IDEAS home Printed from https://ideas.repec.org/p/csg/ajrcau/268.html
   My bibliography  Save this paper

Interest Parity Conditions as Indicators of Financial Integration in East Asia

Author

Listed:
  • Gordon de Brouwer

Abstract

Market participants and policymakers have a growing interest in the development of East Asian financial markets, and to the extent to which these markets are open and influenced by world markets. This paper examines the information contained in interest parity conditions about the international integration of a wide range of economies in East Asia. Legal restrictions on the capital account and tests of covered, uncovered and real interest parity are presented in some detail. Using standard regressions, cointegration analysis and error decompositions, it is argued that uncovered interest parity tests reveal a surprisingly large amount of information about financial openness. For example, McCallum’s (1994) model of the interaction of uncovered interest parity and a monetary policy reaction function can be used to explain striking anomalies that arise between countries. Openness and the importance of foreign interest rate shocks appear to have increased in most countries, although Korea remains an important exception. Four policy implications are discussed in the conclusion.

Suggested Citation

  • Gordon de Brouwer, 1997. "Interest Parity Conditions as Indicators of Financial Integration in East Asia," Asia Pacific Economic Papers 268, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcau:268
    as

    Download full text from publisher

    File URL: https://crawford.anu.edu.au/pdf/pep/pep-268.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:taf:oaefxx:v:4:y:2016:i:1:p:1256023 is not listed on IDEAS
    2. Francis, Bill B. & Hasan, Iftekhar & Hunter, Delroy M., 2002. "Emerging market liberalization and the impact on uncovered interest rate parity," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 931-956, November.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:csg:ajrcau:268. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Akira Kinefuchi). General contact details of provider: http://edirc.repec.org/data/ajrccau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.