Abstract

Contrary to cross-country studies, this paper explores the regional relationships between trade and output growth for three rapidly developing Southeast Asian countries; Malaysia, Thailand and Indonesia, using time series framework and vector error-correction model. This article also investigates the balance-of-payment growth constraints of these three countries. The results suggest that there is evidence of growth-led exports in Malaysia and Thailand whereas growth-led imports hypothesis is supported in Thailand and Indonesia. There is also evidence of bidirectional causality between gross domestic product growth and trade flows. For balance-of-payments analysis, higher estimates of elasticity reflect greater trade liberalization and expansion of inter-regional trade. Therefore, a successful economic policy that increases the income elasticity of exports and/or reduces income elasticity of imports, permits a country to secure growth in demand and supply without suffering a deterioration in its balance of payments.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.