Impact of Trade Liberalization on Economic Growth in ASEAN: Copula-Based Seemingly Unrelated Regression Model

Abstract

© 2018, Springer International Publishing AG, part of Springer Nature. Trade liberalization especially ASEAN-5 countries has raised in globalization economy. To understand the linkage of trade openness and economic growth, we examine the endogenous growth approach participated with trade liberalization indicators. The proposed method involved the multivariate Copula-based Seemingly Unrelated Regression (SUR) model with an unstructured correlation matrix. Using data on the augmented aggregate production function (human, capital and trade proxy) from 1980 to 2015, the findings convey that the multivariate Copula-based SUR model outperforms the conventional SUR model in terms of AIC and BIC. In addition, the results indicate that the trade-outward orientations in ASEAN affect economic growth differently. The Philippines and Thailand perform a significant positive effects of the terms of trade (TOT) and foreign direct investment (FDI) to growth, while Indonesia has a negative impact. Furthermore, the total factor production (TFP) creates a high contribution towards ASEAN economic growth.