The Impact of Trade Openness on Economic Stability in Asian Countries
Abstract
:1. Introduction
2. Literature Review
2.1. Theoretical Background
2.1.1. The Three Aspects of Macroeconomic Stability
2.1.2. Trade Openness
2.2. Trade Openness and Its Impact on the Economy
3. Data and Methodology
3.1. Data
3.2. Research Model
3.3. Research Methodology
- Determine the lags of variables in the model via the Akaike Information Criterion (AIC) and Schwarz Criterion (SC);
- Determine the co-integration between variables and looks for long-term relationships between variables;
- Test the long-term relationships between variables in the model through the ARDL regression model with defined lags;
- Verify standard distribution and autocorrelation of residuals and data interpolation.
4. Empirical Results
4.1. Preliminary Investigation
4.1.1. Descriptive Statistics
4.1.2. Correlation Coefficient Matrix
4.2. Unit-Root Test and Co-Integration Test
4.2.1. Unit-Root Test
4.2.2. Co-Integration Test
4.2.3. ARDL Model Selection
4.3. ARDL Model Estimation Results
4.3.1. ARDL Model Estimation Results
4.3.2. Long- and Short-Term Estimates for the ARDL Model
4.3.3. Test for the Existence of Cointegration between Variables in the Model
4.3.4. Data Interpolation Results
5. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Variable | Explanation | Measure | |
---|---|---|---|
MS | Macroeconomic stability | Growth stability | Standard deviation of the annual GDP growth rate (SD_LNGDP) |
Inflation stability | Standard deviation of the annual inflation rate (SD_INFLATION) | ||
Exchange rate stability | Standard deviation of real exchange rate (SD_EXCHANGE) | ||
TOP | Trade openness | Ratio of import and export difference to GDP | (Export—Import)/GDP |
Z | Control variables | Employment rate | Standard deviation of the ratio of employed workers which is divided by the total number of people in the labour force (SD_EMP) |
Government capital reserves | GOV. | ||
Private capital reserves | PRI | ||
Foreign direct investment | Ln (FDI) | ||
M2 Monetary Aggregate | The ratio of M2 money supply to GDP (M2_GDP) |
SD_GDP | SD_INF | SD_EX | TOP | SD_EMP | GOV. | PRI | LN_FDI | M2_GDP | |
---|---|---|---|---|---|---|---|---|---|
N | 177 | 177 | 177 | 177 | 177 | 177 | 177 | 177 | 177 |
Min | 0.03 | 0.02 | 0.00 | 4.21 | 0.01 | 8.66 | 8.97 | 14.79 | 26.69 |
1 sq qu | 0.38 | 0.51 | 0.12 | 10.72 | 0.20 | 10.56 | 11.00 | 20.61 | 43.02 |
Median | 0.75 | 1.06 | 1.22 | 16.79 | 0.36 | 11.85 | 13.11 | 22.04 | 63.09 |
Mean | 1.24 | 1.38 | 58.11 | 24.81 | 0.49 | 11.73 | 12.63 | 21.99 | 75.69 |
3rd qu | 1.80 | 1.84 | 6.22 | 26.69 | 0.70 | 12.67 | 13.64 | 23.35 | 93.76 |
Max | 8.34 | 5.85 | 1408.68 | 112.19 | 2.07 | 15.51 | 16.42 | 26.40 | 207.67 |
Var | 1.63 | 1.46 | 40,785.78 | 660.11 | 0.13 | 2.73 | 3.34 | 4.72 | 1752.92 |
Sd | 1.28 | 1.21 | 201.95 | 25.69 | 0.37 | 1.65 | 1.83 | 2.17 | 41.87 |
SD_GDP | SD_INF | SD_EX | TOP | SD_EMP | GOV | PRI | FDI | M2_GDP | |
---|---|---|---|---|---|---|---|---|---|
SD_GDP | 1.000 | ||||||||
SD_INF | 0.299 | 1.000 | |||||||
SD_EX | −0.190 | 0.117 | 1.000 | ||||||
TOP | 0.282 | 0.074 | −0.175 | 1.000 | |||||
SD_EMP | 0.317 | 0.035 | −0.113 | 0.198 | 1.000 | ||||
GOV. | −0.278 | −0.138 | −0.060 | −0.296 | −0.149 | 1.000 | |||
PRI | −0.247 | −0.139 | −0.092 | −0.278 | −0.150 | 0.962 | 1.000 | ||
FDI | −0.163 | −0.154 | −0.040 | −0.003 | −0.233 | −0.120 | −0.166 | 1.000 | |
M2_GDP | −0.220 | −0.315 | −0.086 | 0.060 | −0.121 | 0.145 | 0.111 | 0.709 | 1.000 |
Variables | ADF Statistic | Lags Order | p–Value | Conclusion |
---|---|---|---|---|
SD_GDP | −4.2272 | 5 | 0.01000 | Stationary |
SD_INFLATION | −4.4111 | 5 | 0.01000 | Stationary |
SD_EXCHANGE | −3.9956 | 5 | 0.01094 | Stationary |
TOP | −4.1148 | 5 | 0.01000 | Stationary |
SD_EMP | −4.4535 | 5 | 0.01000 | Stationary |
GOV. | −3.8549 | 5 | 0.01786 | Stationary |
PRI | −3.4540 | 5 | 0.04869 | Stationary |
LN_FDI | −3.8664 | 5 | 0.01729 | Stationary |
M2_GDP | −3.9677 | 5 | 0.01231 | Stationary |
Test | Null Hypothesis | Statistic | 5% Critical Value | 1% Critical Value |
---|---|---|---|---|
Panel A: SD_GDP | ||||
Trace | 0 co-integration vector | 187.69 | 124.25 | 136.06 |
1 co-integration vector | 124.62 | 90.39 | 104.20 | |
2 co-integration vector | 64.58 | 70.60 | 78.87 | |
3 co-integration vector | 42.88 | 48.28 | 55.43 | |
4 co-integration vector | 25.90 | 31.52 | 37.22 | |
5 co-integration vector | 13.12 | 17.95 | 23.52 | |
6 co-integration vector | 4.60 | 8.18 | 11.65 | |
Maximum eigenvalue | 0 co-integration vector | 63.07 | 44.91 | 51.30 |
1 co-integration vector | 60.04 | 39.43 | 44.59 | |
2 co-integration vector | 21.70 | 33.32 | 38.78 | |
3 co-integration vector | 16.98 | 27.14 | 32.14 | |
4 co-integration vector | 12.79 | 21.07 | 25.75 | |
5 co-integration vector | 8.51 | 14.90 | 19.19 | |
6 co-integration vector | 4.60 | 8.18 | 11.65 | |
Panel B: SD_INFLATION | ||||
Trace | 0 co-integration vector | 164.89 | 124.25 | 136.06 |
1 co-integration vector | 101.05 | 90.39 | 104.20 | |
2 co-integration vector | 64.64 | 70.60 | 78.87 | |
3 co-integration vector | 43.11 | 48.28 | 55.43 | |
4 co-integration vector | 26.16 | 31.52 | 37.22 | |
5 co-integration vector | 12.93 | 17.95 | 23.52 | |
6 co-integration vector | 4.54 | 8.18 | 11.65 | |
Maximum eigenvalue | 0 co-integration vector | 63.84 | 44.91 | 51.30 |
1 co-integration vector | 36.42 | 39.43 | 44.59 | |
2 co-integration vector | 21.53 | 33.32 | 38.78 | |
3 co-integration vector | 16.95 | 27.14 | 32.14 | |
4 co-integration vector | 13.23 | 21.07 | 25.75 | |
5 co-integration vector | 8.39 | 14.90 | 19.19 | |
6 co-integration vector | 4.54 | 8.18 | 11.65 | |
Panel C: SD_EXCHANGE | ||||
Trace | 0 co-integration vector | 163.68 | 124.25 | 136.06 |
1 co-integration vector | 100.57 | 90.39 | 104.20 | |
2 co-integration vector | 63.17 | 70.60 | 78.87 | |
3 co-integration vector | 41.82 | 48.28 | 55.43 | |
4 co-integration vector | 25.68 | 31.52 | 37.22 | |
5 co-integration vector | 13.07 | 17.95 | 23.52 | |
6 co-integration vector | 4.76 | 8.18 | 11.65 | |
Maximum eigenvalue | 0 co-integration vector | 63.11 | 44.91 | 51.3 |
1 co-integration vector | 37.4 | 39.43 | 44.59 | |
2 co-integration vector | 21.35 | 33.32 | 38.78 | |
3 co-integration vector | 16.14 | 27.14 | 32.14 | |
4 co-integration vector | 12.61 | 21.07 | 25.75 | |
5 co-integration vector | 8.31 | 14.9 | 19.19 | |
6 co-integration vector | 4.76 | 8.18 | 11.65 |
Panel A: SD_GDP | ||||||||
ID | SD_GDP | TOP | SD_EMP | GOV. | PRI | LN_FDI | M2_GDP | AIC |
1 | 1 | 2 | 1 | 1 | 1 | 0 | 0 | 500.3201 |
2 | 1 | 2 | 1 | 1 | 1 | 0 | 1 | 500.4397 |
3 | 1 | 2 | 1 | 0 | 1 | 0 | 0 | 500.8088 |
4 | 1 | 2 | 0 | 1 | 1 | 0 | 0 | 500.8367 |
5 | 1 | 2 | 1 | 1 | 2 | 0 | 0 | 501.4777 |
6 | 1 | 2 | 1 | 1 | 1 | 1 | 1 | 501.9884 |
7 | 1 | 2 | 0 | 1 | 1 | 1 | 1 | 502.0566 |
8 | 1 | 2 | 1 | 2 | 1 | 1 | 1 | 502.8354 |
9 | 1 | 2 | 1 | 1 | 2 | 1 | 1 | 503.1007 |
10 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 505.0645 |
Panel B: SD_INFLATION | ||||||||
ID | SD_INFLATION | TOP | SD_EMP | GOV | PRI | LN_FDI | M2_GDP | AIC |
1 | 1 | 0 | 0 | 2 | 2 | 0 | 0 | 499.06930 |
2 | 1 | 0 | 0 | 2 | 2 | 0 | 1 | 500.53410 |
3 | 1 | 0 | 0 | 2 | 2 | 1 | 1 | 502.51820 |
4 | 1 | 0 | 0 | 2 | 1 | 1 | 1 | 502.92650 |
5 | 1 | 0 | 0 | 1 | 1 | 1 | 1 | 503.15890 |
6 | 1 | 0 | 1 | 1 | 1 | 1 | 1 | 504.58890 |
7 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 506.43510 |
Panel C: SD_EXCHANGE | ||||||||
ID | SD_EXCHANGE | TOP | SD_EMP | GOV | PRI | LN_FDI | M2_GDP | AIC |
1 | 1 | 2 | 0 | 1 | 1 | 1 | 1 | 2239.865 |
2 | 1 | 2 | 0 | 1 | 1 | 1 | 2 | 2240.203 |
3 | 1 | 2 | 0 | 1 | 1 | 2 | 1 | 2241.000 |
4 | 1 | 2 | 1 | 1 | 1 | 1 | 1 | 2241.800 |
5 | 1 | 2 | 0 | 1 | 2 | 1 | 1 | 2241.841 |
6 | 1 | 2 | 0 | 2 | 1 | 1 | 1 | 2241.865 |
7 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2251.506 |
Variables | Coefficient | Std. Error | t–Test | p–Value |
---|---|---|---|---|
Panel A: SD_GDP (1,2,1,1,1,0,0) | ||||
(Intercept) | 2.3198185 | 1.0249514 | 2.263 | 0.0249 |
SD_GDPt−1 | 0.3621607 | 0.0717350 | 5.049 | 0.0000 *** |
TOPt | 0.0155832 | 0.0076935 | 2.025 | 0.0445 ** |
TOPt−1 | −0.0089743 | 0.0096344 | −0.931 | 0.3530 |
TOPt−2 | 0.0006306 | 0.0063022 | 0.100 | 0.9204 |
SD_EMPt | 0.5557864 | 0.2536052 | 2.192 | 0.0298 ** |
SD_EMPt−1 | −0.4024415 | 0.2627199 | −1.532 | 0.1275 |
GOVt | 0.5778227 | 0.4309124 | 1.341 | 0.1818 |
GOVt−1 | −0.6442804 | 0.4229689 | −1.523 | 0.1296 |
PRIt | −0.7610779 | 0.3953300 | −1.925 | 0.0560 * |
PRIt−1 | 0.8217079 | 0.3921763 | 2.095 | 0.0377 ** |
LN_FDIt | −0.0789160 | 0.0497773 | −1.585 | 0.1148 |
M2_GDPt | −0.0007993 | 0.0022466 | −0.356 | 0.7225 |
Panel B: SD_INFLATION (1,0,0,2,2,0,0) | ||||
(Intercept) | 1.266137 | 0.987271 | 1.282 | 0.2015 |
SD_INFLATIONt−1 | 0.561764 | 0.064413 | 8.721 | 0.0000 *** |
TOPt | 0.001585 | 0.003099 | 0.512 | 0.6097 |
SD_EMPt | −0.159361 | 0.221025 | −0.721 | 0.4719 |
GOVt | 0.923947 | 0.422243 | 2.188 | 0.0301 ** |
GOVt−1 | −1.426024 | 0.587712 | −2.426 | 0.0163 ** |
GOVt−2 | 0.621166 | 0.414332 | 1.499 | 0.1358 |
PRIt | −0.937760 | 0.396946 | −2.362 | 0.0193 ** |
PRIt−1 | 1.395204 | 0.556871 | 2.505 | 0.0132 ** |
PRIt−2 | −0.579654 | 0.393377 | −1.474 | 0.1425 |
LN_FDIt | −0.006544 | 0.048093 | −0.136 | 0.8919 |
M2_GDPt | −0.004501 | 0.002269 | −1.984 | 0.0490 ** |
Panel C: SD_EXCHANG (1,2,0,1,1,1,1) | ||||
(Intercept) | −104.50532 | 141.97706 | −0.736 | 0.46276000 |
SD_EXCHANGEt−1 | 0.64940 | 0.05734 | 11.326 | 0.00000000 *** |
TOPt | −2.78557 | 1.10275 | −2.526 | 0.01250000 ** |
TOPt−1 | 2.50269 | 1.39460 | 1.795 | 0.07460000 * |
TOPt−2 | −0.21891 | 0.90698 | −0.241 | 0.80959000 |
SD_EMPt | 19.06966 | 31.77715 | 0.600 | 0.54928000 |
GOVt | −160.58185 | 63.64756 | −2.523 | 0.01261000 ** |
GOVt−1 | 173.10485 | 62.95149 | 2.750 | 0.00665000 *** |
PRIt | 107.35100 | 59.56061 | 1.802 | 0.07336000 * |
PRIt−1 | −129.71707 | 59.13194 | −2.194 | 0.02969000 ** |
LN_FDIt | 37.08143 | 12.16516 | 3.048 | 0.00269000 *** |
LN_FDIt−1 | −23.86773 | 12.26932 | −1.945 | 0.05348000 * |
M2_GDPt | −3.48445 | 0.68706 | −5.072 | 0.00000108 *** |
M2_GDPt−1 | 3.17504 | 0.70156 | 4.526 | 0.00001160 *** |
Models | Variables | Coefficient | Std. Error | t–Test | p–Value |
---|---|---|---|---|---|
Panel A: SD_GDP | |||||
Long–term model | (Intercept) | 2.3198185 | 1.0249514 | 2.263 | 0.0249 |
SD_GDPt−1 | −0.6378393 | 0.0717350 | −8.892 | 0.0000 *** | |
TOPt−1 | 0.0072395 | 0.0033482 | 2.162 | 0.0321 ** | |
SD_EMPt−1 | 0.1533450 | 0.2627332 | 0.584 | 0.5603 | |
GOVt−1 | −0.0664578 | 0.1729009 | −0.384 | 0.7012 | |
PRIt−1 | 0.0606300 | 0.1511257 | 0.401 | 0.6888 | |
LN_FDIt | −0.0789160 | 0.0497773 | −1.585 | 0.1148 | |
M2_GDPt | −0.0007993 | 0.0022466 | −0.356 | 0.7225 | |
Short–term model | TOPt | 0.0155832 | 0.0076935 | 2.025 | 0.0445 ** |
TOPt−1 | −0.0006306 | 0.0063022 | −0.100 | 0.9204 | |
SD_EMPt | 0.5557864 | 0.2536052 | 2.192 | 0.0298 ** | |
GOVt | 0.5778227 | 0.4309124 | 1.341 | 0.1818 | |
PRIt | −0.7610779 | 0.3953300 | −1.925 | 0.0560 * | |
Panel B: SD_INFLATION | |||||
Long–term model | (Intercept) | 1.266137 | 0.987271 | 1.282 | 0.2015 |
SD_INFLATIONt−1 | −0.438236 | 0.064413 | −6.803 | 0.0000 | |
TOPt | 0.001585 | 0.003099 | 0.512 | 0.6097 | |
SD_EMPt | −0.159361 | 0.221025 | −0.721 | 0.4719 | |
GOVt−1 | 0.119088 | 0.175738 | 0.678 | 0.4990 | |
PRIt−1 | −0.12221 | 0.154237 | −0.792 | 0.4293 | |
LN_FDIt | −0.006544 | 0.048093 | −0.136 | 0.8919 | |
M2_GDPt | −0.004501 | 0.002269 | −1.984 | 0.0490 | |
Short–term model | GOVt | 0.923947 | 0.422243 | 2.188 | 0.0301 |
GOVt−1 | −0.621166 | 0.414332 | −1.499 | 0.1358 | |
PRIt | −0.93776 | 0.396946 | −2.362 | 0.0193 | |
L(PRIt−1) | 0.579654 | 0.393377 | 1.474 | 0.1425 | |
Panel C: SD_EXCHANGE | |||||
Long–term model | (Intercept) | −104.50532 | 141.97706 | −0.736 | 0.46276000 |
SD_EXCHANGEt−1 | −0.35060 | 0.05734 | −6.115 | 0.00000001 *** | |
TOPt−1 | −0.50179 | 0.47084 | −1.066 | 0.28814000 | |
SD_EMPt | 19.06966 | 31.77715 | 0.600 | 0.54928000 | |
GOVt−1 | 12.52300 | 24.83116 | 0.504 | 0.61472000 | |
PRIt−1 | −22.36607 | 21.84607 | −1.024 | 0.30746000 | |
LN_FDIt−1 | 13.21370 | 7.56977 | 1.746 | 0.08279000 * | |
M2_GDPt−1 | −0.30941 | 0.34375 | −0.900 | 0.36942000 | |
Short–term model | TOPt | −2.78557 | 1.10275 | −2.526 | 0.01250000 ** |
TOPt−1 | 0.21891 | 0.90698 | 0.241 | 0.80959000 | |
GOVt | −160.58185 | 63.64756 | −2.523 | 0.01261000 ** | |
PRIt | 107.35100 | 59.56061 | 1.802 | 0.07336000 * | |
LN_FDIt | 37.08143 | 12.16516 | 3.048 | 0.00269000 *** | |
M2_GDPt−1 | −3.48445 | 0.68706 | −5.072 | 0.00000108 *** |
Types of Test | Model with SD_GDP Dependent Variable | Model with SD_INFLATION Dependent Variable | Model with SD_EXCHANGE Dependent Variable | |||
---|---|---|---|---|---|---|
Statistic | p–Value | Statistic | p–Value | Statistic | p–Value | |
F–test | 9.9952 | 0.000001 | 6.0030 | 0.0003272 | 4.8997 | 0.0012750 |
t–test | −8.8916 | 0.000001 | −6.8035 | 0.0001314 | −6.1148 | 0.0006687 |
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Nguyen, V.M.H.; Ho, T.H.; Nguyen, L.H.; Pham, A.T.H. The Impact of Trade Openness on Economic Stability in Asian Countries. Sustainability 2023, 15, 11736. https://doi.org/10.3390/su151511736
Nguyen VMH, Ho TH, Nguyen LH, Pham ATH. The Impact of Trade Openness on Economic Stability in Asian Countries. Sustainability. 2023; 15(15):11736. https://doi.org/10.3390/su151511736
Chicago/Turabian StyleNguyen, Vu Manh Hoai, Tin Huu Ho, Luan Huynh Nguyen, and An Thi Ha Pham. 2023. "The Impact of Trade Openness on Economic Stability in Asian Countries" Sustainability 15, no. 15: 11736. https://doi.org/10.3390/su151511736
APA StyleNguyen, V. M. H., Ho, T. H., Nguyen, L. H., & Pham, A. T. H. (2023). The Impact of Trade Openness on Economic Stability in Asian Countries. Sustainability, 15(15), 11736. https://doi.org/10.3390/su151511736