Capital Market Integration in Japan
AbstractWe construct new quarterly estimates of lending rates for the 47 Japanese prefectures for the period 1886-1922, and test the extent to which regional capital markets integrated during this period. We analyze whether the Japanese capital market was efficient, estimate the speed of convergence among the rates, and assess the degree to which different regions were integrated with the main financial centers of Japan. Interest rate differentials between the financial centers of Japan and other regions do not follow a random walk, and hence are suggestive of market efficiency-in the sense that arbitrage opportunities did not persist. Results from cointegration tests suggest that the integration in Japan is characterized by multiple stochastic elements. We find the existence of four long-run cointegrating relationships. We also find evidence that shocks occurring in a financial center, such as the Kanto region in which Tokyo is located, were transmitted to outlying regions and had permanent but small effects on their rates.
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Bibliographic InfoArticle provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.
Volume (Year): 25 (2007)
Issue (Month): 2 (November)
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Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
Financial market development; Capital market integration; Economic integration; Japanese banks;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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