Macroeconomic effects of fiscal rules for a commodity-exporting economy: avoiding procyclical bias in Kazakhstan
Ybrayev Z. Kubenbayev O. Baimagambetov A.
2024Routledge
Macroeconomics and Finance in Emerging Market Economies
2024#17Issue 2271 - 294 pp.
This paper investigates the macroeconomic consequences of an alternative fiscal rule in the context of commodity price shocks for a commodity-exporting country. We build a DSGE model to explain the business cycle in an oil-exporting economy, estimated using macroeconomic data from Kazakhstan. Our results demonstrate that when fiscal policy is procyclical in response to a transitory negative oil price shock, and if a majority of households are non-Ricardian, then a one standard deviation drop in oil prices causes an output decline of about 0.19%. In contrast, if the fiscal policy is countercyclical and conducted according to the structural balance fiscal rule, output increases by about 0.13% in response to the same shock. We also report that countercyclical fiscal policy is robustly effective when the monetary policy is characterized by its active inflation stabilization framework.
Commodity shocks , Fiscal rules , Kazakhstan , Structural balance
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Economist, Financial Stability and Research Department, National Bank of Kazakhstan, Kazakhstan
Director, Financial Stability and Research Department, National Bank of Kazakhstan, Kazakhstan
Deputy Governor, National Bank of Kazakhstan, Kazakhstan
Economist
Director
Deputy Governor
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