Oil price fluctuations and stock market behavior in a resource-dominant economy: Case of kazakhstan

Mukan M. Oskenbayev Y. Naderi N. Dosmagambet Y.
March 2021 World Scientific

Singapore Economic Review
2021 #66 Issue 2 569 - 594 pp.

During the past 10 years, the oil market has been very unpredictable and volatile, which created uneasy conditions for market participants. The remedy of increasing oil prices is considered as a positive factor for the economy of the Republic of Kazakhstan as an oil-exporting country. Using structural decomposition of vector autoregression (VAR), this study aims to examine how the whole financial system in Kazakhstan is depending on oil prices. The results suggest that the strongest factor affecting the stock index is aggregate demand, and the impact of oil production shocks on the equity market is, on average, insignificant. Such shocks can be discounted while a fall in oil prices affects financial conditions as a whole, damaging the solvency of Kazakhstan, an oil-exporting country. With the positive shock of aggregate demand, the stock market index tends to rise. There is also an effect of oil price volatility on changes in currency value, which also influences the financial situation of the country. Moreover, oil-exporting countries such as Kazakhstan can secure and support their economies with the help of stable aggregate demand. The focus on Kazakhstan as one of the oil-producing countries is interesting for at least two reasons. Importantly, oil-exporting countries supply oil to really strong countries concentrating on manufacturing and other industries. Besides, this study provides useful insights for countries with similar economic conditions, including similar stock market development.

Kazakhstan , oil price volatility , Stock market index , VAR decomposition

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Narxoz University, Kazakhstan
Suleyman Demirel University, Kazakhstan
Azad University Tehran North, Iran
Atyrau University of Oil and Gas, Kazakhstan

Narxoz University
Suleyman Demirel University
Azad University Tehran North
Atyrau University of Oil and Gas

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