The Relationship between Terms-of-Trade and Trade Balance in Asean-5

Abstract

This study investigated the relationship between terms-of-trade and trade balance in the ASEAN-5, namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand, using time series data. Moreover, this study examined the Granger causality between terms-of-trade and trade balance. This study uses commodity terms-of-trade. The results showed that there is a long-run relationship between terms-of-trade and trade balance in the ASEAN-5, except for Indonesia and Singapore. Furthermore, the results showed that Granger causality between terms-of-trade and trade balance is mixed. The mixed results of the relationship between terms-of-trade and trade balance are consistent with the ongoing debate in the literature of terms-of-trade and trade balance.