The Nexus Between Regional Trade Integration and ASEAN Macroeconomic Indicators: Evidence from Bayesian Panel Regression Approach

Abstract

As regionalization gains momentum globally, this paper aims to investigate the impact of regional trade integration on three macroeconomic indicators for ASEAN member countries: economic growth, inflation, and labor force participation. The regional trade integration is represented by three regional variables: trade intensity, export diversification, and value chain. This paper has deployed the Bayesian panel regression approach using a panel data set of 10 ASEAN countries with their major trading partners in Asia from 1995 to 2019. The empirical findings suggest that the regional export diversification and trade intensity promote economic growth for the overall ASEAN, whereas the regional value chain stimulates employment. Furthermore, the regional trade integration significantly reduces inflation. The key finding indicate that since 2015, ASEAN’s deeper integration has enabled member countries with a greater regional trade intensity and regional value chain to enhance their economic growth and development. The ASEAN could also achieve the goal of the ASEAN economic community to uplift their people’s standard living.