Is China compatible with ASEAN‐5? A gradual cointegration analysis

Abstract

PurposeThe purpose of this paper to examine if there is continuous macroeconomic compatibility between ASEAN‐5 and China. Thus, in addition to the typical VECM test of the long run macroeconomic cointegration test, this paper examines the existence of an ongoing cointegration analysis.Design/methodology/approachThe degree of convergence during different sub‐sample period of the full sample is employed, via Johansen cointegration rank tests, to examine if there is evidence of ongoing and improved cointegrating relationship among the economies.FindingsA successful ASEAN‐China economic cooperation would only work if there is continuous macroeconomic interdependence between the partnership. Since a smooth transition of ACFTA will complement AFTA, the effective ASEAN‐China coordination plan is essential to endorse a successful ASEAN‐China coalition.Originality/valueThis paper suggests a quick yet effective verification on the continuous compatibility of economies intended to have a long‐term economic coordination.