Terms of Trade in Oil Exporting Countries. The case of Kazakhstan.

Abstract

The purpose of this thesis is to analyze the economy of a developing country that built its growth mostly on the export of oil. This work presents an initial theoretical focus on the terms of trade and their mechanism. This choice is due to the fact that the terms of trade is considered among the most important determinants of the purchasing power of the exports of a country, in this thesis it is the measure used to evaluate gains to individual countries from international trade. Furthermore, the work contains a detailed focus on the market of energy, in order to understand the trends of the energy sector. The focus is divided into the two types of energy on the market nowadays: fossil energy and renewables. Specific attention will be given to oil market, since it is particularly relevant for the main purpose of the thesis. The case study, object of the analysis of the terms of trade, is the country of Kazakhstan, an oil-net exporting country. The goal is to analyse the impact of a swing in oil price on the economy of the country, in order to achieve a better understanding about the reasons why economic diversification is an imperative for Kazakhstan’s future development, to reduce its exposure to external conditions like falls in oil price, as well as furthering job and value creation domestically.