Trade-growth dynamics in Central Asia: a causal analysis of international trade and GDP interactions

This study investigates the causal relationships between international trade, intraregional trade, and gross domestic product (GDP) growth across Central Asian countries. It aims to determine the direction, significance, and heterogeneity of these interactions, offering insights into how trade performance influences economic development in the region. Empirical findings reveal that international trade has a positive and statistically significant impact on GDP in all Central Asian countries. However, the reverse relationship exhibits a negative and statistically significant effect in Uzbekistan, whereas Tajikistan displays mixed but statistically significant effects. This suggests that, in these countries, economic growth does not necessarily lead to proportional increases in international trade. With regard to intraregional trade, the results are mixed. Intraregional trade positively and significantly contributes to GDP in Kyrgyzstan and Uzbekistan, implying that deeper regional economic integration in these countries enhances domestic economic activity. In contrast, Turkmenistan exhibits negative and statistically significant effects in lags two to three, while the effect turns positive and remains statistically significant at lag four. The impact of GDP on intraregional trade is negative and statistically significant in Kyrgyzstan, Turkmenistan, and Uzbekistan, with mixed but statistically significant effects observed in Tajikistan. This indicates that economic growth in these countries does not necessarily stimulate increased trade within the region. These findings emphasize the need for Central Asian economies to adopt more outward-looking and regionally coordinated trade strategies. Enhancing trade efficiency, diversifying trade partners, and investing in regional trade infrastructure could help convert domestic economic gains into expanded trade flows.