Effects of the Regional Trading Arrangements on Trade: Evidence from the NAFTA,ANZCER and ASEAN Countries, 1989 – 2000

Using the modified gravity model, this study examines whether the free trade areas of NAFTA, ANZCER and ASEAN would result in trade creation among the member countries and trade diversion with the non-member countries. Further, it applies Linder's income similarity concept to explain the trade patterns in the developed and developing countries within these free trade areas. First, the results suggest that the implementations of the free trade areas have facilitated higher trade among the member countries, particularly the ANZCER and ASEAN countries. However, among all three free trade areas, the formation of the ANZCER free trade area has resulted in trade diversion with non-member countries, whereas that of the ASEAN free trade area has resulted in a trade increase with non-member countries. Surprisingly, the formation of the NAFTA free trade area has no significant effect on trade with non-member countries as their trade flows remain quite low even before its implementation. Second, the result indicates that the trade-enhancing effect of income similarity is confirmed for the developing rather than developed member countries. The developing member countries with similar incomes would trade extensively more with each other. This result can be partly explained by Hanink's income threshold concept, which argues that the income similarity effect is only applicable to developed countries with very small difference in incomes. Given the heterogeneous country sample in this study, the substantial income differences among the developed member countries would probably account for the lack of income similarity effect in these countries.     

ECONOMIC INTEGRATION AMONG THE ASIA-PACIFIC ECONOMIC COOPERATION COUNTRIES: Linder Effect on Developed and Developing Countries (1985–1999)

This study tests the income similarity effect developed by Linder on the developed and developing APEC countries. A modified gravity model is estimated for fourteen APEC countries based on trade data from 1985 to 1999. The result confirms early prediction that the income similarity effect is stronger for developed APEC countries. The developed APEC countries with similar per capita incomes tend to trade more with each other during the study period. In addition, the level of trade between the APEC countries can be predicted by their economic characteristics. The result reveals that trade between the APEC countries would increase as their economies become more developed.     

The effect of European integration on trade with the APEC countries: 1981–2000

This study examines whether the European Union (EU) integration has resulted in significant trade decrease with the three Asia-Pacific Economic Cooperation (APEC) sub-groups during 1981–2000: NAFTA, ASEAN, and NIC. To include all the trade data including those with zero data values, this study estimates the modified gravity model using the scaled ordinary least squares method. First, as expected, the EU countries have reduced trade with all three sub-groups, especially during 1996–2000. However, the ASEAN countries maintain a stable level of trade growth with the EU countries. Second, the results indicate that the EU, ASEAN, and NIC countries trade significantly more among themselves due to their respective integration schemes. (JEL F20, F100)     

The effect of financial development on economic growth: evidence from the APEC countries, 1981–2000

Using the modified growth model, this study examines whether financial development would facilitate economic growth among the Asia-Pacific Economic Cooperation (APEC) countries from 1981 to 2000. It focuses on the effects of three aspects of financial development on growth: stock market, banking sector and capital flow. To control for the country-specific effect, the model is further estimated for the developed and developing member countries. Results suggest that among the three financial sectors, only the stock market development shows strong growth-enhancing effect, especially among the developed member countries. This positive relationship remains very robust even after controlling for the simultaneity bias. Thus, there is no evidence to suggest that the level of financial infrastructure development does affect the overall finance–growth relationship observed in this study.