Abstract
In this paper, we propose a panel approach in the construction of the Asia-Pacific Regional Cooperation and Integration Index (ARCII) to strengthen the index’s ability to track the progress of economic integration in the region over time. Panel-based procedures are employed in imputing missing values, normalizing raw data, and deriving dimensional and subdimensional weights via principal components analysis. Findings suggest the pace of integration in Asia was broadly steady over the 11-year sample period (2006–2016). However, modest gains have been made as a majority of economies in the sample have moved up in their levels of regional integration from 2006 to 2016. Of the six dimensions featured in the ARCII, trade and investment and movement of people are the main drivers of regional integration, while the money and finance dimension was the weakest link. Based on global normalization, Asia comes second to the European Union (EU) in progress on regional integration, but in recent years a few Asian economies have broken through to the top tier dominated by the EU economies.
Highlights
Regional integration is a dynamic process where a group or more than one neighboring countries cooperate to achieve common goals for mutual benefit
We propose a panel approach in the construction of the Asia-Pacific Regional Cooperation and Integration Index (ARCII) to strengthen the index’s ability to track the progress of economic integration in the region over time
Modest gains have been made as a majority of economies in the sample have moved up in their levels of regional integration from 2006 to 2016
Summary
Regional integration is a dynamic process where a group or more than one neighboring countries cooperate to achieve common goals for mutual benefit. Regional cooperation and integration can take form in many different facets, such as promoting trade and investment, developing infrastructure, improving people’s mobility, strengthening the provision of regional public goods, and providing the legal and institutional basis for international policy cooperation. The dynamic effects of regional cooperation and integration are often considered positive for the region’s economic growth and development, when driven by increased market size, exploitation of economies of scale, enhanced competition, increased investment, and technical transfers. Reflecting the multifaceted nature of regional integration, the ARCII combines 26 indicators categorized into six regional cooperation and integration dimensions: trade and investment, money and finance, regional value chains, infrastructure and connectivity, movement of people, and institutional and social integration
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