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Probability of forming regional trade agreements (RTAs) will be greater if two countries are closer in geographical distance. This paper extends the meaning of 'closer' by considering not only the geographical distance, but also the socio-political distance as well. This paper empirically analyzes whether a causal relation exists between the socio-political factors−the cultural affinity measured by common language, same religion, and a newly introduced composite index of cultural distance and political ties measured by the existence of a military alliance and the level of democracy–and the likelihood that RTAs will form. For such quantitative analysis, this paper applies the estimation techniques of a qualitative choice model (pooled Probit model with cluster-robust standard errors) to the panel data, which covers bilateral country-pairs among 66 countries between 1998 and 2009. In addition, the interdependence of the formation of RTA is also investigated by considering the third country effects. For a feasibility study, we estimate the probability of forming the proposed RTAs in the East Asian region as an empirical application. We find that the formation of RTAs has been strongly and significantly driven by the reduced cultural distance between members and influenced by the interdependence with third countries. Unlike the existing studies, however, the conventional socio-political determinants (religious similarity, military alliance, and democracy) do not significantly matter for the formation of interdependent RTAs. From the feasibility test for proposed RTAs in East Asia, we argue that building closer cultural linkages between countries in the region are prerequisite to realize the formation of the proposed RTAs such as the China-Japan (CJ), the Japan-Korea (JK), the China-Japan-Korea (CJK), the ASEAN + 3 (10 Association of SouthEast Asian Nations, China, Japan, and Korea), and the Regional Comprehensive Economic Partnership (RCEP). [ABSTRACT FROM AUTHOR]

There is a fear among East Asian governments that China's rapid export driven growth is significantly impairing the export performance of their own countries. The common belief among East Asian economies is that to remain competitive they must improve the quality of their exports relative to those of China. In this paper, we show how the emergence of China has affected the quality of its exports and imports to and from Malaysia, Singapore and Indonesia. Specifically, we combine a measure of marginal intra-industry trade (IIT) concerned with the adjustment implications of changes in matched trade, a measure of vertical and horizontal intra-industry trade concerned with the differences in product quality and a new dynamic measure of quality differentiated IIT. Our results suggest that Singapore and Malaysia have managed to maintain and even improve their position as the exporter of high quality varieties in bilateral trade with to China despite China's rapid development and export orientated growth. [ABSTRACT FROM AUTHOR]

Abstract: In the Ministerial meeting of ASEAN held in 1998, the devastation caused by Asian financial crisis remained the point of contemplation. The participants enthusiastically discussed the need to establish common currency and exchange rate system in order to counter any financial crisis anticipated. The ever-growing financial crisis threatening every region in the world has compelled the economists to acknowledge the elevating need of financial cooperation in their respective territories. This is certainly meant to ensure economic stability at both economic and political level. The authors, in the course of this paper, have focused the need to materialize the ideal of promoting monetary integration in the major economies of South, South East, and North East Asia. Calculating Optimum Currency Area (OCA) Index, the authors in a way present costs and benefits associated with the adoption of this currency union. Demand and supply sides of each economy are tested as a pre requisite of OCA in order to provide a good rationale in favor of selection of regions. For this purpose, Structural VAR Analysis (SVAR) method was employed and innovation accounting is done through variance decomposition of forecast errors, impulse response function and correlation matrix. The theory of OCA has been tested by (i) calculating the OCA index estimated by simple OLS method and (ii) following Bayoumi and Eichengreen extrapolating the variability of exchange rate data. The common consensus drawn from the two approaches adopted implies that there is a good potential in the region excluding China to construct a currency union particularly amongst South and North East Asian economies. It is worth mentioning, however, that some of these will have to work harder to join and become an effective member of this currency merger. [ABSTRACT FROM AUTHOR]

The current literature concerning East Asia's security prospects in the face of the region's continued economic expansion and political development is full of contradictory predictions and analyses. The confusion is primarily due to the implicit assumptions underlying most of the current studies—universal, deterministic, and state-centric. The different views of East Asia's security prospects originate from the same kind of assumption that all decisionmakers will respond to external factors in certain uniform manners. This paper challenges this assumption and suggests that a substate-level analytical approach, which examines how external factors interact with decisionmakers in different countries, might be a better way to enhance our understanding on the subject. [ABSTRACT FROM AUTHOR]