The complementarities of multi-lateralism and regionalism and income convergence: ASEAN and SAARC
This paper proposes the hypothesis thatmultilateralism and regionalism are complementary, and that regionalincome convergence is likely with a like minded and committedregionalism that often has links geographically and culturally. Theassociation between international trade, income per capita, andregional income convergence in founder members of ASEAN andSAARC, is explored by applying the Lumsdaine, and Papellapproach. The causal relationships between the above variables arealso studied in respective trade blocs by using Granger causalitytests. The conclusion is that global reforms have had a greater impacton increasing trade for both trade blocs and induced convergenceonly in ASEAN-5 countries. The experience of ASEAN countriesshows a two-way causal relationship between the flow from trade toregional income convergence, and vice versa. There is no evidence inSAARC countries for income convergence and causality.