A Factor Analysis of Trade Integration: The Case of Asian and Oceanic Economies

Yin-Wong Cheung, Matthew S. Yiu and Kenneth K. Chow
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Matthew S. Yiu: Hong Kong Monetary Authority
Kenneth K. Chow: Hong Kong Institute for Monetary Research

No 132009, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We study trade integration among 15 selected Asian and Oceanic economies using factor models. The principal component approach is employed to extract the common factor that drives trade integration from bilateral trade integration series. It is found that the estimated common trade integration factor has strong seasonal and deterministic components. In accordance with theory, the common trade integration factor is significantly associated with the economic growth and the trade barriers of the 15 economies. However, we find no evidence that the common trade integration factor is affected by foreign direct investment. The basic model is extended to incorporate an ASEAN factor that affects trade integration among the ASEAN economies in our sample.

Keywords: Factor Model; Principal Component; Growth; Trade Barriers; ASEAN (search for similar items in EconPapers)
JEL-codes: F15 F36 F42 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-03
New Economics Papers: this item is included in nep-int and nep-sea
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Citations: View citations in EconPapers (6)

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Journal Article: A Factor Analysis of Trade Integration: the Case of Asian and Oceanic Economies (2009)
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