Sahar AMIDI

Abstract One of the most fundamental issues worldwide is the economic interdependence of countries which affects their economic growth. Some new growth theorists such as Mankiw et al., Islam, Ertur and Koch, Lee, Yu and Yu Ho et al. consider geographical proximity and trade as spatial variables. This study aims to investigate the spatial effects of geographical distance on economic growth using the spatial dynamic panel data model and the spatial cross section data model for the period 1992–2016 in selected Asian countries. The findings demonstrate that the effect of spatial spillover or spatial dependency is one of the main causes of economic growth spillovers. In the spatial dynamic panel data model, log of gross domestic product (GDP), gross fixed capital formation and growth rate of labor force had negative, positive and negative impacts on economic growth, respectively. In the spatial cross-sectional data models including human capital, log of GDP, gross fixed capital formation and growth rate of labor force had negative impacts on economic growth, while in a model without human capital log of GDP, gross fixed capital formation and growth rate of labor force, respectively, had positive and negative effects on economic growth.

The common currency is a legitimate recognition of political commitment to ensuring regional integration. Geographic distance and common currency as spatial variables are one of the most important determinants of regional integration and trade. This paper aims to investigate the spatial effects of common currency on bilateral trade using the spatial dynamic panel data model during 2006- 2016. The results show that the effect of common currency and geographic distance on bilateral trade is positive and significant, statistically. Hence, it can be concluded that countries that are adjacent to each other or have common currency would strengthen the trade between themselves, by creating monetary unions. In addition, the results indicate that the effect of other variables based on spatial econometric approach, GDP and trade openness -in three spatial matrices-had a positive and significant effect on bilateral trade. The exchange rate had a negative and significant effect on the geographical distance matrix and it had no effect on bilateral trade (in the common currency matrix and the modified currency matrix).

DR LEO - Working paper 2022-14