Research On Trade And Economic Growth In Turkmenistan

Trade has a crucial role in the development of countries.It provides the opportunity to enhance the export of developing countries who want to reach the level of developing countries by a rapid development.This study aims at examining the relationship between trade and economic growth in Turkmenistan.This study took in to consideration a specific time period between 1991 to 2016 using the World Bank data source.An empirical analysis was carried out to test the relationship between trade and economic growth with GDP serving in the place of economic growth while the sum of import and export represents trade.This empirical analysis used the time series analysis method with the EngelGranger method and the co integration test was applied to the two variables.To capture the stationerity in the two variables and whether the two variables had a long run relationship,we used the unit root test.The result on the analysis of economic growth and trade in Turkmenistan shows economic growth at 2.3%while trade was at 48% for the period 2001 to 2016 making the data negatively skewed to the right while the kurtosis tell us the normality of the data.The correlogram auto correlation and partial correlation test shows the probability estimate for lag(1)p-value shows(0.01),lag(2)probability estimate(0.02)and lag(3)probability estimate(0.05).The results shows that LNGDP at level is not stationary,which means the variable has a unit root.The variable LNT,meaning log of trade using the optimal lags AIC criteria,the probability estimate for lag(1)p-value is(0.12),lag(2)probability estimate shows(0.26)and lag(3)probability shows(0.43).The results shows that LNT at level is stationary.Taking the first difference for both variables,LNGDP and LNT,LNGDP became stationary at optimal lags with lag 1 probability estimate at(0.71),lag(2)probability estimate at(0.74)and lag(3)probability estimate at(0.84)while LNT also became stationary at first difference with lag 1probability estimate is(0.12),lag(2)probability estimate is(0.26)and lag(3)probability estimate is at(0.43).Therefore,the research accepts the null hypothesis that the variables are stationary after taking the first difference and rejects the alternate hypothesis that the variables has unit root.The Engle Granger Test using the two testing method for the co integration show the maximum rank(0)the estimated values of both Test statistics is greater than the 5% critical value which analyzes that there are some among cointegration exiting within the variables,meaning the variables has a long runassociation or move together.The research reject the null-hypothesis that there is no existences of co-integration among the variables and accept the alternative hypothesis.The vector error correction model result indicates that there is a short term causality relationship running from trade to GDP that is as trade increases by one unit,GDP increase 7.8 unit.The speed of adjustment to equilibrium level is48.5 and it is significant,as such the long-run association of the variables can be corrected in a period of two(2)months.In accordance with the error-correction model,tested the magnitude of the deviation between the long-term equilibrium relationship and the speed of adjustment between the two variables.Lastly,we used the Granger causality test to find out whether the two variables have a uni-lateral or bi-lateral causality in both the short run and the long run.From these different empirical test and analysis,it was gathered that the co integration was best suited making the coefficients of the variables to be significant.A positive relationship was shown between the two variables,trade and economic growth from this model.The results also established that,during the period of the study;trade level stimulates economic growth leaving us with a conclusion that trade in Turkmenistan is a driving force that stimulates economic growth.The Granger causality test shows a two-way effect from the level of trade and GDP suggesting that the level of economic growth promotes trade.On the other hand,it shows a one-way causality which suggests that trade influences GDP thereby making trade to be the stirring force for economic growth in the long-run stand point with economic growth not been the stirring force for trade.A confirmation from the time series analysis,the co integration with the usage of the Engels Granger test proved the stationery of the data.Evaluating the extent of difference between the long-term equilibrium relationship and the speed of adjustment between the two variables,the error correction model was used in determining that.The findings from these various empirical tests confirms that there is a bi-lateral causality between trade and economic growth.It also validate a positive and significant relationship between trade and economic growth for the entire period of the study.As a result of these findings,a number of recommendations were made to national government on how to further improve trade and promote the growth of the Turkmenistan's economy.