Xinpeng Xu and Ligang Song* INTRODUCTION In a recent paper, Glick and Rose (1998) show that a currency crisis currently affects clusters of countries tied together by international trade, and that trade provides an important channel for contagion above and beyond macroeconomic and ﬁnancial similarities. Given the severity of the East Asian ﬁnancial crisis, it is worthwhile investigating systematically trade linkages among East Asian economies. The pattern of East Asia development is sometimes characterized as a ‘ﬂying geese’ one, with Japan at the front, followed by the newly industralizing economies (NIEs, that is, South Korea, Taiwan, Hong Kong and Singapore) and then by other Association of Southeast Asian Nation (ASEAN) countries (namely Thailand, Malaysia, the Philippines and Indonesia). While Pearson (1994) ﬁrst uses an export similarity index in the context of East Asia, his primary interest is to determine whether the Asian exporters of manufactures are rapidly climbing a product-sophistication ladder and whether exports are shifting down a country ladder, a phenomenon termed the ‘export ladder hypothesis’. Our paper differs from Pearson’s (1994) in several ways. Our primary interest is in the trade linkage between East Asian economies, with both cross-sectional and time-series analysis. We ask questions that are of immediate interest, for example, ‘how similar are East Asian economies’ exports?’ and ‘how competitive are East Asian economies’ exports in the third market?’ We also ask questions that are more fundamental, for example, ‘does export similarity between East Asian economies tend to be divergent or convergent?’ and...
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