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Financial Integration and Cooperation in East Asia: Assessment of Recent Developments and Their Implications

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  • Hong Bum Jang

    (Visiting Economist, Institute for Monetary and Economic Studies, Bank of Japan/ Director-General, Bank of Korea (E-mail: jhb@bok.or.kr))

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    Abstract

    This paper examines the current situation pertaining to trade and financial integration in East Asia from various approaches and discusses potential linkages between intra-regional trade and financial integration. This paper also offers policy suggestions based upon its analyses that take full account of the post-global crisis policy landscape. The main conclusions drawn from this study are as follows: (i) the overall degree of intra-regional trade and financial integrations in East Asia still remain insufficient, as the regionfs financial integration lags far behind its trade integration; (ii) inter-regional links appear stronger than intra-regional links in East Asian economies; and (iii) intra-regional trade and portfolio investment flows in East Asia generally show positive correlations. Developing East Asia would benefit from wider regional mechanisms with the enhancement of intra- regional trade and financial integration. Since East Asia is at a critical turning point, this paper suggests that East Asian countries strive to strengthen the regional mechanisms with smoothly functioning, integrated regional markets while effectively controlling its risks. They should focus especially on enhancing trade policy cooperation, expediting capital market development, effectively managing cross-border portfolio investments, and strengthening regional safety networks. The three major countries in the region-Japan, China, and Korea-should take the lead in facilitating the integration process.

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    Bibliographic Info

    Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 11-E-05.

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    Date of creation: Feb 2011
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    Handle: RePEc:ime:imedps:11-e-05

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    Related research

    Keywords: Trade and Financial Integration; Cross-Border Investment and Settlement; Trade-Finance Linkage; Free Trade Agreements; Asian Bond Market; East Asia; Global Economic and Financial Crisis;

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    References

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    1. Adams, Charles & Jeong, Hoe Yun & Park, Cyn-Young, 2010. "Asia’s Contribution to Global Rebalancing," Working Papers on Regional Economic Integration 58, Asian Development Bank.
    2. Gloria O. Pasadilla, 2008. "Financial services integration in East Asia: Lessons from the European Union," Working Papers 5308, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
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    Cited by:
    1. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.

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