The sustainability of trade accounts of the ASEAN-5 countries

Published date28 January 2014
Date28 January 2014
AuthorOlayeni Olaolu Richard,Aviral Kumar Tiwari
The sustainability of trade
accounts of the ASEAN-5
Olayeni Olaolu Richard
Department of Economics, Obafemi Awolowo University,
Ile-Ife, Nigeria, and
Aviral Kumar Tiwari
Institute of Chartered Financial Analysis of India,
University Tripura, Tripura, India
Purpose The present study aims to analyse the sustainability of the trade deficits in the
Association of Southeast Asian Nations (ASEAN)-5 countries using panel framework during the
period from 1965 to 2011.
Design/methodology/approach – The paper applied a battery of first- and second-generation
panel unit root tests and Pedroni’s, Kao and Chiang’s, Westerlund, and Di Iorio and Fachin
cointegration tests to achieve the objective.
Findings – The paper found the evidence of sustainable trade deficit in ASEAN-5 countries while
utilizing panel unit root tests as well as panel cointegration tests.
Research limitations/implications – The findings have important macroeconomic policies
implication for ASEAN-5 countries that these policies had been effective in leading exports and
imports to long-run steady-state equilibrium relationship among the ASEAN-5 countries.
Originality/value – The main contribution of the paper is to show that the macroeconomic policies
of ASEAN-5 countries had been effective in leading exports and imports to long-run steady-state
equilibrium relationship. To the authors’ best knowledge, in this area, this is the first study in the
panel framework for ASEAN countries.
Keywords ASEAN-5, Exports,, Imports, Trade accounts sustainability
Paper type Research paper
1. Introduction
The behaviour of the trade (current account) deficit, particularly in an open economy,
is an indicator of macroeconomic stability. Hence, for such an economy, one important
aspect of inter-temporal plans is the time path of the current accounts, which measures
changes in national net indebtedness. Problems that arise in an open economy are not
caused by rising imports but are due to the mismatch between export and import
growth. Therefore, the stationarity of current accounts is important for two reasons.
First, a stationary current account is consistent wi th the accumulation and
sustainability of external debts (which indicates that there is no incenti ve for a
country to default on its international debts) as well as an indicator of potential
The current issue and full text archive of this journal is available at
The authors are grateful to two anonymous referees for their very constructive comments and
suggestions on an earlier draft of the manuscript without which the paper would have remained
flawed and incomplete. The authors are solely responsible for any remaining errors.
Received 8 June 2013
Revised 8 November 2013
Accepted 13 November 2013
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 7 No. 1, 2014
pp. 51-65
qEmerald Group Publishing Limited
DOI 10.1108/JCEFTS-06-2013-0023
of trade

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