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Prospects for Closer Economic Cooperation in Northeast Asia

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  • Nathalie Aminian
  • Cuauhtémoc Calderon

Abstract

In contrast to developments in other world regions, efforts to institutionalize regional economic cooperation in East Asia have been weak. Though Southeast Asian economies have taken action toward trade liberalization (ASEAN Free Trade Area), the major economies of the region such as China, Japan, and Korea have not been part of any formal trade groupings until recently. However, given the slow pace of progress within AFTA and the importance of the Northeast Asian countries in terms of weight in the Asian economy, a de facto Northeast Asian economic cooperation is a necessary condition for East Asian integration. This paper investigates the substance of recent economic cooperation in Northeast Asia. The trilateral economic cooperation is analyzed through examination of trade and direct investment links for 1990-2004, and estimation of selected determinants of direct investment, in particular the relationship between trade and FDI. Estimation results suggest that the main driving forces for direct investment outflows from the source country have been the falling-off of exchange rate risk, the level of the nominal bilateral exchange rates, growth rate of the recipient country, and the per capita GDP gap between source and host countries. Bilateral trade has been shown to be statistically insignificant. Copyright (C) 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Nathalie Aminian & Cuauhtémoc Calderon, 2010. "Prospects for Closer Economic Cooperation in Northeast Asia," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 417-432, August.
  • Handle: RePEc:bla:rdevec:v:14:y:2010:i:s1:p:417-432
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    References listed on IDEAS

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    1. Aminian, Nathalie, 2005. "Economic integration and prospects for regional monetary cooperation in East Asia," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 91-110, March.
    2. Frenkel, Michael & Funke, Katja & Stadtmann, Georg, 2004. "A panel analysis of bilateral FDI flows to emerging economies," Economic Systems, Elsevier, vol. 28(3), pages 281-300, September.
    3. Kojima, Kiyoshi, 1973. "A Macroeconomic Approach to Foreign Direct Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 14(1), pages 1-21, June.
    4. Robert E. Lipsey, 1999. "The Location and Characteristics of U.S. Affiliates in Asia," NBER Working Papers 6876, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kozo Kiyota, 2014. "Industrial Upgrading in a Multiple-cone Heckscher–Ohlin Model: The Flying Geese Patterns of Industrial Development," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 177-193, February.

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