Intra-Industry Trade and Business Cycles in ASEAN

Carlos Cortinhas

No 7/2005, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: Recently, a new resolve for both increased economic integration and monetary and exchange rate cooperation has started to emerge in ASEAN, especially since the 1997- 1998 Asian financial crisis. According to the optimum currency area theory, the degree of trade integration is one most important criterion for joining a currency union. The large increase in intra-ASEAN trade in recent years naturally raises the question of whether the ASEAN countries are becoming better prepared to form a currency union. This paper sets to test whether the recorded increase in intra-ASEAN trade is leading the ASEAN members to closer economic integration and thus to better satisfy the criteria for a common currency. Two separate models are estimated for that purpose. First, a variation of the model of Frankel and Rose (1997) was estimated for the ASEAN members. As the results were not very significant, a new methodology that uses the whole sample period data instead of dividing the data into sub-periods was conducted. The results with our own model were very significant and robust when four of the ASEAN5 countries were considered, and showed a clear positive correlation between intra-industry trade and business cycle synchronization in ASEAN. This result has important implications for the prospects of the creation of a common currency in the region.

Keywords: Intra-Industry Trade; Business Cycle Harmonization; Economic Integration; Asean. (search for similar items in EconPapers)
JEL-codes: E42 F15 F33 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-int, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www3.eeg.uminho.pt/economia/nipe/docs/2005/NIPE_WP_7_2005.PDF (application/pdf)

Related works:
Journal Article: Intra-industry trade and business cycles in ASEAN (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nip:nipewp:7/2005

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in NIPE Working Papers from NIPE - Universidade do Minho Núcleo de Investigação em Políticas Económicas e Empresariais, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal. Contact information at EDIRC.
Bibliographic data for series maintained by NIPE ().