Tai Methodology Hoasen

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Estimating the Economic Impact of an FreeTradeAgreement onASEAN.Case study: Vietnam and theASEAN-Australia-NewZealand Free Trade Agreement

Scott H. Murray & Tai H. Pham

Discipline of Mathematics & Statistics

August 2014


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Contents

1. Problemstatement

2. Goal and objectives

3. Literature review

4. Methodology

5. Main activities and result

6. Progress and work Plan

7. Conclusion


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1. Problem statement

ASEAN is experiencing a rapid proliferation of FTAs.This creates a potential noodle bowl situation.

The ASEAN Economic Community (AEC) by 2015.

Many models used to estimate economic effects ofan FTA.

It is relatively rare to use international Input-Outputmodel (IIO) in ASEAN countries.


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Goal: Estimate the economic impact of an FTA on ASEANcountries.

2. Goal and objectives

Objective:1. Establish theoretical framework of Extended I-O

Models.

2. Establish theoretical framework of trade indicators.

3. Carry out the analysis for the impact of the

AANZFTA on Vietnam.4. Make recommendations to Vietnam government

and entrepreneurs to implement AANZFTA.


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3. Literature review

Thetheoryfor ExtendedInput-outputmodels:

Francois Quesney, Tableau Economique (1758).

AdamSmith, Division of labor (1776).

Wassily Leontief, Leontief Input-Output model (1951).

Walter Isard, Isards Model (1951).

Chenery and Moses Model (1953). Riefler-Tieouts regional Input-Output model (1970).


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3. Literature review (cont)Theory of I-O multipliers :

Leontief (1938); Isard (1951); Richardson(1985).

Useandmisuseof I-O multipliers:

Coughlin and Mandelbaum(1991); Mills (1993);Hughes(2003); Grady and Mullen (1988); Harris (1997);Siegfried, Sanderson, and McHenry (2006).

Use of I-O linkages:

Planting and Guo (2000); Gulihoto, Sonis, and Hewings(2005).

Vertical specialization of trading blocs.

Hummels, Ishii and Yi (2001); Yi (2001).


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3. Literature review (cont)The theory of complementary or competing economies:

David Ricardo, The theory of comparative advantage(1817).

Eli Heckscher & Bertil Ohlin, the factor-proportionstheory (1919) & (1933).

Grubel and Lloyd, The trade indicators.

Delphi Method

U.S Census (1790). Rand Corporation (1950).

Hubacek and Sun, RAS method (2010).


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The steps in the procedure of analysis:

4. Methodology

Click 5 Click 7

Click 3

Click


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Step 2: Compile Extended Input-Output table

Collecting the dataof I-O table

Making ofimport matrices

by member

countries fromtrading blocand the rest of

the World

Making of exportvectors tomember

countries fromtrading bloc andthe rest of the

World

Linking andbalancing


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Step 2: National Input-Output tableIntermediate use Final use Total

Industrial

sectors

Quadrant 1Intermediate use

matrix

(square matr ix)Fi j

Quadrant 2Final demand

(co lumn vector )Yi

Total Output byindustry

(outp ut vect or)Xi

Value added(primaryinputs)

Quadrant 3Valua added(row vecto r)

Vj

Quadrant 4GDP

Total

Total input byindustry

(i npu t vector)Xj

X


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Step 2: Extended Input-Output tableIntermediateuse Final use Total

Country AIntermediate use

of domestic output(F

i j

d)

Domestic finaluse of

domestic

Exports(Ej

d)

Total use ofdomestic

output (Xi

d)

Membercountries fromtrading bloc

Intermediate useof imports (Fi j

m)Domestic finaluse of imports

Re-Exports

Total use ofimports(Xi

mm)

Rest of World

Intermediate use

of imports (Fijw)

Domestic final

use of imports

Re-

Exports

Total use of

imports(Ximw)

Valua added (Vj)

Total Total input X

click


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Trade indicatorsStep 3: Analyse competing and complemetary

Revealed symmetric comparative

advantage index

Intra-industry trade index

Trade specialization index

Bilateral trade intensity index

Trade complementarity index Click


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Step 5: Translate the programs into the models

1( ) A

rr rsI A

The models of imported behaviors for exports


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1( ) A

rr rsI A

The models of imported behaviors for consumtion


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1( ) A

rr rsI A

The models of exported behaviors for exports


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Using GEMPACK software to build the models

click


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General outline of the method

Step 7: Choose the scenario

Recruitexperts

Surveyexperts

Synthesiseresponses

Consensus !

Feedback


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Step 7: Choose the scenario

Consensus !

Feedback

Recruit

experts

Survey

expertsSynthesise

responses

In-depth

interviews

Construct

I-O model

click


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5. Main activities and results Gather data and compile the Extended Input-

Output Table

Delphi method survey

Simulate Scenarios by using GEMPACK Build trade indicators between Australia NewZealand and Vietnamese economy

Activities

Establishing the framework to estimate theeconomic effects of an FTA for ASEAN

Making recommendations to Vietnamgovernment and entrepreneur

Results


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6. Progress and work plan

2011 2012 2013 2014 (plan)

- Literature

review.

- Presenting initialproposal

- Participatingconferences &

seminars (NUS,UEH)

- Designing the

Website

- Collecting thedata.

- Seminar (UC, UEH,NEU)

- In-depth interviewof Vietnameseexperts

- Surveying

Delphi Method

-EstablisngExtended I-O

Table

- Establisng

scenarios

-Check

scenarios

- WritingThesis

- Submittingthe papers


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7. Conclusion

Thanks for listening!

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