UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM-NETHERLANDS PROGRAMME FOR MASTER’S DEGREE IN DEVELOPMENT ECONOMICS THE IMPACTS OF EXPORTS ON ECONOMIC GROWTH: THE CASE OF SELECTED SOUTHEAST ASIA COUNTRIES A thesis presented by Ha Manh Cuong In partial fulfilment of the requirements for obtaining the degree of MASTER OF ARTS IN ECONOMICS OF DEVELOPMENT Academic Supervisor Dr. Le Cong Tru HO CHI MINH CITY, NOVEMBER 2012 i TIEU LUAN MOI download : skknchat@gmail.com CANDIDATE’S CERTIFICATION I hereby certify that the paper has not been submitted in whole or in part for any degree before or has not been submitted at the time being to qualify for other degrees and any other academic award; All the contents of the paper is the outcome of works that I has done; any paid or unpaid material are acknowledged; and ethics standards as well as guidelines have been tightly followed. Signed : _______________________ Name : Ha Manh Cuong Date : _______________________ ii TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENTS The thesis is a partial fulfilment of the requirements for obtaining the degree of Master of Arts in Economics of Development, which jointly conducted by Economics University of Ho Chi Minh City, Vietnam and the Institute of Social Studies in The Hague, Netherlands. The thesis is fruit of knowledge I have gained and contributions from many other people.
First of all, I would like to show my deep thanks to my supervisor, Dr. Le Cong Tru who gave me his caring instruction during the time I focused on doing the thesis and I did also learn so much from him the ways to write and prepare a research paper well. I am profoundly grateful to the teachers and the staffs of the Vietnam Netherlands Project in Ho Chi Minh City who guided and helped me in the process of doing the thesis. Besides, I would like to give my heartfelt thanks to Prof.
Nguyen Trong Hoai who taught me Econometrics and the ways to write a paper well. Finally, I am very happy to express my profound gratitude to my parents who are always in my back to silently encourage and support me at anytime I got difficult and discouraged in doing the thesis. I bear full responsibilities for all errors, omissions, and shortcomings in the thesis. Ha Manh Cuong Ho Chi Minh City, 2012 iii TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS CHAPTER 1.4 STRUCTURE OF RESEARCH .2 CONCEPTS AND DEFINITIONS .3 METHODOLOGY AND DATA COLLECTION .4 DESCRIPTION OF VARIABLES .5 SUMMARY OF THE STEPS USED IN THIS STUDY .2 SELECTION REASON OF FIVE ASIAN COUNTRIES .3 HIGHLIGHTS OF EXPORT ACTIVITIES AND SOURCES OF EXPORT GROWTH OF ASEAN-5 OVER THE LAST DECADES .1 Economic growth of Vietnam over the studied period.2 Export activity of Vietnam .3 Comparison of correlation between Vietnam’s export growth and economic growth .4 Economic growth of Malaysia over the studied period: .5 Export activity of Malaysia .6 Comparison of correlation between Malaysia’s export growth and economic growth .7 Economic growth of Thailand over the studied period .8 Export activity of Thailand .9 Comparison of correlation between Thailand’s export growth and economic iv TIEU LUAN MOI download : skknchat@gmail.10 Economic growth of Indonesia over the studied period: .11 Export activity of Indonesia .12 Comparison of correlation between Indonesia’s export growth and economic growth .13 Economic growth of Singapore over the studied period .14 Export activity of Singapore .15 Comparison of correlation between Singapore’s export growth and economic growth .1 Correlation Coefficient Matrix.2 Descriptive statistics result .3 REGRESSION RESULTS AND ANALYSIS .1 Result analysis for Indonesia .2 Result analysis for Malaysia .3 Result analysis for Singapore .4 Result analysis for Thailand .5 Result analysis for Vietnam .1 For The Selected Southeast Asia Countries .2 For The Case of Vietnam .3 LIMITATIONS OF THE THESIS.
72 v TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 3-1: Analysis framework for the impact of exports on growth. 19 Figure 3-2: Summary of steps used in data analysis. 20 Figure 4-1: GDP growth of Vietnam in the period of 1991 - 2010 .23 Figure 4-2: Export growth of Vietnam in the period of 1991 - 2010. 26 Figure 4-3: GDP growth of Malaysia in the period of 1991 - 2010.
27 Figure 4-4: Export growth of Malaysia in the period of 1991 - 2010. 29 Figure 4-5: GDP growth of Thailand in the period of 1991 - 2010 .32 Figure 4-6: Export growth of Thailand in the period of 1991 - 2010. 36 Figure 4-7: GDP growth of Indonesia in the period of 1991 - 2010. 38 Figure 4-8: Export growth of Indonesia in the period of 1991 - 2010.
40 Figure 4-9: GDP growth of Singapore in the period of 1991 - 2010. 42 Figure 4-10: Export growth of Singapore in the period of 1991 - 2010. 45 vi TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 2-1: Summary of researches studying on impact of exports on growth.13 Table 3-1: Summary of variables in the model. 18 Table 4-1: Vietnam exports by sector, 2010 .25 Table 4-2: Malaysia exports by sector, 2010 .29 Table 4-3: Thailand exports by sector, 2010.34 Table 4-4: Indonesia exports by sector, 2010 .39 Table 4-5: Singapore exports by sector, 2010 .44 Table 5-1: Correlation matrix of variables (all countries) .49 Table 5-2: Summary of Descriptive Statistics (All countries) .52 Table 5-3: Regression Results (Fixed Effects Method with Dependent Variable: GDP growth rate).53 vii TIEU LUAN MOI download : skknchat@gmail.com The Impacts of Exports on Economic Growth: The Case of Selected Southeast Asia Countries 1 TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT The thesis aims to answer the question that how is exports affect on the economic growth in the five selected Southeast Asia countries, including Indonesia, Malaysia, Singapore, Thailand and Vietnam, during the period of 1991-2010 by using the neoclassical growth model established by Romer (1986) and Lucas (1988).
In the period of 1991-2010, economic growth of the five Southeast Asia countries were growing very fast in tandem with the strong growth of exports. This is because the economies of the five Southeast Asia countries largely relied on trade activities, especially exports, with developed countries such as USA, Japan, and European countries, etc…. Therefore, determining and examining the impact of exports on economic growth are important to help these countries keep their growth sustainable. In this paper, the augmented Solow Growth Model was adopted to find the impact of exports on growth.
Also, the key model employed to run regression is Linear Exports-Growth Model with a panel data of the five Southeast Asia countries. To capture the different impact of exports on growth over the selected countries, fixed effect regression model is chosen to apply in the paper. The main findings of the paper point out that only Malaysia, Singapore and Thailand of which exports have statistically significant positive impacts on economic growth at the levels of significance of 1%, 1% and 10%, respectively. Oppositely, Indonesia and Vietnam showed a negative impact on economic growth, however, these impacts were not statistically significant.
In addition, to measure and compare the different impacts of exports on growth over the selected countries, the fixed effect regression model is employed. The results showed that the more developed the economy is, the stronger impact of exports on economic growth is. More specifically, the impact levels of exports on growth at the five selected Southeast Asia countries are ascendingly arranged based on development of the economy as follows: Vietnam (-0. 2 TIEU LUAN MOI download : skknchat@gmail.com Chapter 1 INTRODUCTION 1.1 PROBLEM STATEMENT Economic growth is often the final goal of the economy.
To accelerate economic growth, it is vital to know where sources of economic growth come from and this is subject of controversy amongst economists. One side, economists such as Solow (1957), Romer (1986), and Lucas (1988) reckoned that TFP laying residual brings about growth in long term. Romer (1986) emphasized research and development while Lucas (1988) stressed on role of human capital formulation as significant cause of growth. Trade far ago was an effective way that human being used to exchange products they had and received other essential products that they were unable to produce to meet their daily life.
Trade at that time played a vital role as a blood vent in a human body and was the best way that human being had in daily life, production activities and social development. Nowadays, the importance role of trade in modern society and economy is significantly increasing, especially exports. Exports have helped many countries reach impressive economic growths and become very rich and powerful countries such as Japan, China, Korea and Taiwan, etc. From the origin of theories of reputable economists with classical school thoughts in hundreds of years ago such as: Adam Smith (1776) and David Ricardo (1817), and being connected recently by a series of theoretical works of other well-known economists.
Misselden (1623) 3 TIEU LUAN MOI download : skknchat@gmail.com stressed the positive role of international trade as a strong motivation of economic growth, he pointed out that the government should encourage exports and minimize imports. Keynes (1936) considered effects of factors in aggregate demand on growth through multiplier. Thirlwall (1979), post-Keynesian economist, considered demand, especially international trade, as principal cause of accelerating or constraining growth. All their findings are foundations for understanding and analysis of relationship between exports and economic growth systematically and scientifically.
Based on these theoretical works, a series of researches have been conducted, using national, regional and international data to clarify the above relationship. These researches tend to confirm that exports have a positive relationship with economic growth (Sprout, 1993, Van den Berg, 1994). Successful models of outward-oriented development of East Asian Countries during the last decades are the persuasive evidences for the role of exports as a driving force of economic growth in this region (Frankel, 1996). Nevertheless, the above positive relationship is not always right in the case of all countries, regions.
In the other word, speeding up exports does not always bring in higher growth rate for the economy, if other conditions remain unchanged and/or other prior conditions are not satisfied. There were not less studies that showed the weak role of exports to GDP growth in some countries and group of countries (Dodaro, 1993, Jung, 1985, Salvatore, 1991). Along with prudence in consideration of the relationship among exports and economic growth, policy-makers of each country therefore would have to find a way to measure these relationships in their own country, before making development strategies such as speeding-up of exports as a driven engine for economic growth. Many theoretical and empirical evidences have proven that economies nowadays tend to have a faster growth than 50 years ago thanks to free trade, especially developing countries and emerging economies in Southeast Asia.
However, the fact shows that economic growth of the five Southeast Asia countries from the support of exports is still not sustainable and contains costs and risks by the instability of outside impacts such as the Asian financial crisis in 1997 – 1998 and the global economic crisis in 2008, these impacts may hamper the economic growth. Furthermore, the five Southeast Asia countries’ economies are very different and not equally developed. Therefore, examining the difference in the impact of exports on economic growth among the five Southeast Asia countries’ economies is a necessary task to have proper policy 4 TIEU LUAN MOI download : skknchat@gmail. Therefore, an important policy implication is that the five Southeast Asia countries should restructure the composition of exports to focus on goods with high value-added and stable demand in the long term.
Besides, the five Southeast Asia countries should encourage and have preferential policies to export sectors. More importantly, reform of export sectors with highly comparative advantage should be encouraged to aim at strengthening export competition capacity of the economies of these countries.