Real Financial Integration among the East Asian Economies: A SURADF Panel Approach
AbstractTo testify RIP, this study scrutinizes the mean-reversion behavior of bilateral real interest differentials (RIDs) in eight East Asian economies. We incorporate the ASEAN-5, South Korea and China (mainland) with the US and Japan taken as base countries. Four sub-samples within 1976-2004 are being considered to accentuate the effects of institutional changes and financial crises. To rectify the deficiency in extant univariate and panel tests, the newly proposed SURADF statistics by Breuer et al. (2002) is utilized. Overall, the findings are in favor of RIP such that RIDs are found mean-reverting (except China) and with faster adjustment, especially during the post-crisis era. Such outcome is in accord with the enhanced financial integration among the ASEAN-5 and South Korea with their major trading partners, suggesting that further economic cooperation and currency arrangements in the region are bright to preserve potential financial shocks. Conversely, the real financial integration among China-US and China-Japan are not yet empirically recognized notwithstanding the recent surge of capital flows into the mainland.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2021.
Date of creation: 2005
Date of revision: Feb 2007
Real Interest Differentials; SURADF Panel Unit Root Test; Half-life; Confidence Intervals; Financial Integration;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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