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Financial integration in Asia: new Empirical evidence using dynamic panel data estimations

Author

Listed:
  • Burak Erkut

    (Eastern Mediterranean University)

  • Gagan Deep Sharma

    (Guru Gobind Singh Indraprastha University)

Abstract

The aim of this work is to examine financial integration in Asia between 1970 and 2018 by using dynamic panel data methods, covering first and second generation panel unit root tests, cointegration, common correlated effects models, dynamic ordinary least squares and fully modified ordinary least squares models, augmented mean group, and Arellano-Bond dynamic panel data estimations. This research utilizes data for 13 Asian economies between 1970 and 2018 based on the World Bank’s World Development Indicators. The focus of the data analysis is on domestic saving and investment rates, operationalized as gross domestic saving and gross fixed capital formation. The results highlight that these rates are integrated at I(1); there is evidence of cointegration, and the causality between saving and investment for these Asian economies is statistically significant and bidirectional. Furthermore, we also estimate the coefficients of the long-run relationship by using panel data methods. Using the Dumitrescu-Hurlin causality analysis, we identify a bidirectional causality between investments and savings for Asia. Overall, our results deliver statistically significant empirical evidence with contemporary econometric methods to understand the degree of Asian financial integration.

Suggested Citation

  • Burak Erkut & Gagan Deep Sharma, 2023. "Financial integration in Asia: new Empirical evidence using dynamic panel data estimations," International Economics and Economic Policy, Springer, vol. 20(1), pages 213-231, February.
    • Handle: RePEc:kap:iecepo:v:20:y:2023:i:1:d:10.1007_s10368-023-00553-0
    DOI: 10.1007/s10368-023-00553-0
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    More about this item

    Keywords

    Asia; Financial integration; Feldstein-Horioka puzzle; Economic integration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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