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Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies

This study examines the impact of trade on economic growth through four main growth channels, namely private domestic investment (PDI), government spending (GOV), manufacturing value added (MVA) and foreign direct investment (FDI), taking into consideration the role of external shock, which is proxi...

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Main Author: Masron, Tajul Ariffin
Format: Thesis
Language:English
English
Published: 2006
Online Access:http://psasir.upm.edu.my/id/eprint/4998/1/FEP_2006_2.pdf
http://psasir.upm.edu.my/id/eprint/4998/
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spelling my.upm.eprints.49982013-05-27T07:19:39Z http://psasir.upm.edu.my/id/eprint/4998/ Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies Masron, Tajul Ariffin This study examines the impact of trade on economic growth through four main growth channels, namely private domestic investment (PDI), government spending (GOV), manufacturing value added (MVA) and foreign direct investment (FDI), taking into consideration the role of external shock, which is proxied by capital flight. It is particularly important because past studies indicate that trade and economic growth does not show a parallel co-movement, or in other words, high level of trade does not necessarily lead to high economic growth. By using five East Asian economies (i.e. Indonesia, Korea, Malaysia, The Philippines and Thailand) as case studies, autoregressive distributed lag (ARDL) estimation procedure is utilized in order to estimate the impact of trade on economic growth which covers period from 1970 to 2002. The indirect impact procedure is used so as to help us to determine through which channel trade will positively affect economic growth, vice versa. The indirect impact of trade on economic growth is calculated based on the study done by Wacziarg (2001).Several important conclusions can be drawn from the study. The threat of capital flight (and thus negative external shock) is justified in this study. Capital flight could reverse the good prospect of economic growth as had been experienced by five East Asian economies during the 1997 economic crisis. In addition, the calculated indirect impact of trade on economic growth tells us the reason of why trade does not necessarily lead to high economic growth since the indirect impact does not necessarily positive and high through all channels. The main source of low positive or negative effect of trade on economic growth is because of inefficiency in resource allocation (proxied by channels of PDI and GOV) as well as low technological development (proxied by channels of MVA for domestic technological development and FDI for foreign technological diffusion) in East Asian, especially in the case of ASEAN economies. What is important to mention here is that without considering the indirect impact of trade on growth, we may face difficulty to magnify the positive impact of trade on economic growth since we are not guided as to what effort should be undertaken. Based on the framework in this study, we found that in order for ASEAN to emulate the success of Korea in developing its economy, ASEAN has to ensure that they are moving towards greater competitiveness by enhancing the level of efficiency as well as technological development. 2006 Thesis NonPeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/4998/1/FEP_2006_2.pdf Masron, Tajul Ariffin (2006) Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies. PhD thesis, Universiti Putra Malaysia. English
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
English
description This study examines the impact of trade on economic growth through four main growth channels, namely private domestic investment (PDI), government spending (GOV), manufacturing value added (MVA) and foreign direct investment (FDI), taking into consideration the role of external shock, which is proxied by capital flight. It is particularly important because past studies indicate that trade and economic growth does not show a parallel co-movement, or in other words, high level of trade does not necessarily lead to high economic growth. By using five East Asian economies (i.e. Indonesia, Korea, Malaysia, The Philippines and Thailand) as case studies, autoregressive distributed lag (ARDL) estimation procedure is utilized in order to estimate the impact of trade on economic growth which covers period from 1970 to 2002. The indirect impact procedure is used so as to help us to determine through which channel trade will positively affect economic growth, vice versa. The indirect impact of trade on economic growth is calculated based on the study done by Wacziarg (2001).Several important conclusions can be drawn from the study. The threat of capital flight (and thus negative external shock) is justified in this study. Capital flight could reverse the good prospect of economic growth as had been experienced by five East Asian economies during the 1997 economic crisis. In addition, the calculated indirect impact of trade on economic growth tells us the reason of why trade does not necessarily lead to high economic growth since the indirect impact does not necessarily positive and high through all channels. The main source of low positive or negative effect of trade on economic growth is because of inefficiency in resource allocation (proxied by channels of PDI and GOV) as well as low technological development (proxied by channels of MVA for domestic technological development and FDI for foreign technological diffusion) in East Asian, especially in the case of ASEAN economies. What is important to mention here is that without considering the indirect impact of trade on growth, we may face difficulty to magnify the positive impact of trade on economic growth since we are not guided as to what effort should be undertaken. Based on the framework in this study, we found that in order for ASEAN to emulate the success of Korea in developing its economy, ASEAN has to ensure that they are moving towards greater competitiveness by enhancing the level of efficiency as well as technological development.
format Thesis
author Masron, Tajul Ariffin
spellingShingle Masron, Tajul Ariffin
Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
author_facet Masron, Tajul Ariffin
author_sort Masron, Tajul Ariffin
title Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
title_short Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
title_full Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
title_fullStr Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
title_full_unstemmed Trade, External Shock And Economic Growth In Selected Asean And South Korean Economies
title_sort trade, external shock and economic growth in selected asean and south korean economies
publishDate 2006
url http://psasir.upm.edu.my/id/eprint/4998/1/FEP_2006_2.pdf
http://psasir.upm.edu.my/id/eprint/4998/
_version_ 1643823060015382528
score 13.211869

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