Regionalism in East Asia: The Way Forward

Fithra Hastiadi

No 201208, Working Papers in Economics and Business from Faculty of Economics and Business, University of Indonesia

Abstract: For the past few years, regionalism has been progressing in East Asia with the likes of China, Japan, and Korea (CJK) as the most prominent actors. Unfortunately, with the absence of trade arrangement amongst the CJK, the present regional trade scheme is not sufficient to reach sustainability. This paper uncovers the inefficient scheme through Engle-Granger Cointegration and Error Correction Mechanism. This paper also proves that China’s action to conduct FTA with ASEAN countries will create Baldwin’s domino effect to Japan and Korea. Moreover, the paper underlines the importance of triangular trade agreement for accelerating the phase of growth in CJK which eventually create a spillover effect to East Asia as a whole. Employing Two Stage Least Squares in a static panel fixed effect model, the paper argues that the spillover effect will function as an impetus for creating region-wide FTA. Furthermore, the paper also identifies a number of economic and political factors that can support the formation of East Asian Regionalism.

Keywords: regionalism; engle-granger cointegration; error correction mechanism; fixed effect; two stage least squares (search for similar items in EconPapers)
JEL-codes: C13 C22 C33 F15 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2012-07, Revised 2012-07
New Economics Papers: this item is included in nep-sea
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