EXCHANGE RATE DYNAMICS AND MONETARY POLICY IN A SMALL OPEN ECONOMY: A DSGE MODEL FOR KAZAKHSTAN
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Date
2021-06
Authors
Kabzhalyalova, Madina
Journal Title
Journal ISSN
Volume Title
Publisher
Nazarbayev University School of Sciences and Humanities
Abstract
Shift to floating exchange rate regime is controversial decision to commodity
oriented economy of Kazakhstan. Increase in volatility of nominal exchange rate
is believed to bring deterioration of main macroeconomic variables and reduction
of welfare. This paper thus aims to define optimal monetary policy in estimated
small open economy of Kazakhstan. On a foundation of Taylor rule and under two
specifications of the model it is found that currently National Bank of Kazakhstan
reacts to movements in exchange rate on a limited extent. In addition, optimal
policy simulation based on posterior distribution of model parameters and welfare
loss minimization function is performed. This analysis shows that exchange rate
stabilization within 5% band delivers lowest welfare loss.
Description
Keywords
Type of access: Open Access, economy, Kazakhstan, exchange rate
Citation
Kabzhalyalova, M. (2021). Exchange rate dynamics and monetary policy in a small open economy: a DSGE model for Kazakhstan (Unpublished master`s thesis). Nazarbayev University, Nur-Sultan, Kazakhstan