The Impact of the Exchange Rate and Oil Prices on SME Manufacturing Output in Kazakhstan

This study investigates the impact of oil prices and exchange rates on the manufacturing output of small and medium-sized enterprises (SMEs) in Kazakhstan using data from the period 2000 to 2023, within the framework of the ARDL model. In the Kazakhstani economy, approximately 60% of SMEs operate in the wholesale and retail trade sectors, a factor that has been taken into consideration in interpreting the effects of macroeconomic variables on SME output. The results of the long-run analysis reveal that the exchange rate has a significant and strong positive effect on SME manufacturing output. Although oil prices do not directly exert a statistically significant influence on production output, the study identifies an indirect effect of oil revenues on SME output via the exchange rate channel. In the short-run findings, both exchange rates and oil prices are found to have significant effects on production output; in particular, oil prices exhibit a positive impact in the short term, which partially reverses in subsequent periods. The error correction term indicates a rapid adjustment back to equilibrium in the long run. These results highlight the high sensitivity of SME production performance in Kazakhstan to exchange rate fluctuations and underscore the indirect influence of oil prices through exchange rate movements. The study recommends enhancing the financial resilience of SMEs, minimizing exchange rate risks, and closely monitoring changes in energy prices. Furthermore, it suggests the development of policies aimed at promoting SMEs’ involvement in foreign currency-generating activities, as well as protecting enterprises in the wholesale and retail sectors against price volatility. In this context, the study makes a valuable contribution by providing a comprehensive evaluation of the effects of macroeconomic variables on SME manufacturing output.