Causal linkages of output growth and interest rate from US and China to ASEAN-5 economies and among ASEAN-5 economies

• Main Authors: Tay, Joshua Zhi Wei, Tan, Sean Han Wei, Wong, Jing Yi
• Other Authors: Sng Hui Ying
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2022
• Subjects: Social sciences::Economic theory
• Online Access: https://hdl.handle.net/10356/156674
• Institution: Nanyang Technological University

In our study, we will be answering 3 research questions. Firstly, what are the output and interest rate linkages among the ASEAN-5 countries? Secondly, is China’s influence over ASEAN-5 stronger than the US? Lastly, we will explore how ASEAN-5 can position itself to benefit from the current global economic dynamics and environment. Within the VEC framework, we examined Granger causality from output growth of the US and China to ASEAN-5 economies and among ASEAN-5 economies. Using VAR, we also examined Granger causality from interest rates of the US and China to ASEAN-5 economies, and from interest rates of the ASEAN-5 economies to their output growth. We found that the Philippines and Thailand are the most influential countries in terms of GDP growth and interest rates within ASEAN-5. Additionally, the US is still an important economic growth driver for ASEAN-5 as its economic growth is still more influential in affecting ASEAN-5 GDP growth, although China’s interest rate is more influential than the US in affecting ASEAN-5 GDP growth. Based on the results, we recommend ASEAN countries to continue enhancing regional integration within ASEAN through intra-ASEAN investments and trade and to diversify their risks by avoiding over-reliance on China.