Central Asian Trade Relations in the Post-Soviet Era

By looking at post colonial trade relationships of the world countries for period of 1948-2006, Head and Mayer (HM [Head et al. (2010)]) conclude that a country's trade with the colonizer, typically, erodes by 60% after 30 years of independence. However, the CAR (Central Asian Republics(CAR) arehave been independent from itstheir colonizer, Russia for over 22 years, but their trade since 1995 has been is steady and increasing. As a highly-specific application of Head and Mayer's (HM[Head et al. (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 aimed to investigate what is explaining CAR-Russia trade based onn the CAR's' bilateral trade forin the Post-Soviet period under a gravity framework according to 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 which is due to monadic effects (i.e., GDP growth, following the recovery in wWorld oil prices increase); (3) dynamics analysis of 185 country pairs trade show that 3/4 cases of observed changes in country pair trade is explained by country-specific features and 1/4 cases by bilateral trade relationships. Additionally, we find that country pair trade of the less liberal CARs (Uzbekistan and Turkmenistan) forwas 96% driven byexplained by a monadic effect, while for the more liberal CARs (Kyrgyzstan and Kazakhstan), trade for 50% is influenced by a dyadic effect.