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Real and Financial Integration in East Asia

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  • Kim, Soyoung

    ()
    (Korea University)

  • Lee, Jong-Wha

    ()
    (Asian Development Bank)

Abstract

We examine the real and financial integration of East Asian economies, comparing the degree of real versus financial integration, the degree of global versus regional integration, and the extent of integration before versus after the 1997/98 financial crisis in East Asian economies. We analyze price and quantity measures of integration such as the size of intra- and inter-regional trade, cross-border financial assets, correlation of stock returns, and interest rate differentials. In addition, we adopt a panel VAR approach of investigating cross-country output inter-dependence and consumption relation in order to infer the macroeconomic consequences of real and financial integration on East Asian economies. The empirical investigations suggest that (i) using the quantity measure there is a significant increase in real integration within East Asia; (ii) real-side integration based on output linkage increased substantially after the Asian crisis, both regionally and globally; (iii) although quantity and price measures showed some degree of increased financial integration after the crisis, the cross-country consumption relation did not change much; (iv) the degree of regional financial integration within Asia is far smaller than the degree of global financial integration, based on the consumption-based measure; and (v) financial integration lags real integration, especially for regional integration within Asia.

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Bibliographic Info

Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 17.

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Length: 36 pages
Date of creation: 01 Jun 2008
Date of revision:
Handle: RePEc:ris:adbrei:0017

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Keywords: Trade and financial integration; global and regional integration; risk sharing; East Asia;

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  1. Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-of-One-Price Deviations: Evidence from Micro-data," Levine's Bibliography 321307000000000311, UCLA Department of Economics.
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  6. Marco Terrones & M. Ayhan Kose & Eswar Prasad, 2007. "How Does Financial Globalization Affect Risk Sharing? Patterns and Channels," IMF Working Papers 07/238, International Monetary Fund.
  7. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
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Cited by:
  1. Kim, Soyoung & Lee, Jong-Wha & Shin, Kwanho, 2006. "Regional and Global Financial Integration in East Asia," MPRA Paper 695, University Library of Munich, Germany.
  2. Wang, Lihong, 2014. "Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 182-203.
  3. McKibbin, Warwick J. & Chanthapun, Waranya Pim, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," Working Papers on Regional Economic Integration 36, Asian Development Bank.
  4. Schou-Zibell, Lotte & Madhur, Srinivasa, 2010. "Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform," Working Papers on Regional Economic Integration 40, Asian Development Bank.
  5. Cavoli, Tony, 2012. "Exploring dimensions of regional economic integration in East Asia: More than the sum of its parts?," Journal of Asian Economics, Elsevier, vol. 23(6), pages 643-653.
  6. Catherine Figuière & Laëtitia Guilhot, 2010. "L'Asie d'une crise à l'autre : l'impact sur l'intégration régionale," Post-Print halshs-00493869, HAL.
  7. Dewandaru, Ginanjar & Alaoui, Abdelkader & Masih, A. Mansur M. & Alhabshi, Syed Othman, 2013. "Comovement and resiliency of Islamic equity market: Evidence from GCC Islamic equity index based on wavelet analysis," MPRA Paper 56980, University Library of Munich, Germany.
  8. Yamamoto, Shugo, 2014. "Transmission of US financial and trade shocks to Asian economies: Implications for spillover of the 2007–2009 US financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 88-103.
  9. Vinokurov, Evgeny, 2009. "Systema Indikatorov Evraziyskoy Integracii
    [The System of Indicators of Eurasian Integration]
    ," MPRA Paper 20914, University Library of Munich, Germany.
  10. Vinokurov, Evgeny, 2010. "The System of Indicators of Eurasian Integration," MPRA Paper 22227, University Library of Munich, Germany.
  11. Yin-Wong Cheung & Matthew S. Yiu & Kenneth K. Chow, 2009. "A Factor Analysis of Trade Integration: The Case of Asian and Oceanic Economies," Working Papers 132009, Hong Kong Institute for Monetary Research.
  12. Binner, Jane & Chen, Shu-Heng & Lai, Ke-Hung & Mullineux, Andrew & Swofford, James L., 2011. "Do the ASEAN countries and Taiwan form a common currency area?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1429-1435.
  13. Catherine Figuière & Laëtitia Guilhot, 2010. "La Chine : avenir du découplage asiatique ?," Post-Print halshs-00456498, HAL.
  14. Soyoung Kim & Jong‐Wha Lee & Cyn‐Young Park, 2011. "Emerging Asia: Decoupling or Recoupling," The World Economy, Wiley Blackwell, vol. 34(1), pages 23-53, 01.
  15. Kwanho Shin, 2008. "Global and Regional Shocks: Challenges to Asian," Working Papers id:1788, eSocialSciences.
  16. Madhur, Srinivasa & Wignaraja, Ganeshan & Darjes, Peter, 2009. "Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network," Working Papers on Regional Economic Integration 37, Asian Development Bank.
  17. Rigg, Robert & Schou-Zibell, Lotte, 2009. "The Financial Crisis and Money Markets in Emerging Asia," Working Papers on Regional Economic Integration 38, Asian Development Bank.

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