Central Asian Trade Relations in the Post-Soviet Era (original) (raw)

By looking at post colonial trade relationships of the world countries for period of 1948-2006, Head and Mayer (HM [2010]) conclude that a country's trade with the colonizer, typically, erodes by 60% after 30 years of independence. However, the Central Asian Republics(CAR) have been independent from their colonizer, Russia for over 22 years, but their trade since 1995 has been steady and increasing. As a highly-specific application of Head and Mayer's (HM[2010]) study of post-colonial ties, CAR-Russia trade may appear to contradict the predictions or imply that there are interesting factors at work. We investigate the CAR's bilateral trade in the Post-Soviet period under a gravity framework in terms of a combination of monadic (country-specific) effects, such as national GDP, and dyadic (bilateral) effects associated with relative trade costs. We find that (1) dyadic time-varying "RTA" and time-invariant "Landlockedness", and monadic "importer's GDP" are highly significant in trade with the Central Asian Republics while "Tariffs" have low importance; (2) the CAR-Russia pair unobservable trade costs that are sensitive to global shocks had increased by 20%, their trade continued to be steady and increasing due to monadic effects (i.e., GDP growth following the recovery in World oil prices); (3) dynamic analysis of 185 country pairs show that 3/4 of observed changes in country pair trade is explained by country-specific features and 1/4 by bilateral trade relationships. Additionally, we find that country pair trade of the less liberal CAR (Uzbekistan and Turkmenistan) was 96% explained by a monadic effect, while for the more liberal CAR (Kyrgyzstan and Kazakhstan), 50% is influenced by a dyadic effect.