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ASEAN in a Regional Perspective

Author

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  • Frankel, Jeffrey A.
  • Wei, Shang-Jin

Abstract

Trade among the ASEAN economies is higher than one would expect, based on their income levels and other important determinants of bilateral trade. The same is true of trade within East Asia more broadly (or trade within an ASEAN-Australia-New Zealand grouping). To the extent that this regional concentration of trade is attributed to formal or informal regional trading arrangements, they appear to be trade-creating, not trade-diverting. The rate of increase of trade within ASEAN or within East Asia, however, can be entirely explained by the rapid growth of the countries. There is nothing left over to attribute to an intensifying bloc. Perhaps the regional concentration, which shows up from the beginning of the sample period, is not due to formal measures, such as the decision to form an ASEAN FrA, but rather to a shared trading culture. (Trade among Southeast Asian countries will in the future naturally continue to grow more rapidly than incomes.) The openness of the Indochinese countries, suitably adjusted, was very low in 1992, but had almost doubled by 1994. If these formerly autarkic countries restore normal trade relations with the rest of the world over the coming decade, the gravity model predicts that their trade will expand another seven-fold, in addition to the expansion attributable to growth. The stock of Foreign Direct Investment (FDI) is a significant determinant of trade. We find that bilateral FDI can be modelled analogously to bilateral trade. In both cases, there is no evidence that Japan has accelerated its economic interactions with Southeast Asia, beyond what can be attributed to simple economic growth rates. We accept others' arguments that the ASEAN countries' trade relations with the industrialized countries are more important than their relations with each other. But we do not accept the argument that the latter are unimportant. If the ASEAN countries make serious progress along the path that they have set for themselves under the AFTA, the
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Frankel, Jeffrey A. & Wei, Shang-Jin, 1996. "ASEAN in a Regional Perspective," Center for International and Development Economics Research, Working Paper Series qt7g38z09z, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:ciders:qt7g38z09z
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    References listed on IDEAS

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    1. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, pages 190-207.
    2. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
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    Cited by:

    1. Diwan, Ishac & Hoekman, Bernard, 1999. "Competition, Complementarity and Contagion in East Asia," CEPR Discussion Papers 2112, C.E.P.R. Discussion Papers.
    2. Norman Loayza & Humberto Lopez & Angel Ubide, 1999. "Comovement and Macroeconomic Interdependence: Evidence for Latin America, East Asia, and Europe," Working Papers Central Bank of Chile 60, Central Bank of Chile.
    3. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 71-105, September.
    4. Yin-Wong Cheung & XingWang Qian, 2009. "The Empirics of China's Outward Direct Investment," Working Papers 172009, Hong Kong Institute for Monetary Research.
    5. Yin‐Wong Cheung & Jakob de Haan & Xingwang Qian & Shu Yu, 2012. "China's Outward Direct Investment in Africa," Review of International Economics, Wiley Blackwell, pages 201-220.
    6. Marek Rusnak & Tomas Havranek & Roman Horvath, 2013. "How to Solve the Price Puzzle? A Meta‐Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(1), pages 37-70, February.
    7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, pages 691-751.
    8. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
    9. Manchin, Miriam & Pelkmans-Balaoing, Annette O., 2008. "Clothes without an Emperor: Analysis of the preferential tariffs in ASEAN," Journal of Asian Economics, Elsevier, pages 213-223.
    10. Céline Carrère & Maurice Schiff, 2005. "On the Geography of Trade. Distance is Alive and Well," Revue économique, Presses de Sciences-Po, pages 1249-1274.
    11. Agnès Bénassy-Quéré & Amina Lahrèche-Revil, 2003. "Trade Linkages and Exchange Rates in Asia: The Role of China," Working Papers 2003-21, CEPII research center.
    12. Céline Carrère & Maurice Schiff, 2005. "On the Geography of Trade. Distance is Alive and Well," Revue économique, Presses de Sciences-Po, pages 1249-1274.
    13. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, pages 170-192.
    14. Cheshire, P. C. & Magrini, Stefano, 2002. "The distinctive determinants of European urban growth : does one size fit all?," LSE Research Online Documents on Economics 569, London School of Economics and Political Science, LSE Library.
    15. Misa OKABE, 2015. "Impact of Free Trade Agreements on Trade in East Asia," Working Papers DP-2015-01, Economic Research Institute for ASEAN and East Asia (ERIA).
    16. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, pages 170-192.
    17. Foroutan, Faezeh, 1998. "Does membership in a regional preferential trade arrangement make a country more or less protectionist?," Policy Research Working Paper Series 1898, The World Bank.
    18. Manchin, Miriam & Pelkmans-Balaoing, Annette O., 2008. "Clothes without an Emperor: Analysis of the preferential tariffs in ASEAN," Journal of Asian Economics, Elsevier, pages 213-223.
    19. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, pages 369-395.
    20. Timothy Bond, 1998. "Capital Flows to Asia: The Role of Monetary Policy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 165-182.
    21. Bec, Frédérique & Gollier, Christian, 2006. "Assets Returns Volatility and Investment Horizon: The French Case," IDEI Working Papers 467, Institut d'Économie Industrielle (IDEI), Toulouse, revised 30 Nov 2008.
    22. Amina Lahrèche-Révil & Juliette Milgram, 2006. "Exchange-rate policies and trade in the MENA countries," ThE Papers 06/07, Department of Economic Theory and Economic History of the University of Granada..
    23. Stacie Beck & Alexis Chaves, 2011. "The Impacts of Various Taxes on Foreign Direct Investment," Working Papers 11-18, University of Delaware, Department of Economics.

    More about this item

    Keywords

    Southeast Asia; Indochina; AFTA; gravity; yen bloc; regional; trade; foreign direct investment; flying geese; Business; Social and Behavioral Sciences; Arts and Humanities;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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