A Study On Influence Of Oil Price And FDI On GDP Growth In Case Of Kazakhstan

Crude oil possesses a grave significance in society,as it is pivotal for copious industries,ranging from rubber and plastic production to pharmaceuticals,and consumption of individuals,i.e.as lubricant and fuel.Thus,it garnered the attention of most countries and whole branch of industry arose,exploiting crude oil for its economic value.Besides,it is a strategic resource,which attracts every country in the world.Oil price affects developing countries especially that based on natural resources,as their economy is highly dependent on the oil and gas industry.Furthermore,it is also highly dependent on Foreign Direct Investment(FDI).Crude oil possesses a grave significance in society,as it is pivotal for copious industries,ranging from rubber and plastic production to pharmaceuticals,and consumption of individuals,i.e.as lubricant and fuel.Thus,it garnered the attention of most countries and whole branch of industry arose,exploiting crude oil for its economic value.Besides,it is a strategic resource,which attracts every country in the world.Oil price affects developing countries based on natural resources,as their economy is highly dependent on the oil and gas industry.Furthermore,it is also highly dependent on Foreign Direct Investment(FDI),as developing country with vast of natural resources.To this end,the connection between oil price,Growth Domestic Product(GDP)and oil exports in Kazakhstan based of quarterly data from 2000Q1 to 2015Q4 are investigated.The efflux of oil price on the economy of Kazakhstan is explored by using a time-series Vector Error Correction Model(VECM)approach.Moreover,to look at the sensitivity of economic growth to changes of oil prices in the long run-term,the Johansen cointegration test was applied.The results show that an oil price shock has no vital impact on economic processes in Kazakhstan.However,the model shows the positive influence of variables to the GDP growth.Furthermore,the exchange rate is essentially significant.The result of equation in VEC model shows the positive influence of oil price to GDP growth.The oil price and inflation rate are not essentially valuable.The exchange rate is essentially valuable.It can be represented the 10 percent increase per unit in oil price leads to increase GDP by 1 percent unit.In addition,increase of the exchange rate increases GDP growth by 1.7 percent unit.It means that the exchange rate is the most significant variable,which influences the oil price significantly.The increase of inflation rate for 10 percent per unit lead the economic growth in 3 percent unit.Moreover,the connection between FDI and economic growth of Republic of Kazakhstan was explored.A Vector Autoregression Model(VAR)regression was applied for data analysis.The annual data was used for twenty-two years(two years after the independence of Kazakhstan)was utilized.The analysis testifies a positive relationship between the FDI and economic growth,based on the empirical results.In addition,it was investigated if the economy of Kazakhstan is driven by petroleum industry.Nevertheless,for a country based on petroleum industry and export of natural resources,our findings confirmed that Republic of Kazakhstan attracts FDI.A positive relationship between FDI and GDP growth was unraveled and the GDP showed to benefit from FDI.R-sq:(GDP)is 99.6% and Adjusted R-sq:(FDI)is 97.2%.GDP and FDI are so close with each other.It means that model fits well.In addition,foreign direct investment explains the 97.2 % case of gross domestic product.Further,FDI has a significantly positive impact on GDP growth of Kazakhstan.