E3 Journal of Business Management and Economics

E3 Journal of Business Management and Economics Vol. 7 (1) pp. 001-012, January 2016; © E3 Journals; ISSN 2141-7482
DOI: http://dx.doi.org/10.18685/EJBME(7)1_EJBME-15-018

ASEAN4 prospective of export-led economic growth

Abstract

This paper validates the evidence of Export-Led-Growth Hypothesis through a modified Cobb Douglas production model towards the selected developing of Association of South East Asian Nations (ASEAN4) namely Malaysia, Indonesia, Philippines and Thailand. The motivation of this study is derived from the successfull implemention of agreement on the Common Effective Preferential Tariff (CEPT) scheme for the ASEAN Free Trade Area (AFTA) that aims to reduce tariff and non tariff barrier for the trade activities among ASEAN member countries.With the reduction of tarrif, the amount of export for ASEAN4 countries has progressed further. This paper formulates a dynamic econometric model for real gross domestic product (GDP), export (X), import (M), capital (CP), labor (LL) and exchange rates (EXR) besides employing recent time-series econometric techniques known as Bound test or ARDL approach. The findings reveal that the Export-Led-Growth Hypothesis has contributed significantly to the four countries tested in the long run. Nevertheless, the evidence of the importance for capital and labor was varried for the countries tested. Besides the estimated coefficients of the variables used in this paper such as exchange rate (EXR), Asian Financial Crisis 1997-1998 (DUM1) and Global Recession 2007-2008 (DUM2) also differ across the tested countries.

Keywords: ARDL, export led growth, CEPT, ASEAN4