Kazakhstan trade with its partners and the role of tenge: an asymmetric analysis


Previous research has shown that lack of any short-run and long-run relationship between the trade balance and the exchange rate could be due to ignoring non-linear adjustment of the exchange rate. In this paper, we introduce non-linearity of the exchange rate adjustment and consider the asymmetric response of Kazakhstan’s trade balance with each of its 13 trading partners. While we find short-run asymmetric response in almost all 13 models, short-run asymmetric effects translate into the long run only in the trade with Austria, China, France, and the U.S. Only in the trade with France a tenge depreciation had favorable long-run effects.

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  1. 1.

    IMF (2017b) also argues that the impact of real exchange rate depreciation on competitiveness and exports is likely to manifest with a lag.

  2. 2.

    For theoretical derivation of the model, see Rose and Yellen (1989) or Bahmani-Oskooee (2018).

  3. 3.

    Note that if increase in economic activity is due to an increase in the production of import substitute goods, an estimate of b (c) could also be negative (positive). For details see Bahmani-Oskooee (1986).

  4. 4.

    Note that once normalization takes place, we have \(\hat{b} = \frac{{\hat{\lambda }_{2} }}{{ - \hat{\lambda }_{1} }},^{{}} \hat{c} = \frac{{\hat{\lambda }_{3} }}{{ - \hat{\lambda }_{1} }},^{{}} \hat{d} = \frac{{\hat{\lambda }_{4} }}{{ - \hat{\lambda }_{1} }}.\)

  5. 5.

    Indeed, we made sure that there is no I(2) variable.

  6. 6.

    Note that partial sum of positive (negative) changes is the same as cumulative sum where negative (positive) values are replaced with zeroes.

  7. 7.

    For more on some other application of these methods see Gogas and Pragidis (2015), Durmaz (2015), Baghestani and Kherfi (2015), Al-Shayeb and Hatemi (2016), Lima et al. (2016), Nusair (2016), Caputo et al. (2016), Aftab et al. (2017), Arize et al. (2017), and Gregoriou (2017).

  8. 8.

    Note that the size of estimate attached to ECMt-1 measures the speed of adjustment. Therefore, the estimates of − 1.28 in the linear model and − 1.43 in the non-linear model of Russia that are greater than one imply that 60–70% of adjustment takes place in half of a quarter since data are quarterly. For more on Russia’s foreign trade, see Rasoulinezhad (2018).

  9. 9.

    The significant negative long run estimate attached to the real exchange rate could be due to import demands being inelastic.

  10. 10.

    As tenge appreciates against the dollar, Kazakhstan export earnings increase, and her trade balance with U.S. improves. This could only be the case if U.S. import demand is inelastic.


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Corresponding author

Correspondence to Mohsen Bahmani-Oskooee.

Additional information

Valuable comments of two anonymous reviewers as well as those of the editor and associate editor are greatly appreciated. Any error, however, is our responsibility. Views suggested in the paper are those of the authors only and not their affiliated organizations.



Data definition and sources

Quarterly data over the period 2000QI–2015QIV are used to carry out the empirical analysis. They come from the IMF e-Library—DATA: The sources are:

  1. a.

    Direction of Trade Statistics (DOT) of the IMF.

  2. b.

    International Financial statistics (IFS) of the IMF.

There are 13 partners of Kazakhstan are: Austria, Canada, China, France, Germany, Italy, Japan, Netherlands, Romania, Russian Federation, Switzerland, Turkey, and United States.


TBi Kazakhstan trade balance with partner i is defined as Kazakhstan imports from partner i over her exports to partner i. The data come from source a.

YKZN  Measure of Kazakhstan’s income. It is proxied by index of real GDP. The data come from source b.

Yi Trading partner i’s income. This is also proxied by the index of real GDP in country i and the data come from source b.

REXi The real bilateral exchange rate of the Kazakhstani Tenge against the currency of partner i. It is defined as REXi = (PKZN. NEXi/Pi) where NEXi is the nominal exchange rate defined as number of units of partner i’s currency per Tenge, PKZN is the price level in Kazakhstan. (measured by CPI) and Pi is the price level in country i (also measured by CPI). Thus, a decline in REX reflects a real depreciation of the Kazakhstani tenge. All nominal exchange rates and price levels data come from source b.

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Bahmani-Oskooee, M., Harvey, H. & Hosny, A. Kazakhstan trade with its partners and the role of tenge: an asymmetric analysis. Eurasian Econ Rev 9, 493–513 (2019). https://doi.org/10.1007/s40822-018-0116-2

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  • Trade balance
  • Exchange rate
  • Asymmetry effects
  • Kazakhstan
  • 13 partners