The Geopolitics of International Trade in Southeast Asia

A. Kerem Coşar and Benjamin Thomas

No 15414, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Motivated by the historically tense geopolitical situation in Southeast Asia, we simulate the potential closure of key maritime waterways in the region to predict the impact on trade and welfare. We generate initial (unobstructed) and counterfactual (rerouted) least-cost maritime paths between trading countries, and use the distances of these routes in a workhorse model of international trade to estimate welfare effects. We find heterogeneous and economically significant reductions in real GDP, and show the magnitude of welfare loss is directly correlated with military spending as a proportion of GDP, suggesting nations may be responding to economic security threats posed by such potential conflicts.

Keywords: International trade; Quantitative trade models; Military spending (search for similar items in EconPapers)
JEL-codes: F14 F5 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-cwa, nep-int and nep-sea
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Working Paper: The Geopolitics of International Trade in Southeast Asia (2020)
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