ASYMMETRIC EFFECTS OF TRADE OPENNESS ON ECONOMIC GROWTH IN SELECTED ASEAN COUNTRIES

In the growing of economic integration and international relations, the effect of trade openness on economic growth has become an important issue across countries. Following the economic integration, the world trading system has become progressive and competitive in recent years. Many countries generated their economic growth by attracting both foreign and domestic investments and expanding export production. In response to current challenges posed by the implementation of economic integration in the ASEAN region, it is important to conduct a study focusing on the impact of trade openness as well as other economic factors on economic growth. This research examines the effects of trade openness and other economic variables such as foreign direct investment, gross capital formation and human capital on economic growth in selected ASEAN countries. Using long term annual data, the empirical NARDL models incorporate asymmetric effects of trade openness on economic growth in Indonesia, the Philippines, Thailand, and Singapore. While such effects for the case of Malaysia are symmetric both in the short and long-run models, the effects are asymmetric in the long run and symmetric in the short run for the Philippines, Thailand, and Singapore. The results are different for Indonesia where the impact of trade openness is asymmetric in the short run and symmetric in the long run. This paper highlights that trade openness has a net positive impact on economic growth only in the Philippines and Singapore. It implies that most of the other countries in that region have a challenge regarding the implementation of trade liberalization. This research also found that both foreign and domestic investments are important factors of economic growth in the ASEAN countries. Similarly, human capital is proven to be an important factor in economic growth. This paper contributes to the literature by providing a new insight that incorporates the asymmetric effects of trade openness on economic growth.