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How resilient is ASEAN-5 to trade shocks? Regional and global shocks compared

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Abstract

This paper revisits the resilience of the ASEAN region to external shocks amidst the unfolding effects of the US-China trade war. It investigates and compares the effects of regional(ASEAN) and global (US, China) shocks on ASEAN-5 using a structural VAR framework. To identify the propagation of economic shocks and spillovers on ASEAN-5, the changing trade links between the economies considered are used to account for time variations spanning the period 1978Q1 to 2018Q2. Three major results follow from the analyses on trade links and output multiplier effects. First, the response of ASEAN-5 to shocks from the US and China were more pronounced than regional shocks for the period after the Asian financial crisis. Second, the increasing cumulative impact of China’s shock on ASEAN was congruous to the growing trade links and trade intensities between ASEAN and China. Third, the US and China were dominant growth drivers for the weaker trade-linked ASEAN partners. Taken together, the results suggest that global shocks matter for the region, and the economic resilience of the region to global shocks depends on indirect effects, apart from the direct trade links.

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  • Raghavan, Mala & Devadason, Evelyn S, 2019. "How resilient is ASEAN-5 to trade shocks? Regional and global shocks compared," Working Papers 2019-04, University of Tasmania, Tasmanian School of Business and Economics.
    • Handle: RePEc:tas:wpaper:30947
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    More about this item

    Keywords

    trade links; SVAR model; ASEAN-5; China; US;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • 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
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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