Economic Liberalization And Its Link To Convergence: Empirical Evidence From RCEP and TPPA Countries
Abstract
Economic liberalization has been the emphasisof adjustment policies in developing countries; ASEAN countries jumped on the bandwagon and espousedeconomic reforms by liberalizingits international trade andfinancial policies. Through the development of free tradeagreement policies such as AEC and RCEP,regional economic integration is accelerating in South East Asia; not leaving behind the less developed member countries such as Cambodia, Lao PDR, Myanmar and Vietnam (CLMV). Hence, the objectives ofthis paper are to examine the dynamic impact of economic liberalization (financial and trade liberalization) on ASEAN’seconomic growth and to assess the possibility of the existence of convergence club between ASEAN and its RCEPcounterparts. Using the annual data covering the period of 1994to 2014, the analysis is based on the Pooled Mean Group (PMG) estimations for liberalization analysis while the Phillips and Sul (2007) methodology is used to assess the economic convergence clubs. The empirical evidence suggests that both trade and financial liberalization play a significant role in ASEAN’seconomic growth. For convergencein RCEP,full sample find an absence of homogenous convergence;as a result, four club convergencesare formed.The result highlights the importance of trade and financial liberalization in enhancing economic growth of ASEANandimpliesthat strong commitments in continuation of liberalization and integration policies arerecommended to promote a sustained economic growth.
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