Abstract
The study aims to evaluate the economic growth process and the macroeconomic factors, namely, the inflation rates, the value added in the production taken as a proxy of productivity and openness to trade for the selected Eurasian transition economies. The paper focuses on the transition period and the economic performance achieved following the independence of the analyzed countries. By using a sample that consists of Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, the relationship between economic growth with inflation, trade openness and value added obtained by the national industries are evaluated within a panel setting. The dataset is investigated with traditional and structural break unit root tests followed by panel regression analyses. Considering the findings in the literature which suggest either statistically insignificant or having positive or negative effects of inflation on growth depending on the countries analyzed, the empirical findings of the paper are in favor of negative effects of inflation on growth: though the size of the effect of inflation rates on growth in rather small, negative effect of inflation cannot be rejected. Further, the positive effects of value added in the production which is taken as a proxy to productivity shows significant positive impacts on growth. Similarly, openness to international trade is shown to have positive impacts for the transition countries analyzed. The results are in favor of the findings in literature suggesting that “it is not the inflation rates, rather than the variation in inflation” which could limit economic growth. The findings for openness and value added suggest policies to enhance productivity and international trade to accelerate the economic growth in the transition economies.
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