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The impact of trade openness on the incomes of four South East Asian countries before and after the Asian financial crisis

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  • Vatthanamixay Chansomphou

    ()
    (Graduate School for Internatinal Development and Cooperation, Hiroshima University)

  • Masaru Ichihashi

    ()
    (Graduate School for Internatinal Development and Cooperation, Hiroshima University)

Abstract

The purpose of this study is to present a robust estimation of trade openness in four South East Asian countries—Indonesia, Malaysia, the Philippines, and Thailand—before and after the Asian financial crisis, using time series analysis. We use the co-integration technique with a structural break developed by Carrion-i-Silvestre and Sanso (2006) to estimate the elasticity of trade openness that affects GDP per capita in the long run. The results show that the trade openness of Thailand performs better than that of the other three sampled countries both before and after the crisis. For Indonesia and Malaysia, trade openness also has a significant positive influence on income per capita, but this impact is relatively smaller than that of Thailand. The trade openness of the Philippines seems to perform better than that of Malaysia before the crisis, but after the crisis, trade openness lowers income per capita. Therefore, we think that Thailand might be a good example of how to make trade work for other developing countries.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 4 ()
Pages: 2890-2902

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Handle: RePEc:ebl:ecbull:eb-11-00652

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Keywords: long-run income; trade openness; structural break; cointegration;

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References

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  1. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  2. Josep Lluís Carrion-i-Silvestre & Andreu Sansó, 2005. "Testing the Null of Cointegration with Structural Breaks," DEA Working Papers, Universitat de les Illes Balears, Departament d'Economía Aplicada 10, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  3. Sebastian Edwards, 1991. "Trade Orientation, Distortions and Growth in Developing Countries," NBER Working Papers 3716, National Bureau of Economic Research, Inc.
  4. Slaughter, Matthew J., 2001. "Trade liberalization and per capita income convergence: a difference-in-differences analysis," Journal of International Economics, Elsevier, Elsevier, vol. 55(1), pages 203-228, October.
  5. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(493), pages F50-F72, 02.
  6. Santos-Paulino, Amelia U., 2002. "The Effects of Trade Liberalization on Imports in Selected Developing Countries," World Development, Elsevier, Elsevier, vol. 30(6), pages 959-974, June.
  7. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(447), pages 383-98, March.
  8. Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc.
  9. Parikh, Ashok & Shibata, Miyuki, 2004. "Does trade liberalization accelerate convergence in per capita incomes in developing countries?," Journal of Asian Economics, Elsevier, Elsevier, vol. 15(1), pages 33-48, February.
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Cited by:
  1. Muhammad, Shahbaz, 2012. "Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan," MPRA Paper 37391, University Library of Munich, Germany, revised 10 Mar 2012.

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