The impact of global economic dynamics on the performance of the manufacturing industry in ASEAN

Aim: This study analysed the impact of global economic dynamics on the performance of the manufacturing industry in ASEAN. Methodology: The Panel Vector Error Correction Model (VECM) was employed as a quantitative approach to examine both the short-term and long-term relationships between economic growth, exchange rates, inflation, and manufacturing value added in ten ASEAN countries from 1997 to 2022. Results: The results indicate that inflation exerts a significant negative effect on manufacturing value added in both the short and long run. Exchange rate movements exhibit a delayed negative short-run effect, whereas their long-run effects are statistically insignificant. Economic growth emerges as the principal long-run driver of manufacturing value added. Implications and recommendations: The findings stress the critical importance of macroeconomic stability in bolstering manufacturing resilience. Policymakers are encouraged to adopt proactive and adaptive strategies aimed at inflation control, exchange rate stabilisation, and sustained economic growth to enhance productivity and competitiveness in the ASEAN manufacturing sector. Originality/value: This study contributes to the literature by employing a Panel VECM framework to simultaneously capture short-run dynamics and long-run equilibrium relationships among key macroeconomic variables across ASEAN countries. The findings provide new evidence on the dynamic interactions between economic growth, inflation, exchange rates, and manufacturing value added over a period encompassing several major global economic disruptions.