How Resilient Is ASEAN-5 to Trade Shocks? Regional and Global Shocks Compared

26 Pages Posted: 8 Aug 2019 Last revised: 25 Aug 2019

See all articles by Mala Raghavan

Mala Raghavan

University of Tasmania

Evelyn Shyamala Devadason

University of Malaya (UM)

Multiple version iconThere are 2 versions of this paper

Date Written: August 7, 2019

Abstract

This paper revisits the resilience of the ASEAN region to external shocks amidst the unfolding effects of the US-China trade war. It investigates and compares the effects of regional (ASEAN) and global (US, China) shocks on ASEAN-5 using a structural VAR framework. To identify the propagation of economic shocks and spillovers on ASEAN-5, the changing trade links between the economies considered are used to account for time variations spanning the period 1978Q1 to 2018Q2. Three major results follow from the analyses on trade links and output multiplier effects. First, the response of ASEAN-5 to shocks from the US and China were more pronounced than regional shocks for the period after the Asian financial crisis. Second, the increasing cumulative impact of China’s shock on ASEAN was congruous to the growing trade links and trade intensities between ASEAN and China. Third, the US and China were dominant growth drivers for the weaker trade-linked ASEAN partners. Taken together, the results suggest that global shocks matter for the region, and the economic resilience of the region to global shocks depends on indirect effects, apart from the direct trade links.

Keywords: trade links, SVAR model, ASEAN-5, China, US

JEL Classification: F41, C32, F62

Suggested Citation

Raghavan, Mala and Devadason, Evelyn Shyamala, How Resilient Is ASEAN-5 to Trade Shocks? Regional and Global Shocks Compared (August 7, 2019). CAMA Working Paper No. 53/2019, Available at SSRN: https://ssrn.com/abstract=3433500 or http://dx.doi.org/10.2139/ssrn.3433500

Mala Raghavan (Contact Author)

University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

Evelyn Shyamala Devadason

University of Malaya (UM) ( email )

Kuala Lumpur, Wilayah Persekutuan 50603
University of Malaya (UM)
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
+603-79673721 (Phone)

HOME PAGE: http://https://umexpert.um.edu.my/evelyns.html

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