“New Go South Policy”: Are Exports and Imports of Taiwan with ASEAN-10 Cointegrated?

Abstract

The present Taiwan president Tsai Ing-wen has re-initiated the so-called “New Go South Policy” which is aimed at expanding industrial, educational, cultural and agricultural exchanges between Taiwan and Association of Southeast Asian Nations (ASEAN) as well as South Asia. This study investigates the feasibility of the policy, especially from the perspective of international trade, through looking at the existence of a long-run relationship between exports and imports of Taiwan with ASEAN-10, as well as 9 ASEAN countries, namely Indonesia, Cambodia, Laos, Myanmar, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The sample period covers monthly exports and imports with observations ranging between 1989m1 and 2017m11. The estimated error correction terms of Autoregressive Distributed Lag (ARDL) models show that both variables (i.e. Taiwan’s exports to, and imports from the ASEAN-10 and the 6 ASEAN countries) are moving together (cointegrated). These countries are Cambodia, Indonesia, Malaysia, Singapore, Thailand, and Vietnam. It reflects that macroeconomic policies, particularly the so-called “New Go South” policy has been effective in the long run. And Taiwan’s trade positions with ASEAN-10 and the 6 ASEAN countries are not in violation of its international budget constraint. Policy implications are also highlighted and discussed in this study – Taiwan has to relook at bilateral policies with Lao PDR, Myanmar, and the Philippines.

Keywords

• ASEAN-10
• exports
• imports
• New Go South Policy
• Taiwan