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Regional and Global Financial Integration in East Asia

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  • Kim, Soyoung
  • Lee, Jong-Wha
  • Shin, Kwanho

Abstract

We examine the degree of regional vs. global financial integration of East Asian countries in three ways; (1) comparing the size of cross-border assets such as securities and bank claims, (2) estimating the gravity model of bilateral financial asset holdings, and (3) estimating consumption risk sharing model. The results suggest that East Asian financial markets, particularly compared to the European ones, are relatively less integrated with each other than to global markets. We also find relatively more evidence of regional financial integration in bank claim markets than portfolio asset markets. The low financial integration within East Asia is attributed to the low incentives for portfolio diversification within the region, the low degree of development and deregulation of financial markets, and the instability in monetary and exchange rate regime.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 695.

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Date of creation: May 2006
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Handle: RePEc:pra:mprapa:695

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Keywords: Regional financial integration; Global financial integration; East Asia;

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Cited by:
  1. Yap, Josef T. & Aldaba, Rafaelita M., 2009. "Investment and Capital Flows: Implications of the ASEAN Economic Community," Discussion Papers, Philippine Institute for Development Studies DP 2009-01, Philippine Institute for Development Studies.
  2. Hiroshi Fujiki & nd Akiko Terada-Hagiwara, 2007. "Financial Integration in East Asia," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 07-E-12, Institute for Monetary and Economic Studies, Bank of Japan.
  3. Bank for International Settlements, 2008. "Assessing the integration of Asia's equity and bond markets," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Regional financial integration in Asia: present and future, volume 42, pages 1-37 Bank for International Settlements.
  4. Kwanho Shin, 2008. "Global and Regional Shocks: Challenges to Asian," Working Papers id:1788, eSocialSciences.
  5. Shinji Takagi, 2009. "Financial Integration in Asia : A Medium-Term Agenda," EABER Working Papers 22857, East Asian Bureau of Economic Research.
  6. Yohei Okawa & Eric van Wincoop, 2010. "Gravity in International Finance," Working Papers, Hong Kong Institute for Monetary Research 072010, Hong Kong Institute for Monetary Research.
  7. Olaf Unteroberdoerster & Runchana Pongsaparn, 2011. "Financial Integration and Rebalancing in Asia," IMF Working Papers, International Monetary Fund 11/243, International Monetary Fund.
  8. Goohoon Kwon & Raphael A. Espinoza, 2009. "Regional Financial Integration in the Caribbean," IMF Working Papers, International Monetary Fund 09/139, International Monetary Fund.
  9. Iwan J. Azis, 2012. "Asian Regional Financial Safety Nets? Don't Hold Your Breath," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, Policy Research Institute, Ministry of Finance Japan, vol. 8(3), pages 321-340, August.

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