The Ties that Bind Asia, Europe, and United States

37 Pages Posted: 2 Jun 2010

See all articles by Soyoung Kim

Soyoung Kim

affiliation not provided to SSRN

Jong-Wha Lee

Korea University

Cyn-Young Park

Asian Development Bank

Date Written: February 2010


We investigate changes in Asia’s regional and global trade linkages and their influence on macroeconomic relationships among Asia, Europe, and United States (US). We first document changes in trade patterns of East Asia, Europe, and US and discuss stylized facts about East Asia’s trade structure. The People’s Republic of China (PRC) plays a critical role as an assembly and production center in rapidly expanding intra-Asian trade. However, the PRC’s trade share in parts and components with Europe and the US is rising, suggesting that the region’s production chains are increasingly integrated into the global business network. Empirical results from a panel vector auto-regression model generally confirm the positive effect of growing intra-Asian trade on both regional and global output comovements, reflecting the nature of intra-Asian trade that is heavily driven by external demand. However, macroeconomic interdependence among East Asia, Europe, and US is becoming more bidirectional, as shown by the positive effect of the East Asian aggregate output shock on both European and US outputs. The findings suggest a future role for Asia as an increasingly important trade partner and balancing power in the world economy.

Keywords: trade integration, decoupling, economic interdependence, East Asia, China, panel VAR

JEL Classification: E32, F15, O19, O53

Suggested Citation

Kim, Soyoung and Lee, Jong-Wha and Park, Cyn-Young, The Ties that Bind Asia, Europe, and United States (February 2010). Asian Development Bank Economics Working Paper No. 192, Available at SSRN: or

Soyoung Kim (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Cyn-Young Park

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
(632) 632-5473 (Phone)


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