Abstract
This study investigates the drivers of housing price fluctuations in Kazakhstan by using a dynamic stochastic general equilibrium (DSGE) model with the housing market. We estimate the model by using Bayesian methods with data for the period of 2010Q1 to 2020Q4. We find that housing preference shocks play a crucial role in explaining for housing market fluctuations. These shocks account for a substantial portion of housing price and consumption behavior variations. Surprisingly, monetary policy, government spending, productivity and markup shocks show limited explanatory power for housing price fluctuations. Our findings suggest the importance of monitoring potential housing bubbles, as well as the impact of housing market fluctuations on the broader economy, thus highlighting the housing wealth effect. Additionally, our analysis indicates that the pension withdrawal policy has a minor long-term effect on business-cycle fluctuations in Kazakhstan. Overall, technology shocks are key drivers of gross domestic product (GDP) variance, while inflation rate variation is mainly explained by monetary policy and foreign demand shocks.