Is China compatible with ASEAN-5? A gradual cointegration analysis

Purpose – The purpose of this paper to examine if there is continuous macroeconomic compatibility between ASEAN-5 and China. Thus, in addition to the typical VECM test of the long run macroeconomic cointegration test, this paper examines the existence of an ongoing cointegration analysis. Design/methodology/approach – The degree of convergence during different sub-sample period of the full sample is employed, via Johansen cointegration rank tests, to examine if there is evidence of ongoing and improved cointegrating relationship among the economies. Findings – A successful ASEAN-China economic cooperation would only work if there is continuous macroeconomic interdependence between the partnership. Since a smooth transition of ACFTA will complement AFTA, the effective ASEAN-China coordination plan is essential to endorse a successful ASEAN-China coalition. Originality/value – This paper suggests a quick yet effective verification on the continuous compatibility of economies intended to have a long-term economic coordination.