Trade and Economic Development in South East Asia

24 Pages Posted: 2 Jun 2009

See all articles by Beng-Kuan Ang

Beng-Kuan Ang

University of Malaya (UM) - Faculty of Economics & Administration (FEA)

Su-Fei Yap

University of Malaya - FEA

Date Written: June 2, 2009

Abstract

Contrary to cross-country studies, this paper explores the regional relationships between trade and output growth for three rapidly developing Southeast Asian countries; Malaysia, Thailand and Indonesia, using time series framework and vector error-correction model. This article also investigates the balance-of-payment growth constraints of these three countries. The results suggest that there is evidence of growth-led exports in Malaysia and Thailand whereas growth-led imports hypothesis is supported in Thailand and Indonesia. There is also evidence of bidirectional causality between gross domestic product growth and trade flows. For balance-of-payments analysis, higher estimates of elasticity reflect greater trade liberalization and expansion of inter-regional trade. Therefore, a successful economic policy that increases the income elasticity of exports and/or reduces income elasticity of imports, permits a country to secure growth in demand and supply without suffering a deterioration in its balance of payments.

Keywords: Trade liberalization, balance-of-payments constrained growth, export-led growth, error correction model, cointegration

JEL Classification: F10

Suggested Citation

Ang, Beng-Kuan and Yap, Su-Fei, Trade and Economic Development in South East Asia (June 2, 2009). Available at SSRN: https://ssrn.com/abstract=1412992 or http://dx.doi.org/10.2139/ssrn.1412992

Beng-Kuan Ang

University of Malaya (UM) - Faculty of Economics & Administration (FEA)

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Su-Fei Yap (Contact Author)

University of Malaya - FEA ( email )

Kuala Lumpur, Wilayah Persekutuan 50603
University of Malaya (UM)
50603 Kuala Lumpur
Malaysia
60 17 342 0171 (Phone)

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