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Macroeconomic effects of fiscal rules for a commodity-exporting economy: avoiding procyclical bias in Kazakhstan

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  • Zhandos Ybrayev
  • Olzhas Kubenbayev
  • Akylzhan Baimagambetov

Abstract

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.

Suggested Citation

  • Zhandos Ybrayev & Olzhas Kubenbayev & Akylzhan Baimagambetov, 2024. "Macroeconomic effects of fiscal rules for a commodity-exporting economy: avoiding procyclical bias in Kazakhstan," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 17(2), pages 271-294, May.
    • Handle: RePEc:taf:macfem:v:17:y:2024:i:2:p:271-294
    DOI: 10.1080/17520843.2022.2043602
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