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Over the last two decades, there has been a significant increase in the number of countries that began to pursue an Inflation Targeting monetary policy framework. Since the collapse of the Soviet Union, each of the fifteen newly created independent countries started to develop and run their own autonomous monetary policies. Kazakhstan announced the implementation of an Inflation Targeting policy in August 2015. At the same time, a number of researches show that Inflation Targeting might not work as well for developing countries as it does for developed ones due to certain fundamental differences and preconditions that must be met before the implementation phase. Thus, this paper discusses the case of Kazakhstan as a typical emerging market economy example, examines its ability to respond to various external shocks and identifies the main transmission channels in order to contribute to the knowledge in this particular area. Identification assumptions generate contemporaneous monetary shocks on domestic inflation behavior, which also take into account various features of the small open economy as well as indicate different important transitory and persistent effects. The results show, based on the interpretation of impulse response functions, a positive interest rate shock has an uncertain inflationary impact, which raises questions about the effectiveness of interest rate manipulation in keeping inflation within the given band. In addition, a positive exchange rate shock leads to a stronger upward pressure in inflation rates. Finally, inflation inertia explains a substantial increase in future inflation rates.

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