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Does economic integration lead to financial market integration in the Asian region?

Author

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  • Song, Yuegang
  • Huang, Ruixian
  • Paramati, Sudharshan Reddy
  • Zakari, Abdulrasheed

Abstract

This study empirically examines the impact of economic integration on stock market co-movements of India with major Asian markets such as China, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, and Thailand. We collect daily data on stock market indices from September 1999 to December 2017. The asymmetric generalised dynamic conditional correlation GARCH model is applied to estimate the time-varying conditional correlations among the various stock markets. Next, the panel autoregressive distributed lag method is applied to investigate the impact of economic integration on stock market co-movements. Our results show that economic integration has a significant positive impact on stock market co-movements in the region. The results also provide supporting evidence that the global financial crisis positively contributed to stock market interdependence in the Asian region.

Suggested Citation

  • Song, Yuegang & Huang, Ruixian & Paramati, Sudharshan Reddy & Zakari, Abdulrasheed, 2021. "Does economic integration lead to financial market integration in the Asian region?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 366-377.
    • Handle: RePEc:eee:ecanpo:v:69:y:2021:i:c:p:366-377
    DOI: 10.1016/j.eap.2020.12.003
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    Cited by:

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    3. Reza Tajaddini & Hassan F. Gholipour, 2023. "Trade dependence and stock market reaction to the Russia‐Ukraine war," International Review of Finance, International Review of Finance Ltd., vol. 23(3), pages 680-691, September.

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    More about this item

    Keywords

    Economic integration; Stock market co-movements; GFC; AGDCC-GARCH; Asia;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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