Экономическая интерпретация косвенных торговых отношений Армении и Турции / An Economic Explanation of Armenian and Turkish Indirect Trade Relation
Аннотация
The Armenian Republic emerged following the disintegration of the Soviet Union in 1991, ushering in a shift towards a market economy paradigm. Despite attempts to establish diplomatic ties with Turkey, relations between the two countries remained tense, which eventually led to a complete rupture of diplomatic and economic relations with the closure of borders between neighboring countries. Relations between the two countries are complicated by several historical and geopolitical conflicts, primarily related to the Armenian Genocide during the First World War. However, despite this, the countries maintain indirect trade relations through third countries. Until now, relations remain tense, however, in both countries, there is a heated discussion, both at the state and public levels, regarding the possibility of establishing diplomatic relations and opening borders. This study examines the economic factors underlying the unusual dynamics of trade.
This research aims to comprehensively examine the economic relationship between Armenia and Turkey, focusing on trade dynamics and factors influencing bilateral economic interactions. The tasks of the study include analyzing the existing literature, analyzing the dynamics of trade between the countries, conducting an econometric analysis based on historical data, and identifying factors contributing to and hindering trade between Armenia and Turkey. The object of study is Armenian-Turkish indirect trade relations. The subject of study is the economic factors that influence this trade relationship.
We employ a Dynamic Simulated Autoregressive Distributed Lags approach, a modification of the conventional Autoregressive Distributed Lags model presented by Jordan and Phillips in 2018. The model allows this study to analyze time series and understand the effects of changes in the independent variable over different periods, including short- and longer-run changes. This method allows us to automatically identify the impact of positive and negative shocks from any independent variable while treating the rest as constant while addressing the endogeneity issue. The research is based on a time series dataset including seven factors spanning from 1997 to 2021, totaling 175 observations. The data is from The World Bank, The Observatory of Economic Complexity, MIT Media Lab, Matteo Iacoviello and Dario Caldara.
Our analysis uncovers that Armenia's macroeconomic performance and the appreciation of the Turkish Lira against the Armenian Dram both in the short and long run are significant factors boosting imports from Turkey. Turkish GDP, on the contrary, tends to hinder the import from Turkey to Armenia. Furthermore, the appreciation of Turkish currency against the Armenian one as well as Armenian macroeconomic performance in the short run tends to hinder the Armenian export to Turkey. Turkish economic growth has a positive influence on Armenian exports to Turkey. Additionally, when it comes to understanding the total volume of trade between the two countries, which is the sum of Armenian and Turkish exports, these factors are found to play a relatively minor role. Surprisingly, global geopolitical risks are found to be an insignificant factor in explaining this trade relationship in all directions, including Armenian export, Turkish export, and total trade, given its indirect nature.
Thus, this work presents important practical insights explaining indirect trade between countries, which can help policy makers better understand the factors constraining and vice versa developing trade relations between countries, the main of which is the relationship between economic factors and trade contradicts the economic theory, which indicates the presence of other non–economic factors playing a significant role.
This research aims to comprehensively examine the economic relationship between Armenia and Turkey, focusing on trade dynamics and factors influencing bilateral economic interactions. The tasks of the study include analyzing the existing literature, analyzing the dynamics of trade between the countries, conducting an econometric analysis based on historical data, and identifying factors contributing to and hindering trade between Armenia and Turkey. The object of study is Armenian-Turkish indirect trade relations. The subject of study is the economic factors that influence this trade relationship.
We employ a Dynamic Simulated Autoregressive Distributed Lags approach, a modification of the conventional Autoregressive Distributed Lags model presented by Jordan and Phillips in 2018. The model allows this study to analyze time series and understand the effects of changes in the independent variable over different periods, including short- and longer-run changes. This method allows us to automatically identify the impact of positive and negative shocks from any independent variable while treating the rest as constant while addressing the endogeneity issue. The research is based on a time series dataset including seven factors spanning from 1997 to 2021, totaling 175 observations. The data is from The World Bank, The Observatory of Economic Complexity, MIT Media Lab, Matteo Iacoviello and Dario Caldara.
Our analysis uncovers that Armenia's macroeconomic performance and the appreciation of the Turkish Lira against the Armenian Dram both in the short and long run are significant factors boosting imports from Turkey. Turkish GDP, on the contrary, tends to hinder the import from Turkey to Armenia. Furthermore, the appreciation of Turkish currency against the Armenian one as well as Armenian macroeconomic performance in the short run tends to hinder the Armenian export to Turkey. Turkish economic growth has a positive influence on Armenian exports to Turkey. Additionally, when it comes to understanding the total volume of trade between the two countries, which is the sum of Armenian and Turkish exports, these factors are found to play a relatively minor role. Surprisingly, global geopolitical risks are found to be an insignificant factor in explaining this trade relationship in all directions, including Armenian export, Turkish export, and total trade, given its indirect nature.
Thus, this work presents important practical insights explaining indirect trade between countries, which can help policy makers better understand the factors constraining and vice versa developing trade relations between countries, the main of which is the relationship between economic factors and trade contradicts the economic theory, which indicates the presence of other non–economic factors playing a significant role.