This report assesses the role of fiscalrules for countercyclical economic management in Kazakhstanand simulates the behavior of different types of fiscalrules. The work represents technical assistance to theministry of economy and budget planning and has beenfinanced by the joint economic research program between thegovernment of Kazakhstan and the World Bank. Kazakhstanadopted a fixed fiscal rule in 2010 and introduced changesto it in 2012. By keeping the annual amount transferred fromthe fund to the budget constant, Kazakhstan's rule ismore stringent than pure application of the permanent rulewill imply. This report's five chapters outline theadvantages of Kazakhstan's current fiscal rule and itsperformance against other types of rules. Chapter onereviews the performance of the Kazakh economy and the policystance of the authorities over the last 10 years. Chaptertwo argues that fiscal rules should be simple andtransparent; presenting evidence that Kazakhstan'scurrent fiscal rule meets these two criteria. Chapter threepresents the results of simulations of different globaleconomic scenarios and the expected impacts on key variablesin Kazakhstan, considering scenarios as elected in closeconsultation with the Kazakh authorities. Chapter four usesthe results of these simulations to test the performance ofdifferent types of fiscal rules. Chapter five responds to agovernment request to review the literature on the use offiscal and monetary policy for countercyclical economic management.
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