Does ASEAN–India Trade Stimulate Income? A Cointegration Analysis Using the ARDL Approach

Abstract

This article aims to address the extent of income that has been attributed by trade between India and the ASEAN-5 countries (namely, Indonesia, Malaysia, the Philippines and Thailand) from the year 1970 till 2014. This study adopts the autoregressive distributed lag (ARDL) bound test approach to cointegration, with long- and short-run parameter estimates to investigate the impact of regional trade between India and ASEAN-5. The cointegration test results confirmed the presence of a long-run relationship only for India, and no cointegration evidence was found for the ASEAN-5 economies. The long-run parameter estimates showed no influence of ASEAN–India trade on India’s income and a positive impact of India’s trade to the rest of the world on India’s income by about 0.58 per cent in the long run. Interestingly, ASEAN–India trade is positively influencing India’s income in the short run, and the extent of the impact tends to be small. This article concludes that there is limited evidence to support the claim that ASEAN–India trade stimulates income for the case of India and ASEAN-5 countries.