Growth of Asian Regional Trade and Income Convergence: Evidence from ASEAN+3 Based on Extended Helpman-Krugman Hypothesis and Flexible Modelling Approach

In earlier cross-sectional gravity-theory reports (see for example Frankel and Romer, 1999), empirical modelling evidence lends support to the hypothesis of ‘trade causes growth’. In our time-series study on trade-growth causation for a new Asian regionalism (namely ASEAN+3), the hypothesis was also confirmed (Tran Van Hoa, 2002c). A number of benchmark models have also been proposed to find out what causes trade (for a brief survey, see Baier and Bergstrand, 2001), but specific research on income convergence and Asian or more specifically ASEAN+3 trade is still scarce or even non-existent. The paper focuses on studying the growth of ASEAN+3 bilateral trade in the volatile period 1968-2000 and, using an extended Helpman-Krugman (1985) function-free model and World Bank national account and CHELEM trade data, tests the impact of convergence on this trade. Surprisingly, this convergence is found plausible but statistically insignificant and ASEAN output growth and crises are principal determinants of the trade flows between the East Asia 3 and ASEAN.New Asian Regionalism, Free Trade Agreement, ASEAN, ASEAN+3, Trade and Growth, Crises, Convergence Theory, Gravity Theory, Causality, Economic Modelling, Estimation Methods, Economic and Trade Policy

Recent Significant Advances in Estimating and Forecasting Theories and Economic Modelling: With Applications to Asian Investment Studies.

The paper presents the basics of a new and flexible approach to statistically modelling the activities of multi-sectoral economies (Tran Van Hoa, 1992) and applies it to study investment in five major East Asian countries (ie, China, Indonesia, Korea, Malaysia and Thailand) during the period 1970-1993 using recent World Bank databases. The approach dominates the computable general equilibrium method in its data-consistent structure.ECONOMIC MODELS ; EVALUATION ; FORECASTS ; INVESTMENTS

Korea, China and Japan: Their Trade with the World and Its Impact on New Asian Regionalism ASEAN+3

Success of recent developments in Asian economic regionalism and free trade agreements depends to some significant extent on the continuing role and importance of trade of these economies with themselves and also with the world's major trading blocs. The paper reviews especially the case of Korea, Japan and China's interest in new Asian economic regionalism and FTAs, surveys particularly its important trends in international trade in the past 35 years and discusses how these trends and patterns will affect the Asian 3's growth and provide the background for more effective implementation of ASEAN+3 or even ASEAN+5 or similar bilateral, pluri-lateral and multilateral regional economic integrations in the long term.

Australia-Thailand Free Trade Agreement: Challenges and Opportunities for Bilateral Trade Policy and Closer Economic Relations

The signing of the long-awaited Australia-Thailand free trade agreement (ATFTA) on 19 October 2003 at the APEC Meeting in Bangkok, the emergence of new Asian regionalisms such as ASEAN+1 (China) and ASEAN+3 (China, Korea and Japan), and other bilateral, plurilateral and multilateral FTAs world-wide in recent years pose challenges and, at the same time, offer opportunities for member countries. These FTAs require not only ministerial or senior official dialogues or casual heuristic causation on their acceptability and viability but also serious analytical and historical data-based research into these important developments including their underlying fundamental trade-growth and growth-of-trade causation and impact on trade and closer economic relations. Existing methodologies (eg, CGE/GTAP and gravity theory) for this kind of study have their serious coverage and data restrictions. The paper focuses on the empirics of the ATFTA above by using a novel empirical approach that avoids the CGE/GTAP pitfalls and to provide (if any) supporting evidence, emerging challenges and promising opportunities for Australia and Thailand. Implications of the findings for economic integration, trade policy and prospects for trade and welfare improvement for Australia and Thailand in the medium and long terms will also be discussed.New Asian Regionalism, Free Trade Agreement, Economic Integration, Australia-Thailand FTA, ASEAN, Trade and Growth, Gravity Theory, Causality, Economic Modelling, Economic and Trade Policy

Economic and Financial Crisis Management in Asia: A Critical Analysis

Recent financial and economic crisis in Asia and its management have produced dismal outcomes, economically, politically and socially, in many respects in several crisis economies. The paper focuses on a critical analysis of this crisis' diagnostics, prescriptions and outcomes, and discusses initiatives to avoid or better manage future and similar crises. The role played by increasing globalisation in economic crisis management at the country level is also assessed. The recent emergence of new Asian regionalisms such as the ASEAN+3 is argued as a promising initiative to overcome some external problems encountered in recent years and to effectively promote trade, investment, development and growth in the region.Financial and economic crisis, Asia, globalisation, crisis management

New Asian Regionalism: Evidence of ASEAN+3 Free Trade Agreement From Extended Gravity Theory and New Modelling Approach

The emergence of new Asian regionalisms such as ASEAN+3 (China, Korea and Japan) and the proposed ASEAN+5 (ASEAN+3 plus Australia and New Zealand) and other bilateral, plurilateral and multilateral free trade agreements in recent years requires research into these important developments and their underlying fundamental trade-growth causation. The paper extends the gravity theory to time-series data and applies a new flexible modelling approach to construct a simultaneous-equation model of trade and growth for the ASEAN and the East Asia 3. Using data from the World Bank national accounts and CHELEM regional and international trade over the period 1968-2000, the paper then estimates the model by both standard (OLS and 2SLS) and improved estimation methods to provide superior MSE impact estimates. Implications of the findings for ASEAN+3’s economic integration, trade policy and prospects for trade and welfare improvement for this FTA will also be discussed.New Asian Regionalism, Free Trade Agreement, Economic Integration, ASEAN, ASEAN+3, Trade and Growth, Gravity Theory, Causality, Economic Modelling, Estimation Methods, Economic and Trade Policy

WTO Membership for China and Its Impact on Growth, Investment and Consumption: A New Flexible Keynesian Approach

The November 2001 accession of China to the WTO promises increased investment (already the world’s second in 1998 and third in 1999) particularly from the EU into the country. This investment is crucial to China’s expanding trade with the rest of the world and will contribute significantly to its growth. The paper focuses on this nexus, presents a new and flexible approach to modelling the impact of China’s WTO membership on its investment and growth within the general framework of multi-sectoral economies (Tran Van Hoa, 1992), and applies it to study this anticipated impact using recent World Bank data. Our approach dominates in efficiency the CGE and other neo-classical methods (such as used in GTAP models) in its data-consistent structure. The paper then briefly describes the fundamentals of the new two-stage hierarchical information (2SHI) or empirical Bayes estimation and forecasting theory (Tran Van Hoa, 1985, 1986a, 1993b, Tran Van Hoa and Chaturvedi, 1988, 1990, 1997), summarises its superior MSE properties for forecasts and simulation, and reports substantive empirical findings on China’s investment and growth given its trade enhancement positions. As an illustration of applications of our approach, impact on China’s growth over a 7-year timeframe of a price reduction and increased government spending, assumed as a result of the country’s WTO membership, is also investigated and briefly its policy implications discussed.WTO, China, investment, growth, Keynesian approach, simulation