The analysis of economic integration among ASEAN-5 with Japan and USA

Abstract

This study examines the existence of economic integration among the five founding member countries of the Association of Southeast Asian Nations (ASEAN); Indonesia, Malaysia, the Philippines, Thailand and Singapore. It also explores the economic integration among ASEAN-5 with Japan and US. This study uses yearly time series data from 1970-2005. Three types of test are applied, i.e., the Unit Root Test, Johansen and Juselius co-integration Test and Granger Causality Test. The unit root test indicates that all data are stationary at their first differences and this allows us to proceed with co-integrating test. By using lag 2 and 4, it is found that there is a long-run relationship among ASEAN-5 countries and also between ASEAN-5 with Japan and US. On the other hand, the granger causality test shows that there is a short-run relationship between ASEAN-5 with Japan and US. The analysis of this study reveals that the ASEAN-5 has economic integration within the region itself. In addition, the study also found that Japan significantly affects the changes of output of ASEAN-5 compared to US.