This is the definition from Cambridge Advanced Learner's Dictionary. Caucasian Show phonetics adjective belonging to the races of people who have skin that is of a pale colour: The chief suspect for the robbery is a Caucasian male. Do native speakers use this word exactly as the dictionary defines?
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Does 'Caucasian' refere to a specific group of white people, in particular, those who are from
the Western Europe?
Actually, it's more like the opposite. "White" is the more ambiguous term, and opinions as to whom should be included vary from region to region, country to country, and person to person. Generally though, a "White" person is considered to be someone