Abstract
Kazakhstan possesses substantial amount of petroleum and natural gas and relies extensively on revenues from the export of these commodities. We use Kazakhstan's dependence on revenues from the oil sector to demonstrate commodity producer vulnerability to external commodity price fluctuations. The goal of this paper is to examine the nature of the relationship between real gross domestic product (GDP), fiscal revenues, real exchange rate, price level, and oil prices. We employ Bayesian approach to time series data for the period 2000-2017. We find evidence of significant effect of oil prices on Kazakhstani economy where one of the key channels playing a role in the effect of oil prices on real activity is related to the real effective exchange rate. Additionally, results of this research indicate that one possible channel for oil price shocks to affect the real exchange rate is through the upward pressure on domestic price level.