Global financial economic crisis transmission on the transition economy: Case of the Kyrgyz Republic
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 10 May 2019
Issue publication date: 17 April 2020
Abstract
Purpose
The global financial crisis hit the economy of the Kyrgyz Republic by the third wave of its transmission in early 2009. The purpose of this study is to examine the impact of the global financial economic crisis on the transition economy of the Kyrgyz Republic. As there is a low level of the Kyrgyz Republic’s integration into the global financial and economic processes, it is obvious that channels of transmissions are different.
Design/methodology/approach
The empirical model is the vector autoregression approach. The quarterly data from 2005 to 2013 of the remittances from abroad, trade volumes, exchange rates, credits, deposits and liquidity of the banking system, gross domestic product (GDP) and foreign direct investment (FDI) were used in the empirical analysis.
Findings
The authors found a significant positive relation between transmission channels such as remittances flow, banking sector, international trade and GDP within the first six months. Thus, a decline in the aforementioned variables has a significant affirmative effect on the country’s GDP. Notwithstanding, the exchange-rate channel adversely influences GDP. Thereby, the depreciation of the national currency leads to an increase in GDP.
Originality/value
The study findings allow the Kyrgyz policymakers to foresee the global crisis transmission through the primary channels of transmission mechanism. Nevertheless, a decrease of the deposit level by 1 per cent leads to 2.91 per cent decline in FDI inflows. On the contrary, an increase of the exchange rate by 1 per cent leads to 1.54 per cent decrease in imports.
Keywords
Citation
Alymkulova, N. and Ganiev, J. (2020), "Global financial economic crisis transmission on the transition economy: Case of the Kyrgyz Republic", Journal of Financial Economic Policy, Vol. 12 No. 1, pp. 1-22. https://doi.org/10.1108/JFEP-09-2018-0133
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited