Economic Diversification and Macroeconomic Determinants in Kazakhstan: An ARDL Approach

Economic diversification remains a key challenge for resource-dependent economies, where aggregate growth may coexist with persistent concentration in resource-related activities. This study examines the short- and long-run relationship between economic diversification and key macroeconomic conditions in Kazakhstan over 2010Q1–2025Q4. To capture changes in the domestic production structure, a Structural Diversification Index (SDI) is constructed from quarterly gross value added across eight mutually exclusive sector groups using the complement of the Herfindahl–Hirschman Index (1 − HHI). The empirical analysis employs an autoregressive distributed lag (ARDL) framework, allowing the dynamic effects of economic activity, foreign direct investment (FDI), the exchange rate, the policy interest rate, and inflation to be examined within a unified time-series model. Unit-root testing confirms a mixture of stationary and first-difference-stationary variables, with no variable integrated of order two, supporting the ARDL bounds-testing approach. The bounds test provides evidence of a stable long-run relationship, with an F-statistic of 7.9094 exceeding the upper critical bound at the 1% level. However, the estimated long-run coefficients of GDP, FDI, the exchange rate, the policy interest rate, and inflation are individually statistically insignificant. These findings suggest that Kazakhstan’s production diversification cannot be attributed to a single macroeconomic determinant and may instead reflect the interaction of broader structural and productive conditions. The study contributes by providing a quarterly, GVA-based measure of Kazakhstan’s diversification and by distinguishing the existence of a long-run relationship from the statistical significance of individual macroeconomic variables. The findings indicate that changes in sectoral diversification are associated with the selected macroeconomic conditions, although the individual long-run effects of these variables are not statistically significant. The SDI captures changes in the distribution of domestic value added across sectors but does not directly measure the broader dimensions of structural transformation.