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Policy Coordination among the ASEAN-5: A Global VAR analysis

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  • Tan, Sui-Lay

Abstract

This paper aims to analyse the feasibility of policy coordination among the ASEAN-5 economies. This is done by determining whether they experience symmetric responses to common shocks. Given that the problem of dimensionality plagues large-scale macroeconomic modelling, a Global VAR model by Pesaran et al. (2004) and Dees et al. (2007) is used. This approach has the added advantage of accounting for the relative importance of trade and financial flows in influencing the size of the spillovers between countries. The results provide evidence of symmetric responses to the common (global) shocks of interest: a US monetary policy shock, a US output shock, a Chinese output shock; an oil price shock. This evidence suggests that the cost of coordinating policies among the ASEAN-5 is not onerous and that this next step in further regional integration may be feasible. In trying to understand the pattern of their responses, they are likely underpinned by their market linkages and best explained by the regional production network, their respective degrees of oil reliance and the importance of domestic consumption.

Suggested Citation

  • Tan, Sui-Lay, 2014. "Policy Coordination among the ASEAN-5: A Global VAR analysis," Conference papers 332511, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332511
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    References listed on IDEAS

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