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EXCHANGE RATE AND STOCK PRICES INTERACTIONS IN KAZAKHSTAN

This study employs a sample from 1st October, 2007 to 31st December, 2017 from Kazakhstan Stock Exchange (KASE) to investigate the nature of the interaction between exchange rate sensitivity and stock market. First, we test the stationarity of time series using the ADF and PP tests. Additionally, the Johansen and Juselius cointegration procedures were employed for the bivariate as well as multivariate cases. Results of research demonstrated stationarity in differences of the time series and absence of long-run relationship between the variables in bivariate model. When the model is extended to incorporate money supply and reserves, results detect the evidence of cointegration. Moreover, Granger causality tests demonstrate strong bidirectional relationship between exchange rate and stock prices in Kazakhstan. Policy wise, the results suggest that monetary authorities in Kazakhstan in achieving their exchange rate policy objective could take into consideration stock market development.