THE INTERDEPENDENCY OF UNCERTAINTIES IN ASEAN+3 AND G6 ECONOMIES

In this paper, we empirically examine the interdependency of uncertainties among ASEAN +3 countries as well as between these countries and the G6 countries. We collect the uncertainty data from the new World Uncertainty Index (WUI) database. The WUI captures uncertainty related to economic and political events in a country. We show that ASEAN + 3 countries as a group are weakly interdependent, in terms of the long-run relationships of uncertainties within the group. We demonstrate that, in the absence of outside influence, i.e., uncertainty shocks emanating from the G6, the +3 and ASEAN countries are two independent group of countries with the former having its own dynamics and the latter neither affecting nor being affected by the former. We further demonstrate that outside influence strongly affects China but not the other +3 and ASEAN countries. These findings survive robustness checks and suggest that the ASEAN + 3, as a region, may provide long-term diversification benefits to global investors and that the strengthening of the ASEAN + 3 regional cooperation framework may further buttress confidence in this region.