An Analysis of the Pattern of Trade of Kazakhstan: The Gravity Model Approach

Abstract

The aim of this study is on the basis of the gravity model to examine Kazakhstans trade flows, in order to describe trade relations of Kazakhstan and its top ten trade partners. Dependent on natural resources economy of Kazakhstan made it interesting to construct the gravity model using the data of trade volume of Kazakhstan excluding oil and gas sector. Examining the gravity model within the Kazakhstan context this research studied the relationship between bilateral trade flows and the following factors: GDP, distance, population, adjacency, history, and previous year trade value. A regression analysis was utilized in order to test the data, which were collected from the World Bank, CEPII, and the Statistics Agency of the Republic of Kazakhstan. Trade value is used as dependent variable. GDP, per capita GDP, distance, adjacency, history, and trade value of the previous year are used as independent variables. An analysis of the data revealed that the obtained gravity model had a good quality. Independent variables as GDP, history, and previous year trade value had a significant positive effects to the Kazakhstans trade flows, showing that trade flows between two countries depend on trade partners economic size, the existence of previous year bilateral trade value, and their common history of the Soviet Union regime. The insignificance of population variable showed that Kazakhstans bilateral trade flows did not depend on the size of countries internal market. Distance, and adjacency, population variables appear to be statistically insignificant, which can be explained by the specification of the Kazakhstans transportation system.