Publication: Intra-trade potentials of ASEAN :evidence from gravity model
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Southeast Asia -- Commerce
Southeast Asia -- Foreign economic relations
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In international trade, economic theory has highlighted its composition but delves less into its volume and direction, which are of more political and economic importance to countries. Intra-ASEAN trade is found to be very small. This study endeavors to make a formal analysis of the main determinants of intra-ASEAN bilateral trade and the existence of trade creation or trade diversion. Based on cross-sectional data, the gravity model is estimated for three periodsf; 1985, 1995 and 2000. The results obtained do indicate that intra-ASEAN trade is consistent with the standard gravity model. The inclusion of the ASEAN and APEC dummy variables suggest that trade-creating benefits are emerging amongst ASEAN member countries though APEC is a wider economic grouping. ASEAN countries do have great potentials to enhancing intra-regional trade through further trade liberalization.