The belt and road initiative: a spatial empirical analysis of economic performance in Central Asia and the South Caucasus

Abstract

This article focuses on China’s FDIs and mutual trade with five Central Asian countries, three South Caucasus countries and Iran within the framework of the Belt and Road Initiative (BRI). The study examines how the interaction of mutual foreign trade and China’s FDIs affects longitudinal income changes in these countries and to what extent the empirical evidence can demonstrate the significance of China’s investments and trade on their economic growth. Employing panel-spatial econometric models, the study assesses whether a discernible increase in total income occurred before and after 2013, exploring potential spillover effects from the spatial neighborhoods. The findings from the panel regression model reveal that the labor stock and the amount of foreign direct investments from China do not exhibit a statistically significant effect on the economic growth of these countries. However, the BRI positively impacted these economies, primarily through enhanced trade with China rather than FDIs from China.