How resilient is ASEAN-5 to trade shocks? A comparison of regional and global shocks

This article studies the resilience of the ASEAN region to external shocks amid the unfolding effects of the USA–China trade war. It investigates and compares the effects of regional (ASEAN) and global (USA, China) shocks on ASEAN-5 using a Structural VAR (SVAR) framework. To identify the propagation of economic shocks and spillovers on ASEAN-5, the changing trade links between the economies considered are used to account for time variations spanning the period 1978Q1–2018Q2. Three major results follow from the analyses on trade links and output multiplier effects. First, the response of ASEAN-5 to shocks from the USA and China were more pronounced than regional shocks for the period after the Asian financial crisis. Second, the increasing cumulative impact of China’s shock on ASEAN was congruous to the growing trade links and trade intensities between ASEAN and China. Third, the USA and China were dominant growth drivers for the weaker trade-linked ASEAN partners. Taken together, the results suggest that global shocks matter for the region, and the economic resilience of the region to global shocks depends on indirect effects apart from the direct trade links.