Impact of Indo-ASEAN Import on ASEAN Trade and Financial Integration

Abstract

In this paper, the author examined the influence of Indo-ASEAN import on the ASEAN trade and financial integration during 1994-95 to 2017-18 using cointegration test, vector error correction model and Wald Test taking foreign direct investment inflows, real effective exchange rate, openness, Indo-ASEAN import, intra import share, GDP growth rate of ASEAN, the import concentration and diversification index of ASEAN as variables. The paper concludes that there are four co-integrating equations. There are short run causalities from Indo-ASEAN import, intra import share and FDI inflows of ASEAN to growth rate of ASEAN. Long run causalities were found from ASEAN growth rate of GDP to intra import share of ASEAN, from Indo-ASEAN import to growth rate of ASEAN, from FDI inflows of ASEAN and GDP growth of ASEAN to intra-ASEAN import share, from Indo-ASEAN import to import diversification index of ASEAN respectively. Lastly, there are short run causalities from indo-ASEAN import and import concentration index of ASEAN to import diversification index of ASEAN respectively during 1994-2017.