Financial Market Integration of South Asian Countries: Panel data Analysis
AbstractAccording to Frankel (1992) in order to find financial integration from Feldstein Horoika (FH, 1980) model, the real interest parity must hold. This paper estimates the degree of financial market integration of South Asian countries i.e. Pakistan, India, Bangladesh, Sri Lanka and Nepal with both the techniques. The study finds some degree of integration with FH model has which increased after 1990s, post liberalization period. Furthermore, Panel Unit Root techniques i.e. LLC, IPS and Hadri has been used to estimate the real interest rate differentials (RIDs) of South Asian countries are found to be stationary with USA, Canada, UK, Germany, Sweden, Netherland, Australia, Malaysia, Indonesia, South Korea, Singapore, China and Japan. The empirical evidence of integration with both the techniques in my study is unique in the literature. Even though, the RIDS technique provides strong evidence of integration, correlation between savings and investment is still significant.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25774.
Date of creation: Jul 2010
Date of revision: Aug 2010
Financial Integration; interest rate parity; savings investment correlation; South Asian economy;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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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.:
- Kaddour Hadri, 1999.
"Testing For Stationarity In Heterogeneous Panel Data,"
1999_04, University of Liverpool Management School.
- Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
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