The impact of trade openness on the incomes of four South East Asian countries before and after the Asian financial crisis

The purpose of this study is to present a robust estimation of trade openness in four South East Asian countries—Indonesia, Malaysia, the Philippines, and Thailand—before and after the Asian financial crisis, using time series analysis. We use the co-integration technique with a structural break developed by Carrion-i-Silvestre and Sanso (2006) to estimate the elasticity of trade openness that affects GDP per capita in the long run. The results show that the trade openness of Thailand performs better than that of the other three sampled countries both before and after the crisis. For Indonesia and Malaysia, trade openness also has a significant positive influence on income per capita, but this impact is relatively smaller than that of Thailand. The trade openness of the Philippines seems to perform better than that of Malaysia before the crisis, but after the crisis, trade openness lowers income per capita. Therefore, we think that Thailand might be a good example of how to make trade work for other developing countries.