EXPORT LED GROWTH VIA INTRA-REGIONAL TRADING AN ECONOMETRIC ANALYSIS OF ASEAN, EU, NAFTA, MERCOSUR AND COMESA

Samsudin Hazman, Khatijah Omar, Abi sofian Abd Halimb and Muhammad Saiful Syazwan Shamsudin

Applied Econometrics and International Development, 2021, vol. 21, issue 2, 5-28

Abstract: The extent of intra-regional trading in influencing economic growth has not been given adequate attention in the literature. The Heckscher-Ohlin (H-O) factor endowment theory argued that the regional economy is usually blessed with common resources and expertise, thus an increase in intra-regional trading may only lead to trading of commonalities. This raise the questions of whether exports of commonalities may spur economic growth in the long-run. To further understand the issue, data spanning from 1995 to 2019 was employed and five groups of regional economies has been selected namely the ASEAN, EU, NAFTA, MERCOSUR and COMESA. By employing the GMM and 2SLS panel data which may allow for instrumental variables (IV) approach, this study further filled the gap in the literature. Based on the analysis, it is found that an increase export may reverse economic growth in intra-regional trading in most cases. This strengthens earlier argument that trading in commonalities is doubtful in promoting long-run economic growth. The findings are robust to diagnostic checking for both estimations techniques. This suggest that any regional economic arrangements should move away from intra-regional trading towards inter-regional trading in order to sustain more prominent economic growth in the long-run.

Keywords: Export led growth; intra-regional trading; trading of commonalities; endowment factor; instrumental variables; spillover effect; non-exporting industries; comparative advantage; Structural Equation Modelling (SEM); specialization. (search for similar items in EconPapers)
JEL-codes: O54 (search for similar items in EconPapers)
Date: 2021
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