Is Kazakhstan vulnerable to the Dutch disease?

Kazakhstan possesses extensive natural resources reserves that are expected to yield significant export revenues. Since Kazakhstan’s attaining independence in 1991, the composition of exports has changed in favor of energy-related sectors. In the context of such evidence and considerable expected future revenues, many researchers have pointed to the Dutch Disease question. This paper examines whether Kazakhstan is vulnerable to this condition. Using an extended version of the Balassa-Samuelson model including a terms-of-trade effect, we find evidence that changes in the terms of trade had a significant effect on the real exchange rate after 1996, providing evidence of the Dutch Disease. --Dutch Disease,transition,oil,terms of trade,Kazakhstan

The Political Economy of Bulgaria's Peculiar Post-Communist Business Cycle*

This paper describes Bulgarian macroeconomic performance from early 1991 through early 1997 and provides insights into the macroeconomics of unsatisfactory performance and the political-economy of poor decision-making. There are two leitmotifs: failure to face structural problems and inherited foreign debt; the factors generating Bulgaria's business cycle were interest rate policy and the IMF's varying standoffishness. Bulgaria's macroeconomic poroblems were unusual in that the flawed policy regime involved interest rate policy, and the collapse of the lev in 1996 and 1997 was not preceded by growing current account imbalances. The political economy of the situation was distinctive because the cycle was driven by monetary policy and because of the large role played by international financial institutions. We find a model by Roberto Perotti of shifting coalitions among three interest groups – rich, poor, and middle class segments – in a poor, inegalitarian society relevant for explaining Bulgarian events.