Advances in Management and Applied Economics

Is Trade an Engine of Growth? VEC-Granger Causality Evidence from ASEAN Countries

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• Abstract

  This paper investigates the causal relationship between foreign trade, economic growth, and private bank investment in ASEAN [1] countries applying the Error Correction Model and VEC Granger causality/Wald Exogeniety tests. Of nine ASEAN countries, the VEC Granger causality/Wald Exogeniety results found net export (NX) Granger caused the economic growth (GDP) of Malaysia, Philippine, Singapore, Thailand, Cambodia, and Vietnam confirming the hypothesis that trade is an engine of economic growth. On the other hand, economic growth Granger caused/promoted trade in Indonesian and Thailand. Private bank credit Granger caused GDP in Philippine and Vietnam. The paper suggests policy prescriptions

  JEL classification numbers: F11 F14, F43, C23, 040
  Keywords: Trade, Economic growth, Vector Error correction, Granger Causality, ASIAN Countries