Regional Economic Integration and Convergence in Asia

This paper examines economic integration among some selected Asian economies viz., Japan, ASEAN-5 (Indonesia, Malaysia, the Philippines, Thailand and Singapore), China, India, and South Korea (JACIK) in the context of ongoing initiatives for regional economic cooperation. It analyses macroeconomic performance and existing trade and investment relations, and examines whether per capita incomes of the countries are integrated to a long run relationship. The study finds widely divergent levels of development and considerable variations in macroeconomic structure and performance across the countries. Although trade and investment linkages have increased in recent years, there exists potential for enhancing such linkages through regional cooperation. The cointegration results indicate that the long-run relationship between per capita incomes of the countries has been weak, and the economies are not well integrated. While South Korea and Singapore seem to have shared a common steady-state level of per capita income with Japan, the remaining six countries have been following the steady-state growth paths different from that of Japan. It appears that liberalization of trade and investment policies, which may lead to expansion of trade and investment linkages, could enhance integration among the economies and offer welfare benefits to them.