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

Author

Listed:
  • Muhamad Irzal

    (Ministry of Trade of Republic of Indonesia)

  • Kiki Verico

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas 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.

Suggested Citation

  • Muhamad Irzal & Kiki Verico, 2019. "The Economic Correlation between China and Southeast Asian Countries: Derivative Market and Real Sector Analysis," LPEM FEBUI Working Papers 201934, LPEM, Faculty of Economics and Business, University of Indonesia.
    • Handle: RePEc:lpe:wpaper:201934
    as

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    File URL: https://www.lpem.org/repec/lpe/papers/WP201934.pdf
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    References listed on IDEAS

    as
    1. Yu, Ip-Wing & Fung, Kang-Por & Tam, Chi-Sang, 2010. "Assessing financial market integration in Asia - Equity markets," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2874-2885, December.
    2. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-488, September.
    3. Verico, Kiki & Natanael, Yeremia, 2018. "Let’s talk about the Free Trade Agreement (FTA): The five ASEAN members highlighting Indonesia," MPRA Paper 87947, University Library of Munich, Germany.
    4. Kiki Verico, 2017. "The Future of the ASEAN Economic Integration," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-59613-0, March.
    5. Kiki Verico & Yeremia Natanael, 2018. "Let’s talk about the Free Trade Agreement (FTA): The five ASEAN members highlighting Indonesia," LPEM FEBUI Working Papers 201823, LPEM, Faculty of Economics and Business, University of Indonesia, revised Jul 2018.
    6. Richard E. Baldwin, 2008. "Managing The Noodle Bowl: The Fragility Of East Asian Regionalism," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 449-478.
    7. Fukunari KIMURA & Ayako Obashi, 2009. "International Production Networks: Comparison between China and ASEAN," Working Papers d004, Economic Research Institute for ASEAN and East Asia (ERIA).
    8. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    9. Hsiao, Frank S.T. & Hsiao, Mei-Chu W., 2006. "FDI, exports, and GDP in East and Southeast Asia--Panel data versus time-series causality analyses," Journal of Asian Economics, Elsevier, vol. 17(6), pages 1082-1106, December.
    10. Hian Teck HOON & Frank S T Hsiao & Mei-Chu Wang Hsiao, 2020. "FDI, Exports, and GDP in East and Southeast Asia — Panel Data versus Time-Series Causality Analyses," World Scientific Book Chapters, in: Development Strategies of Open Economies Cases from Emerging East and Southeast Asia, chapter 4, pages 81-129, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

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    More about this item

    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;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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