Trade integration in Asia: Trends and determinants

Abstract

While economic nationalism is mounting over the globalization around the western world in recent years, Asia’s external trade and the economies overall is growing faster than in other regions shifting the center of gravity of the world economy from the West to the East. However, it is unclear how Asian economies are integrating within the region. Using the dynamic panel data approach, particularly the generalized method of moments (GMM) estimator, on the cross-country panel data of 34 Asian countries for the period of 1990-2015 this study examines the trend and the determinants of regional trade integration in Asia. The results show fast-growing intra-regional and overall trade for most of the countries in the region. It also finds a significant positive effect of economy’s size and access to mobile phone on the total trade and intra-regional trade volume. Similarly, mobile phone concentration and urbanization rates have a significant positive effect on both intra-Asian trade volume and its share in the total trade. However, the size of an economy has no significant effect on intra-regional trade share. The finding suggests that further liberalization of trade together with policies boosting domestic/regional demand are helpful for broader regional integration in Asia.