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Bounds Estimation for Trade Openness and Government Expenditure Nexus of ASEAN-4 Countries

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  • Kueh, Jerome Swee-Hui
  • Puah, Chin-Hong
  • Wong, Chiew-Meu

Abstract

Southeast Asia countries are encountering several challenges as they are moving towards the globalization and trade liberalization era. Due to that, government intervention is essential in ensuring that the economy is resilience against the severe implications of trade openness. Therefore, this study aims to examine the relationship between trade openness and government expenditure of ASEAN-4 countries using the Autoregressive Distributed Lag [ARDL] bounds testing approach that covers a sample period of annually data from 1974-2006. Empirical results indicate that there is an existence of a significant positive long-run linkage between trade openness and government expenditure of all the ASEAN-4 countries under study. This means that government intervention in an open economy is crucial as to cushion the risks associated with trade liberalization.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12351.

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Date of creation: Nov 2008
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Handle: RePEc:pra:mprapa:12351

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Keywords: ARDL; ASEAN-4; openness; government expenditure;

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  1. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
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  5. Muhammad Islam, 2004. "The long run relationship between openness and government size: evidence from bounds test," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 995-1000.
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  7. Frank Balle & Ashish Vaidya, 2002. "A regional analysis of openness and government size," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 289-292.
  8. Narayan, Paresh Kumar & Narayan, Seema, 2005. "Estimating income and price elasticities of imports for Fiji in a cointegration framework," Economic Modelling, Elsevier, vol. 22(3), pages 423-438, May.
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  10. David F. Hendry & Neil R. Ericsson, 1989. "An econometric analysis of UK money demand in MONETARY TRENDS IN THE UNITED STATES AND THE UNITED KINGDOM by Milton Friedman and Anna J. Schwartz," International Finance Discussion Papers 355, Board of Governors of the Federal Reserve System (U.S.).
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  12. Bejan, Maria, 2006. "Trade Openness and Output Volatility," MPRA Paper 2759, University Library of Munich, Germany.
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Cited by:
  1. Muhammad Zakaria & Samreen Shakoor, 2011. "Relationship Between Government Size and Trade Openness: Evidence from Pakistan," Transition Studies Review, Springer, vol. 18(2), pages 328-341, December.

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