Impact of AFTA on Malaysian Trade Flows: An Empirical Analysis Based on Gravity Model
The main purpose of this study is to empirically examine the trade linkages among ASEAN countries with existing of AFTA using gravity model. To achieve the objectives, the multivariate relationship between the trade flows and the four macroeconomic variables are tested through multivariate Johans...
Saved in:
| Main Author: | |
|---|---|
| Format: | Thesis |
| Language: | English English |
| Published: |
2002
|
| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/8318/1/FEP_2002_16_IR.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | The main purpose of this study is to empirically examine the trade linkages among
ASEAN countries with existing of AFTA using gravity model. To achieve the
objectives, the multivariate relationship between the trade flows and the four
macroeconomic variables are tested through multivariate Johansen cointegration
tests and multivariate Granger causality tests based on VECM and also the Impulse
Response Function are applied to capture the dynamic linkages among the
macroeconomic variables.
Annual data covering the period from 1965 to 2000 was utilized in this study. The
ASEAN countries concerned in this study are Indonesia, Malaysia, Philippines,
Singapore and Thailand.
The empirical results of this study indicates that the macroeconomics variables as
concerned by Erkkila-Widgren and Meronen gravity model are found to be
significantly cointegrated for both export flows and import flows of Malaysia within
the ASEAN countries in long run. However, in short run the evidences of the Granger causality between trade flows and macroeconomic variable IS only
significant determinant in certain countries as proven by multivariate Granger
causality test based on VECM
Under the impulse response function framework, dynamic linkages between
Malaysian trade flows and macroeconomic variables are identified. The results
indicate that APTA and population are positively cointegrated with Malaysian trade
flows, whereas GDP per capital of the observed ASEAN countries and distance are
negatively co integrated with Malaysia trade flows.
This study thus implies that an efficient trade agreement in ASEAN region will
promote a better performance of a country's trade flows. This in turn will create
more employment opportunities and stimulate economic growth. |
|---|