Abstract: This paper proposes the hypothesis that multilateralism and regionalism are complementary, and that regional income convergence is likely with a like minded and committed regionalism that often has links geographically and culturally. The association between international trade, income per capita, and regional income convergence in founder members of ASEAN and SAARC, is explored by applying the Lumsdaine, and Papell approach. The causal relationships between the above variables are also studied in respective trade blocs by using Granger causality tests. The conclusion is that global reforms have had a greater impact on increasing trade for both trade blocs and induced convergence only in ASEAN-5 countries. The experience of ASEAN countries shows a two-way causal relationship between the flow from trade to regional income convergence, and vice versa. There is no evidence in SAARC countries for income convergence and causality.
Abstract: The study investigates the causal link between trade
openness and economic growth for four South Asian countries for
period 1972-1985 and 1986-2007 to examine the scenario before and
after the implementation of SAARC. Panel cointegration and
FMOLS techniques are employed for short run and long run
estimates. In 1972-85 short run unidirectional causality from GDP to
openness is found whereas, in 1986-2007 there exists bi-directional
causality between GDP and openness. The long run elasticity
magnitude between GDP and openness contains negative sign in
1972-85 which shows that there exists long run negative relationship.
While in time period 1986-2007 the elasticity magnitude has positive
sign that indicates positive causation between GDP and openness. So
it can be concluded that after the implementation of SAARC overall
situation of selected countries got better. Also long run coefficient of
error term suggests that short term equilibrium adjustments are driven
by adjustment back to long run equilibrium.