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Financial Integration in East Asia

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Author Info
Hiroshi Fujiki (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: hiroshi.fujiki@boj.or.jp))
nd Akiko Terada-Hagiwara (Institute for Monetary and Economic Studies, Bank of Japan)

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Abstract

This paper examines the degree of integration into world financial markets and the impacts on several key macroeconomic variables of selected East Asian economies, and draws policy implications. According to our analysis, the degrees of integration into world financial markets in those economies are increasing. Regarding the impacts of increasing integration into world financial markets on several macroeconomic variables, we find three results. First, casual two-way plots among macroeconomic variables do not support the theoretical prediction of reduction in relative consumption volatility. Second, the saving-investment correlation is higher than those of the euro area economies. Third, the degrees of smoothing of idiosyncratic shock by cross-holding of financial assets are lower than the euro area economies. These results suggest two policy implications. First, there is some room for improvement in welfare gains in those economies by means of further risk sharing. Second, holding all other conditions equal, the increasing integration into world financial markets alone is unlikely to provide a sound ground for a currency union in East Asia at this stage.

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Publisher Info
Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 07-E-12.

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Date of creation: Aug 2007
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Handle: RePEc:ime:imedps:07-e-12

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Related research
Keywords: Exchange rate regime; financial integration; risk sharing;

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Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mark M. Spiegel, 2008. "Financial globalization and monetary policy discipline," Working Paper Series 2008-10, Federal Reserve Bank of San Francisco. [Downloadable!]
  2. Marvin Goodfriend, 2007. "Monetary Policy in East Asia: Common Concerns," IMES Discussion Paper Series 07-E-18, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
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