Trade has been an important element of growth for the members of the Association of Southeast Asian Nations (ASEAN) since its creation in 1967. For the region, trade between member countries is an essential driver of the integration efforts that will soon culminate in the creation of the ASEAN Economic Community (AEC) in 2015. This integrated production base, in which goods and services will move freely, holds the potential to boost ASEAN’s competitiveness and growth prospects towards a promising future. However, within ASEAN, many barriers to trade still exist today in the areas of market access, border administration, infrastructure and the business environment. These barriers tend to raise trade costs in a significant manner and hurt the competitiveness of ASEAN exports. They prevent countries from fully reaping the gains from trade and hamper further integration of the region, which remains very fragmented. These facts have implications in the levels of trade of each country, hence our intention to analyze their merchandise trading conditions through an econometric analysis employing fractional integration and cointegration. We do this with the aim of reaching conclusions from a statistical perspective of whether the member countries of ASEAN constitute a homogenous trading block that could constitute a strong base for the soon to be established ASEAN Economic Community.
This project is led by Prof. Luis A. Gil-Alaña.