An empirical investigation of the spillover effects of services and manufacturing sectors in ASEAN countries

The services sector has experienced phenomenal expansion in several regions throughout the world, particularly since the 1980s. Similarly, the manufacturing sector has also expanded, although at a slower pace than the services sector. It is quite likely that there is a two-way spillover effect as a result of the growth in these two sectors: expansion of the services sector contributes to the expansion of the manufacturing sector, and vice versa. In this paper, this likely spillover effect is examined using the experience of ASEAN economies. The empirical results confirm a strong, positive bi-directional influence of growth of services and manufacturing. It is also the case that investment in services and manufacturing is essential for the expansion of both sectors.