan
No 21, NAC Analytica Working Paper from NAC Analytica, Nazarbayev University
This paper adds the banking sector to a commodity-exporting small open economy DSGE model and estimates it using the data for Kazakhstan between 2001 and 2019. The resulting model produces one-step-ahead predictions that are a good fit for the banking sector variables. We find that the oil price and risk premium shocks are the drivers of much of the economic activity in Kazakhstan - they explain a large part of the variation in most of the macro variables considered. A comparison with the baseline model that has no banking sector shows that the influence of the risk premium shock on real variables can be overestimated when financial frictions are excluded. The above-mentioned two shocks, along with the fiscal policy shock, have also significantly contributed to historical fluctuations in real GDP growth, although with no particular trend in the direction or magnitude of their effects.
Keywords: DSGE; Bayesian analysis; small open economy; Kazakhstan (search for similar items in EconPapers)
JEL-codes: C11 E30 E32 E37 (search for similar items in EconPapers)
Pages: 41 pages
New Economics Papers: this item is included in nep-ban, nep-cis, nep-cwa, nep-dge, nep-fdg, nep-isf, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:ajx:wpaper:21
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