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A Factor Analysis of Trade Integration: The Case of Asian and Oceanic Economies

Author

Listed:
  • Yin-Wong Cheung

    (University of California, Santa Cruz)

  • Matthew S. Yiu

    (Hong Kong Monetary Authority)

  • Kenneth K. Chow

    (Hong Kong Institute for Monetary Research)

Abstract

We study trade integration among 15 selected Asian and Oceanic economies using factor models. The principal component approach is employed to extract the common factor that drives trade integration from bilateral trade integration series. It is found that the estimated common trade integration factor has strong seasonal and deterministic components. In accordance with theory, the common trade integration factor is significantly associated with the economic growth and the trade barriers of the 15 economies. However, we find no evidence that the common trade integration factor is affected by foreign direct investment. The basic model is extended to incorporate an ASEAN factor that affects trade integration among the ASEAN economies in our sample.

Suggested Citation

  • Yin-Wong Cheung & Matthew S. Yiu & Kenneth K. Chow, 2009. "A Factor Analysis of Trade Integration: The Case of Asian and Oceanic Economies," Working Papers 132009, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:132009
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    References listed on IDEAS

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    Cited by:

    1. Matthew S. Yiu & Alex Ho & Lu Jin, 2009. "Econometric Approach to Early Warnings of Vulnerability in the Banking System and Currency Markets for Hong Kong and Other EMEAP Economies," Working Papers 0908, Hong Kong Monetary Authority.
    2. Gurnain Kaur Pasricha, 2009. "Bank Competition and International Financial Integration: Evidence using a new index," FIW Working Paper series 037, FIW.
    3. Irfan Akbar Kazi & Mohamed Mehanaoui & Farhan Akbar, 2014. "The shift-contagion effect of global financial crisis and the European debt crisis on OECD Countries," Working Papers 2014-128, Department of Research, Ipag Business School.
    4. Masahiro Kawai & Ganeshan Wignaraja, 2014. "Trade Policy and Growth in Asia," ADBI Working Papers 495, Asian Development Bank Institute.
    5. Matthew S. Yiu & Wai-Yip Alex Ho & Lu Jin, 2010. "Dynamic Correlation Analysis of Financial Spillover to Asian and Latin American Markets in Global Financial Turmoil," Working Papers 1001, Hong Kong Monetary Authority.

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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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