The Convergence of Foreign Trade Competitiveness in The Far East Countries: Evidence from Nonlinear Two-Regime TAR Panel Data Analysis

Abstract

This study analyzes the existence of convergence among the Far East countries in terms of foreign trade competitiveness, by using real effective exchange rate data of 17 countries for the period 1995M01-2021M08, each calculated on the basis of CPI and weighted against their 143 trading partners, with the test for linearity by Hansen (1996), and Caner & Hansen (2001), the threshold autoregressive (TAR) panel unit root test by Beyaert and Camacho (2008), and tests for determining types of convergence by Ferreira and Vieira (2009). In the study, in which the series were determined to be nonlinear, firstly it was found that the foreign trade competitiveness of the Far East Countries converges to the group average not during the periods of economic recession, but during the periods of economic expansion. It was established that the foreign trade competitiveness of the Far East Countries partially converges to the foreign trade competitiveness of Japan during both periods of economic recession and expansion. It was also determined that the foreign trade competitiveness of the Far East Countries partially converges to the foreign trade competitiveness of China in economic recession periods, while this convergence is full during economic expansion periods.