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A Review of International Financial Market Integration Using Nonstationary Panel Techniques

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  • Kim, Hong Kee

    (Hannam University)

Abstract

This paper investigates the Feldstein-Horioka coefficient for OECD country group and Asian country group, using the recently developed several nonstatioanry panel cointegration techniques. The savings and investment rates are nonstationary and cointegrated in panel. The estimated FH coefficients using panel FMOLS and DOLS estimators have significantly declined for the second sub-period of 1980-98, comparing with those for the first sub-period of 1960-79 for two country groups. In addition, the FH coefficient using the panel cointegration estimator in FH original samples (16 OECD countries) decreases drastically for the sub-periods of 1975-98 (0.10-0.35), though it is a little smaller (0.59-0.83) than that of original FH(0.88) for 1960-74. These estimated FH coefficients are consistent with the recognitions that international capital flows have increased significantly after the 1980s. The FH coefficient using panel cointegration estimator seems to have important information about international capital mobility.

Suggested Citation

  • Kim, Hong Kee, 2003. "A Review of International Financial Market Integration Using Nonstationary Panel Techniques," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 7(1), pages 65-89, June.
    • Handle: RePEc:ris:eaerev:0218
    DOI: 10.11644/KIEP.JEAI.2003.7.1.102
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    Keywords

    Nonstationary Panel; Financial Market;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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