Economic Interdependence in Asia: Developing Indicators for Regional Integration and Cooperation

The Singapore Economic Review (SER), 2010

Posted: 8 Jun 2010

See all articles by Giovanni Capannelli

Giovanni Capannelli

Asian Development Bank - Office of Regional Economic Integration

Jong-Wha Lee

Korea University

Peter A. Petri

Brandeis University - Brandeis International Business School; Brookings Institution; Brandeis University - Department of Economics

Date Written: March 1, 2010

Abstract

We develop indicators to measure the degree of economic integration and cooperation among East Asian economies and compare these with similar measures for other regions. Our indicators cover regional integration in trade, investment, financial assets, and people-to-people exchange. We also analyze measures of regional cooperation such as the density of free trade agreements and official policy dialogues. We find that in various Asian groupings, and especially in a group of 16 integrating Asian economies, interdependence in trade, direct investment, financial flows, and other forms of economic and social exchange has increased significantly over time, and now approaches that in the European Union. Nonetheless, Asia's official cooperation remains weak and formal regional institutions remain relatively underdeveloped. To provide insight into the causes of this discrepancy, we also develop quantitative measures of political and cultural similarity of nations, and find that Asian countries have relatively low levels of political and cultural proximity compared to regions such as Europe. The diversity of political interests and cultural values may have hindered more intense cooperation among Asian economies in the past. But if regional economic and social interactions continue to grow, requirements for joint decision-making are also likely to expand, leading to stronger frameworks of official cooperation.

Keywords: Regional integration, economic cooperation, East Asia

Suggested Citation

Capannelli, Giovanni and Lee, Jong-Wha and Petri, Peter A., Economic Interdependence in Asia: Developing Indicators for Regional Integration and Cooperation (March 1, 2010). The Singapore Economic Review (SER), 2010. Available at SSRN: https://ssrn.com/abstract=1620212

Giovanni Capannelli

Asian Development Bank - Office of Regional Economic Integration

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Jong-Wha Lee (Contact Author)

Korea University ( email )

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

Peter A. Petri

Brandeis University - Brandeis International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

HOME PAGE: http://ppetri.com/

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Brandeis University - Department of Economics

Waltham, MA 02454-9110
United States

HOME PAGE: http://ppetri.com/

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