The Relationship Between Economic Growth, Trade and FDI–Evidence from ASEAN 5

Since ASEAN FTA is established in 1993, whether international trade leds economic growth has been in debate. As a developing country, ASEAN5 often lack the advanced production equipment and funds in the beginning. FDI is always regarded as ASEAN5’s economic lifeline. Besides, what is the reason that causes ASEAN5 economic growth? Does economic growth mainly for ASEAN FTA or other things? This research intends to discuss the relationship between economic growth, trade and FDI. In the past, scholars used quantity or growth rate to measure economic growth in VAR model. The findings demonstrated there was no significant statistic relationship between economic growth, trade and FDI. This research chooses “World Development Indicators” which is provided by World Bank in 2016. This research also uses growth rate to measure its relationship. Because of ASEAN FTA, the time line is divided into the two periods from 1981 to 1992 and from 1993 to 2014. The results show that economic growth and export stimulate each other before 1993. This indicates that FDI has the injection effect and at the same time leds export before 1993. After establishing ASEAN FTA, the results show that economic growth and trade stimulate each other and at same time FDI leds economic growth in Singapore. This indicates that economic growth, trade and FDI are mainly affected by free trade area after 1993.