Integration or Segmentation of Malaysian Equity Market: An Analysis of Pre- and Post- Capital Controls
AbstractThe paper implements time series techniques of cointegration and vector autoregression (VAR) to assess the integration or segmentation of Malaysian equity market prior to the Asian crisis and after the imposition of capital controls. We consider both regional and international financial forces represented by respectively the ASEAN markets and the advanced markets of US and Japan. We form three systems of share prices – (i) ASEAN markets; (ii) US, Japan and Malaysia; and (iii) US, Japan and ASEAN. Our findings suggest no long run relation among share prices in all systems before the Asian crisis and after the imposition of capital controls. However, there are substantial short run dynamic interactions among regional markets of ASEAN. We note significant responses of the Malaysian market to ASEAN shocks regardless of the sample periods. By contrast, its responses to innovations in US and Japan, while significant before the Asian crisis, turn insignificant after the imposition of capital controls. Comparatively, the US market is more influential in accounting for fluctuations in the ASEAN markets. From the results, while not attributing solely to capital control measures, we contend that capital controls play some role in insulating the Malaysian market from international disturbances.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0411010.
Length: 34 pages
Date of creation: 05 Nov 2004
Date of revision:
Note: Type of Document - doc; pages: 34
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Integration and Segmentation; Cointegration; Vector Autoregression; Generalized Impulse Responses.;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
- NEP-FIN-2004-11-22 (Finance)
- NEP-IFN-2004-11-22 (International Finance)
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