The Economic Correlation between China and Southeast Asian Countries: Derivative Market and Real Sector Analysis

Muhamad Irzal and Kiki Verico
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Muhamad Irzal: Ministry of Trade of Republic of Indonesia

No 201934, LPEM FEBUI Working Papers from LPEM, Faculty of Economics and Business, University of Indonesia

Abstract: This paper attempts to analyze economic integration of China and Southeast Asian countries. This paper adopts several methods: One, stationarity for correlation, Error Correction Model (ECM) for short-run relation and Cointegration for long-run relations. Two, Structural Vector Autoregression (SVAR) analysis to identify the cause and impact. As stock market index follows real sector performance this paper utilizes: One, elasticity analysis of economic growth between China and these countries as a proxy for real sector economic relations between them and two, descriptive statistical analysis on real effective exchange rate as well as Current Account Balance as a proxy of external economic performance between them. In correlation analysis, this paper found that one, stationarity of each country is difference at level; two, short-run economic relations (ECM) between China and these Southeast Asian countries and three, they have long-run economic relations. In causality, this paper found that China affects all of these Southeast Asian countries and no causality between Singapore and Philippines. In term of real sector analysis this paper found that, one, economic growth in China signi?cantly affects all of these countries’ economic growth. Two, external economic performance of these countries are difference with special ?nding on Indonesia’s current account.

Keywords: Time-Series Model — stock market integration — foreign exchange — elasticity of economic growth — current account balance — China and Southeast Asia Economy of Indonesia; Malaysia; Singapore; Thailand; & Philippines (search for similar items in EconPapers)
JEL-codes: C32 F31 F32 F36 F43 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-ets and nep-sea
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https://lpem.org/repec/lpe/papers/WP201934.pdf First version, 2019 (application/pdf)

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Working Paper: The Economic Correlation between China and Southeast Asian Countries: derivative market and real sector analysis (2019)
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