Cointegration and Causality between Disaggregated Exports and Economic Growth in ASEAN-4 Nations

Abstract

This study aimed to examine the relationship between ASEAN-4’s disaggregates exports (i.e., manufactured and primary exports) and economic growth by utilising the time series data over the period from 1982 to 2017. The Johansen-Juselius multivariate procedure was performed to determine the existence of the long-run relationship between variables, while the Granger causality test within VECM was applied to analyse the long-run and short-run causal directions. Prior to that, the unit root test was conducted to examine the series properties of the variables. The empirical results from the Johansen and Juselius Multivariate Cointegration test revealed that there were long-run equilibrium relationships among variables, while the Granger causality test based on VECM found that the ELG hypothesis for manufactured exports was valid for Indonesia in the long-run and short-run, while in the Philippines this hypothesis was only valid for the short-run. On the other hand, in the case of Malaysia and Thailand, both ELG and GLE hypotheses were valid in both long-run and short-run. For each ASEAN-4 nation the results also revealed that physical capital indirectly caused economic growth via the manufactured exports. Nevertheless, in the case of Malaysia and Thailand, it seemed that the reserve effect was likely to happen whereby the economic growth caused the growth of manufactured exports through the increase of the national production. The growth of the manufactured exports due to the reverse effect in turn caused the demand for imports to increase, particularly the imports of intermediate products. As far as the primary exports were concerned, the ELG hypothesis was valid for Thailand in both long-run and short-run, while for Malaysia and Indonesia, this hypothesis was valid respectively in the long-run and short-run. For Thailand, Indonesia and Malaysia, it appeared that in the short run, human capital indirectly stimulated economic growth via primary exports.