Hoa, Tran Van, New Asian Regionalism: Evidence on ASEAN+3 Free Trade Agreement From Extended Gravity Theory and New Modelling Approach, Department of Economics, University of Wollongong, 2003.
The emergence of new Asian regionalisms such as ASEAN+3 (China, Korea and Japan) and the proposed ASEAN+5 (ASEAN+3 plus Australia and New Zealand) and other bilateral, plurilateral and multilateral free trade agreements in recent years requires research into these important developments and their underlying fundamental trade-growth causation. The paper extends the gravity theory to time-series data and applies a new flexible modelling approach to construct a simultaneous-equation model of trade and growth for the ASEAN and the East Asia 3. Using data from the World Bank national accounts and CHELEM regional and international trade over the period 1968-2000, the paper then estimates the model by both standard (OLS and 2SLS) and improved estimation methods to provide superior MSE impact estimates. Implications of the findings for ASEAN+3’s economic integration, trade policy and prospects for trade and welfare improvement for this FTA will also be discussed.