Managing Growth: The Role of Export, Inflation and Investment in three ASEAN Neighboring Countries

This study investigates the relationship between export, inflation, investment and economic growth for three ASEAN countries namely Indonesia, Malaysia, and Thailand. In general, the results revealed that export has a positive impact on growth. As for, Malaysia and Thailand, inflation has a negative impact on growth; while for Indonesia it has a positive impact. The inflation rate for Indonesia is almost consistent for a several years, which have lead to a positive relationship between inflation and growth. However, there is also a modest increase in the rate of inflation for certain years. The results also shows that investment have a positive impact on growth for Indonesia, Malaysia and Thailand.Economic growth; export; inflation; investment; ASEAN

Interdependence of Income between China and ASEAN-5 Countries

This paper examines the interdependence of income between China and ASEAN-5 countries by resorting to the time series econometrics analysis from 1960 to 2000 of the real Gross Domestic Product (GDP). Empirical results are found to support the strong interdependence of income between China and ASEAN-5 countries. With the increasing interest of economic integration around the globe especially the proposed China-ASEAN Free Trade Area (CAFTA), the interdependence and synchronization movements of income between member countries is an important characteristic for suitability toward the regional common currency goal.

FINANCIAL AND CURRENT ACCOUNT INTERRELATIONSHIP: AN EMPIRICAL TEST

Theoretically, financial account (FA) serves as a means of financing deficit in a country’s current account (CA). With the outburst of the rapid globalization and the liberalization of the capital markets, the function of FA could be a major cause of CA instability. This study empirically investigates the interrelationship between CA and the components of FA for the four crisis-affected Asian countries of Indonesia, Korea, the Philippines and Thailand. Empirical results show that deficit in CA mirror the surplus in FA supporting the theoretical foundation of balance of payment (BOP). We observed CA Granger causes FA suggesting that CA can be used as the control policy variable for the flows of capital in these countries. Therefore, the innovation of CA (whether deficit or surplus) would be important information for the liberalization and globalization of FA.current account, financial account, Asian, causality

Twin deficits in Cambodia: An Empirical Study

This study examines the inter-linkages between Government budget balance, and external balance for a transition economy in South East Asia – Cambodia. The empirical results of the quarterly data between 1996 and 2006, support twin deficits hypothesis that is the budget deficits do cause external deficits, in the short run. These two macroeconomics variables are moving together in the long run. For implication, these findings provide an insight for the Cambodia''s policy design and formulation.Budget Deficits Cambodia Current Account Deficit Unit Root Tests

Twin deficits in Cambodia: Are there Reasons for Concern? An Empirical Study

This study examines the inter-linkages between Government budget balance, and external balance for a transition economy in South East Asia – Cambodia. The empirical results of the quarterly data between 1996 and 2006, support twin deficits hypothesis that is the budget deficits do cause external deficits, in the short run. These two macroeconomics variables are moving together in the long run. For implication, these findings provide an insight for the Cambodia’s policy design and formulation.Budget Deficits; Cambodia; Current Account Deficit; Unit Root Tests

Testing Twin Deficits Hypothesis: Using VARs and Variance Decomposition

This paper examines the twin deficits hypothesis in Indonesia, Malaysia, the Philippines and Thailand (ASEAN-4 countries). The major findings of this paper are: (1) Long run relationships are detected between budget and current account deficits. (2) We found that the Keynesian reasoning fits well for Thailand since a unidirectional relationship exists which runs from budget deficit to current account deficit. For Indonesia the reverse causation (current account targeting) is detected while the empirical results indicate that a bidirectional pattern of causality exists for Malaysia and the Philippines. (3) We also found support for an indirect causal relationship that runs from budget deficit to higher interest rates, and higher interest rates lead to the appreciation of the exchange rate and this leads to the widening of current account deficit. (4) The results of the variance decompositions and impulse response functions suggest that the consequences of large budget and current account deficits become noticeable only over the long run.Twin deficits, Cointegration, Variance Decomposition

AN EMPIRICAL INVESTIGATION ON THE SUSTAINABILITY OF BALANCING ITEM OF BALANCE OF PAYMENT ACCOUNTS FOR OIC MEMBER COUNTRIES

This study aims to examine the sustainability of balancing item (???net errors and omissions') of balance of payment accounts for OIC (Organisation of the Islamic Conference) member countries. The series specific panel unit root test (SURADF unit root tests) suggest that 9 out of 23 sampled OIC member countries have their balancing item sustainable - Albania, Coted???Ivoire, Indonesia, Kuwait, Malaysia, Mozambique, Pakistan, Tunisia, and Uganda.Balancing Item (Net Errors and Omissions); Organisation of the Islamic Conference (OIC); Sustainability

Accounting for the Current Account Behavior in ASEAN-5

Current account are an endogenous variable that contain information about the behavior of the economics agents and is important for economic policymaking as it gives a broad reflection of the stance of macroeconomics policies. The imbalances in current account are a reflection of the forward-looking, dynamic saving and investment decisions in the intertemporal approach to current account modeling. This study empirically analyzed the anatomy of the dynamic current account behavior for the ASEAN-5 countries using present value model. Despite the simplicity, the statistical computations suggest that the agents behave as the forward-looking rational agents in the face of the shocks in the three out of five economies. This implies that the current account acts as a buffer to smooth the consumption in the presence of shock and optimally smoothing its consumption path for these countries.Current Account; Present Value Model; Consumption Smoothing; Consumption Tilting

Real Financial Integration among the East Asian Economies: A SURADF Panel Approach

To testify RIP, this study scrutinizes the mean-reversion behavior of bilateral real interest differentials (RIDs) in eight East Asian economies. We incorporate the ASEAN-5, South Korea and China (mainland) with the US and Japan taken as base countries. Four sub-samples within 1976-2004 are being considered to accentuate the effects of institutional changes and financial crises. To rectify the deficiency in extant univariate and panel tests, the newly proposed SURADF statistics by Breuer et al. (2002) is utilized. Overall, the findings are in favor of RIP such that RIDs are found mean-reverting (except China) and with faster adjustment, especially during the post-crisis era. Such outcome is in accord with the enhanced financial integration among the ASEAN-5 and South Korea with their major trading partners, suggesting that further economic cooperation and currency arrangements in the region are bright to preserve potential financial shocks. Conversely, the real financial integration among China-US and China-Japan are not yet empirically recognized notwithstanding the recent surge of capital flows into the mainland.Real Interest Differentials; SURADF Panel Unit Root Test; Half-life; Confidence Intervals; Financial Integration

The Dynamics Of The Current Account Behavior In The ASEAN-5 Countries

The current account is an endogenous variable that contains information about the behaviors of the economics agents. Thus, it is important for economic policymaking as it gives a broad reflection of the stance of macroeconomics policies. This dissertation empirically analyzed the anatomy of the dynamic current account behavior for the ASEAN-5 countries using three closely related elements. These includes evaluating the dynamic current account behavior using the present value model, the sustainability of current account imbalances and the interconnection between twin deficits phenomenon in the ASEAN-5 economies. Several important results are summarized from this study. First, the statistical estimation from the present value model suggests that the agents behave as the forward-looking rational agents in the face of the shocks in the three out of five economies. This implies that the current account acts as a buffer to smooth the consumption in the presence of shock and optimally smoothing its consumption path for these countries. Second, the sustainability analysis clearly indicates that for all countries, (except Malaysia and Singapore), current account deficits were not on the long-run steady state in the pre-crisis (1961-1997) era. An important lesson from this result is that the large and persistent external imbalances can trigger a financial crisis. The policy action to correct the widening of current account deficits should have taken place prior to 1997 when the external imbalances were on the unsustainable path. In other words, the external imbalances may be used as an indicator (or early warning signal) for a forthcoming crisis. Third, we found two channel of causal relationship between budget and current account deficits which (i) directly transmitted between budget and current account deficit and (ii) budget deficit is the driving force for interest rate, exchange rate and current account. Solving and managing the current account problem had been the center of international economic policymaking in many countries around the globe. As such, the issues presented in this study would serve as important guidelines for the understanding of the co-movements of the current account behavior and provide a platform for debate on the experiences of developing countries in promoting macroeconomic stability and sustainability in their countries