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Table 3: Percentage of the Impact of Supply and Demand Shocks in the Crude OilTable 3: Percentage of the Impact of Supply and Demand Shocks in the Crude Oil
Market on the Overall Variability of the KASE Index
Horizon
Aggregate Demand
Oil Supply
Real Oil Price
RER
Other
1
3.03%
1.40%
8.46%
0.83%
86.29%
2
2.56%
1.73%
7.33%
1.96%
86.42%
3
3.41%
1.65%
15.35%
1.82%
77.77%
15
12.33%
3.67%
19.31%
5.90%
58.78%
∞
2.83%
2.21%
60.93%
33.28%
0.74%
Note: Based on variance decomposition of the structural VAR model (1).
Source: Authors’ compilation.
Structural shocks in the world crude oil market are an important basis for the Kazakhstan
stock market. Historical decomposition of the cumulative effect of structural shocks on
the KASE index shows the overall impact of oil prices and the volatility
of oil prices on the KASE index. The real price of oil has an impact on the KASE
index. However, the volatility shocks of the real price of oil have the greatest impact,
mainly corresponding to changes in the KASE index since the beginning of 2010.
More interestingly, the variable is the only determinant that causes fluctuations in the
KASE index.
In the long term, the shock of the supply of crude oil, the shock of the aggregate demand,
and the shock of the oil demand on the market together make up about 99% of the
variability of the real price in the crude oil market for the variability of the KASE index,
53% of the volatility of the real price in the crude oil market for the volatility in the
exchange rate, and approximately 39% of the variability of the volatility in the crude oil
market on the overall exchange rate volatility. This suggests that structural shocks in the
world crude oil market are an important basis for the Kazakhstan stock market, with the
greatest contribution coming from oil demand shocks (accounting for more than 60% of
long-term changes in real oil prices), then changes in the real exchange rate (which
account for more than 33%). In turn, fluctuations in the exchange rate are due
to shocks in the crude oil market (which account for about 47%) or other shocks in
general (accounting for about 40%).
Figure 5 presents the cumulative impact of each structural shock on the KASE index. It
shows the overall impact of oil prices on the KASE index. It is apparent that the real price
of oil (in the first chart) made the largest contribution to the KASE index. In addition, we
find that shocks in oil supplies cause long fluctuations in the KASE index. Although we
do not present the results in the paper, we observe that the volatility shocks of the real
price of oil have the greatest impact and mainly correspond to changes in the KASE
index since the beginning of 2010, when the volatility of the real oil price replaced the
real price of oil. More interestingly, the variable is the only determinant that causes
fluctuations in the KASE index. The accumulated effect of changes in real oil prices on
the variability of the KASE index is the most significant. Although supply and demand
shocks in the supply of crude oil cause long fluctuations in the KASE index, the effect of
oil price volatility over time is much more intense.
ADBI Working Paper 904
Y. Dosmagambet et al.
16
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