The Economic Correlation between China and Southeast Asian Countries: derivative market and real sector analysis

Irzal, Muhamad and Verico, Kiki (2017): The Economic Correlation between China and Southeast Asian Countries: derivative market and real sector analysis. Published in: LPEM FEB UI Working Paper , Vol. 3, No. 34 (31 March 2019): pp. 1-26.

Abstract

This paper attempts to analyse the economic integration of China and Southeast Asian countries. This paper adopts several methods: One, stationarity for correlation, Error Correction Model (ECM) for short-run relation and Cointegration for long-run relationships. Two, Structural Vector Autoregression (SVAR) analysis to identify the cause and impact. As stock market index follows real sector performance this paper utilizes: One, elasticity analysis of economic growth between China and these countries as a proxy for real sector economic relations between them and two, descriptive statistical analysis on real effective exchange rate as well as Current Account Balance as a proxy of external economic performance between them. In correlation analysis, this paper found that one, stationarity of each country is the difference at level; two, short-run economic relations (ECM) between China and these Southeast Asian countries and three, they have long-run economic relations. In causality, this paper found that China affects all of these Southeast Asian countries and no causality between Singapore and the Philippines. In term of real sector analysis, this paper found that one, economic growth in China significantly affects all of these countries’ economic growth. Two, the external economic performance of these countries are the difference with special finding on Indonesia’s current account.

• Item Type: MPRA Paper
• Language: English
• Keywords: Time-Series Model; Stock Market Integration; Foreign Exchange; Elasticity of Economic Growth; Current Account Balance; China and Southeast Asia Economy of Indonesia, Malaysia, Singapore, Thailand & Philippines
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

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