The Relationship between International Trade and Economic Growth An Empirical finding from ASEAN Countries
Main Article Content
Keywords
International trade, Economic growth, Exchange rate
Abstract
The aim of this study is to find the relationship between international trade and economic growth in ASEAN countries. Three independent variables used to measure the economic growth include international trade, the exchange rate, and foreign direct investment. This study employs a pedroni panel cointegration test to examine the data from 2004 to 2015. The results show that there is a long term cointegrated relationship between international trade and economic growth in the ASEAN countries. International trade and foreign direct investment also have a long term, positive impact on economic growth. Meanwhile, the exchange rate also has a long term, negative influence on the economic growth. In addition, there is an indirect relationship and bidirectional causalities between the GDP and international trade, as well as between the GDP and the exchange rate. On the other hand, there is a direct relationship and a bidirectional causality between international trade and the exchange rate. The FDI leads GDP, international trade, and exchange rates. Our results suggest that international trade must be supported by government policies that aim to enhance the financing of new investment for economic growth.
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References
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Li, K., and Boqiang Lin. (2016). Impact of Energy Technology Patents in China: Evidence from A Panel Cointegration and Error Correction Model. Energy Policy, 89, 214–223. doi:10.1016/j.enpol.2015.11.034
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Nistor, P. (2014). FDI and Economic Growth, the Case of Romania. Procedia Economics and Finance, 15, 577–582. doi:10.1016/S2212-5671(14)00514-0
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Ouedraogo, N. S. (2013). Energy Consumption and Human Development: Evidence from A Panel Cointegration and Error Correction Model. Journal of Energy, 63, 28–41. doi:10.1016/j.energy.2013.09.067
Pan, M., and Hien Nguyen. (2018). Export and growth in ASEAN: does export destination matter?. Journal of Chinese Economic and Foreign Trade Studies, 11(2), 122-131. doi:10.1108/JCEFTS-07-2017-0021
Pegkas, P. (2015). The Impact of FDI on Economic Growth in Eurozone Countries. The Journal of Economic Asymmetries, 12(2), 124–132. doi:10.1016/j.jeca.2015.05.001
Pekarskiene, I., and Rozita Susniene. (2014). The Assessment of the Manifestation of Economic Globalization: The International Trade Factor. Procedia-Social and Behavioral Sciences, 392–397. doi:10.1016/j.sbspro.2014.11.209
Semancikova, J. (2016). Trade, Trade Openness and Macroeconomic Performance. Procedia-Social and Behavioral Sciences, 220, 407–416. doi:10.1016/j.sbspro.2016.05.515
Tekin, R. B. (2012). Development Aid, Openness to Trade and Economic Growth in Least Developed Countries: Bootstrap Panel Granger Causality Analysis. Procedia-Social and Behavioral Sciences, 62, 716–721. doi:10.1016/j.sbspro.2012.09.121
Tellis, A. J., Andrew Marble, and Travis Tanner. (2009). The Global Economic Crisis and the Development of Southeast Asia. The National Bureau of Asian Research, Strategic Asia 2009 –2010.
Trejos, S., and Gustavo Barboza. (2015). Dynamic Estimation of the Relationship between Trade Openness and Output Growth in Asia. Journal of Asian Economics, 36, 110–125. doi:10.1016/j.asieco.2014.10.001
Uddin, G. A., Mohammad Salahuddin, Khorshed Alam, and Jeff Gow. (2017). Ecological Footprint and Real Income: Panel Data Evidence from the 27 Highest Emitting Countries. Ecological Indicators, 77, 166–175. doi:10.1016/j.ecolind.2017.01.003
Vehapi, M. F., Luljeta Sadiku, and Mihail Petkovski. (2015). Empirical Analysis of the Effects of Trade Openness on Economic Growth: An Evidence for South East European Countries. Procedia Economics and Finance, 19, 17–26. doi:10.1016/S2212-5671(15)00004-0
Wongkhae, K., Songsak Sriboonchitta, Kanchana Choketaworn, and Chukiat Chaiboonsri. (2012). Does price matter? The FMOLS and DOLS Estimation of Industrial Countries Tourists Outbound to Four ASEAN Countries. The Empirical Econometrics and Quantitative Economics Letters, 1(4), 107–128.
World Bank, D. (2018). Retrieved Access date: May 02, 2018, from Available Online at https://data.worldbank.org/
World Trade Organization. (2016). Retrieved Access date: May 19, 2018, from Available Online at https://www.wto.org/
Zahonogo, P. (2016). Trade and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa. Journal of African Trade, 3(1-2), 41–56. doi:10.1016/j.joat.2017.02.001
Alvarado, R., Maria Iniguez, and Pablo Ponce. (2017). Foreign Direct Investment and Economic Growth in Latin America. Economic Analysis and Policy, 56, 176–187. doi:10.1016/j.eap.2017.09.006
Apergies, N., and James E. Payne. (2009). Energy Consumption and Economic Growth in Central America: Evidence from a Panel Cointegration and Error Correction Model. Journal of Energy Economics, 31(2), 211–216. doi:10.1016/j.eneco.2008.09.002
Apergis, N. (2012). Energy Consumption and Growth in Romania: Evidence from a Panel Error Correction Model. International Journal of Energy Economics and Policy, 2(4), 348–356. ASEAN, M. S. (2018). Retrieved Access date: May 02, 2018, from Available Online at www.asean.org.
Bank of Indonesia, R. (2009). Indonesia Economic Outlook 2009 –2014. Retrieved Access date: April 27, 2018, from Available Online at https://www.bi.go.id.
Belloumi, M. (2014). The Relationship between Trade, FDI, and Economic Growth in Tunisia: An Application of the Autoregressive Distributed Lag Model. Economic Systems, 38(2), 269–287. doi:10.1016/j.ecosys.2013.09.002
Bidirici, M., and Eda Bohur. (2015). Design and Economic Growth: Panel Cointegration and Causality Analysis. Procedia-Social and Behavioral Sciences, 210, 193-202. doi:10.1016/j.sbspro.2015.11.359
Bo Tang. (2015). Real Exchange Rate and Economic Growth in China: A Cointegrated VAR Approach. China Economic Review, 34, 293–310. doi:10.1016/j.chieco.2014.12.002
Chaudhary, G. M., Shujahat Haider Hashmi, and Muhammad Asif Khan. (2016). Exchange Rate and Foreign Trade: A Comparative Study of Major South Asian and South-East Asian Countries. Procedia-Social and Behavioral Sciences, 230, 85-93. doi:10.1016/j.sbspro.2016.09.011
Cuestas, J. C., Ying Sophie Huang, and Bo Tang. (2018). Does Internationalisation Increase Exchange Rate Exposure? Evidence from Chinese Financial Firms. International Review of Financial Analysis, 56, 253-263. doi:10.1016/j.irfa.2018.01.013
Daumal, M., and Selin Ozyurt. (2011). The Impact of International Trade Flows on Economic Growth in Brazilian States. Review of Economics and Institutions, 2(1), 1-25.
Doku, I., John Akuma, and John Owusu-Afriyie. (2017). Effect of Chinese foreign direct investment on economic growth in Africa. Journal of Chinese Economic and Foreign Trade Studies, 10(2), 162-171. doi:10.1108/JCEFTS-06-2017-0014
El Khoury, A. C., and Andreas Savvides. (2006). Openness in Services Trade and Economic Growth. Economics Letters, 92(2), 277-283. doi:10.1016/j.econlet.2006.03.003
Ghouali, S., Mohammed Feham, and Yassine Zakarya Ghouali. (2014). Revealing the Dynamic Correlation between Cardiac and Respiratory Hemodynamic Signals using Time-Dependent Panel Cointegration Analysis. International Journal of Advanced Research in Electrical, Electronics and Instrumentation Engineering, 3(11), 2278–8875. doi:10.15662/ijareeie.2014.0311091
Gokmenoglu, K. K., Muhammad Yusuf Amin, and Nigar Taspinar. (2015). The Relationship among International Trade, Financial Development and Economic Growth: The Case of Pakistan. Procedia Economics and Finance, 25, 489-496. doi:10.1016/S2212-5671(15)00761-3
Habib, M. M., Elitza Mileva, and Livio Stracca. (2017). The Real Exchange Rate and Economic Growth: Revisiting the Case using External Instruments. Journal of International Money and Finance, 73, 386–398. doi:10.1016/j.jimonfin.2017.02.014
Hayat, A. (2018). FDI and economic growth: the role of natural resources?. Journal of Economic Studies, 45(2), 283-295. doi:10.1108/JES-05-2015-0082
Iamsiraroj, S. (2016). The Foreign Direct Investment-Economic Growth Nexus. International Review of Economics and Finance, 42, 116-133. doi:10.1016/j.iref.2015.10.044
Iamsiraroj, S., and Mehmet AliUlubasoglu. (2015). Foreign Direct Investment and Economic Growth: A Real Relationship or Wishful Thinking. Economic Modelling, 51, 200-213. doi:10.1016/j.econmod.2015.08.009
Ihnatov, I., and Bogdan Capraru. (2012). Exchange Rate Regimes and Economic Growth in Central and Eastern European Countries. Procedia Economics and Finance, 3, 18–23. doi:10.1016/S2212-5671(12)00115-3
International Council on Social Welfare (ICSW) Publication. (2009). Global Financial Crisis and its Social Impact in the Countries in ASEAN. Retrieved Access date: June 03, 2018, from
Available Online at http://www.icsw.org/images/docs/Regions/seasia/pub/2009-12_Global-FinancialCrisis-and-its-Social-Impact-in-the-Countries-in-ASEAN.doc&prev=search.
Latif, Z., Yang mengke, Danish, Shahid Latif, Liu Ximei, Zulfiqar Hussain Pathan, Shafaq Salam, and Zeng Jianqiu. (2018). The Dynamics of ICT, Foreign Direct Investment, Globalization and Economic Growth: Panel Estimation Robust to Heterogeneity and Cross-Sectional Dependence. Telematics and Informatics, 35, 318–328. doi:10.1016/j.tele.2017.12.006
Li, K., and Boqiang Lin. (2016). Impact of Energy Technology Patents in China: Evidence from A Panel Cointegration and Error Correction Model. Energy Policy, 89, 214–223. doi:10.1016/j.enpol.2015.11.034
Mandal, S. K., and S. Madheswaran. (2010). Causality between Energy Consumption and Output Growth in the Indian Cement Industry: An Application of the Panel Vector Error Correction Model (VECM). Energy Policy, 38, 6560-6565. doi:10.1016/j.enpol.2010.07.042
Menyah, K., Saban Nazlioglu, and Yemane Wolde-Rufael. (2014). Financial Development, Trade Openness and Economic Growth in African Countries: New Insights from a Panel Causality Approach. Economic Modelling, 37, 386–394. doi:10.1016/j.econmod.2013.11.044
Musila, J. W., and Zelealem Yiheyis. (2015). The Impact of Trade Openness on Growth: The Case of Kenya. Journal of Policy Modeling, 37(2), 342–354. doi:10.1016/j.jpolmod.2014.12.001
Nasreen, S., and Sofia Anwar. (2014). Causal Relationship between Trade Openness, Economic Growth and Energy Consumption: A Panel Data Analysis of Asian Countries. Energy Policy, 69, 82–91. doi:10.1016/j.enpol.2014.02.009
Nistor, P. (2014). FDI and Economic Growth, the Case of Romania. Procedia Economics and Finance, 15, 577–582. doi:10.1016/S2212-5671(14)00514-0
Organisation for Economic Cooperation and Development Benchmark. (2008). Definition of Foreign Direct Investment. Retrieved Access date: May 16, 2018, from Available online at www.oecd.org/publishing/corrigenda.
Ouedraogo, N. S. (2013). Energy Consumption and Human Development: Evidence from A Panel Cointegration and Error Correction Model. Journal of Energy, 63, 28–41. doi:10.1016/j.energy.2013.09.067
Pan, M., and Hien Nguyen. (2018). Export and growth in ASEAN: does export destination matter?. Journal of Chinese Economic and Foreign Trade Studies, 11(2), 122-131. doi:10.1108/JCEFTS-07-2017-0021
Pegkas, P. (2015). The Impact of FDI on Economic Growth in Eurozone Countries. The Journal of Economic Asymmetries, 12(2), 124–132. doi:10.1016/j.jeca.2015.05.001
Pekarskiene, I., and Rozita Susniene. (2014). The Assessment of the Manifestation of Economic Globalization: The International Trade Factor. Procedia-Social and Behavioral Sciences, 392–397. doi:10.1016/j.sbspro.2014.11.209
Semancikova, J. (2016). Trade, Trade Openness and Macroeconomic Performance. Procedia-Social and Behavioral Sciences, 220, 407–416. doi:10.1016/j.sbspro.2016.05.515
Tekin, R. B. (2012). Development Aid, Openness to Trade and Economic Growth in Least Developed Countries: Bootstrap Panel Granger Causality Analysis. Procedia-Social and Behavioral Sciences, 62, 716–721. doi:10.1016/j.sbspro.2012.09.121
Tellis, A. J., Andrew Marble, and Travis Tanner. (2009). The Global Economic Crisis and the Development of Southeast Asia. The National Bureau of Asian Research, Strategic Asia 2009 –2010.
Trejos, S., and Gustavo Barboza. (2015). Dynamic Estimation of the Relationship between Trade Openness and Output Growth in Asia. Journal of Asian Economics, 36, 110–125. doi:10.1016/j.asieco.2014.10.001
Uddin, G. A., Mohammad Salahuddin, Khorshed Alam, and Jeff Gow. (2017). Ecological Footprint and Real Income: Panel Data Evidence from the 27 Highest Emitting Countries. Ecological Indicators, 77, 166–175. doi:10.1016/j.ecolind.2017.01.003
Vehapi, M. F., Luljeta Sadiku, and Mihail Petkovski. (2015). Empirical Analysis of the Effects of Trade Openness on Economic Growth: An Evidence for South East European Countries. Procedia Economics and Finance, 19, 17–26. doi:10.1016/S2212-5671(15)00004-0
Wongkhae, K., Songsak Sriboonchitta, Kanchana Choketaworn, and Chukiat Chaiboonsri. (2012). Does price matter? The FMOLS and DOLS Estimation of Industrial Countries Tourists Outbound to Four ASEAN Countries. The Empirical Econometrics and Quantitative Economics Letters, 1(4), 107–128.
World Bank, D. (2018). Retrieved Access date: May 02, 2018, from Available Online at https://data.worldbank.org/
World Trade Organization. (2016). Retrieved Access date: May 19, 2018, from Available Online at https://www.wto.org/
Zahonogo, P. (2016). Trade and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa. Journal of African Trade, 3(1-2), 41–56. doi:10.1016/j.joat.2017.02.001